Hong Kong shares fell for a fourth day on Wednesday, on weakness in financial and property stocks, as investors locked in profits ahead of key earnings reports, stalling a rally that had pushed the benchmark up 18 percent in the first two months of the year.

Shanghai stocks reversed early losses, as metal stocks gained on a local media report that Beijing plans to consolidate the sector by pushing for formation of large enterprises, a move that may benefit the bigger players.

The China Enterprises Index of the top mainland listings in Hong Kong slipped 0.9 percent, while the broader Hang Seng Index shed 0.2 percent, finishing off the day's lows, supported at 20,800 on the charts. The Shanghai Composite Index ended the day 0.1 percent higher.

The Hang Seng has lost 2.3 percent over the past four sessions but is still up more than 13 percent so far this year.

We are in a transition phase right now. Markets have been weak but people are not totally bearish. They are taking some profits now with earnings not fantastic and are waiting for a clearer macro picture to emerge in China, said Francis Cheung, CLSA's Hong Kong-China equity strategist.

The HSBC China flash purchasing managers' index (PMI) for March, the earliest indictor of manufacturing activity in the world's second-largest economy this month, is expected on Thursday at 0230 GMT.

Upgrades in earnings expectations could drive the next rally, I don't see that happening in a big way until at least the next quarter, Cheung said, adding that investors should stay away from fixed asset investment-related plays as the Chinese economy matures.

On Wednesday however, Aluminum Corporation of China (Chalco) led gains in the materials sector, surging the maximum 10 percent in more than eight times its 30-day average volume in Shanghai and gaining 1.1 percent in Hong Kong.

The Hong Kong property sector, which was among the outperformers earlier this year, extended its recent weakness. New World Development, which jumped 71 percent in the first two months of 2012, slid 3 percent, bringing its losses so far in March to 14.5 percent.

Chinese banks were broadly weak ahead of a slew of corporate earnings in the sector. Agricultural Bank of China (AgBank), the mainland's fourth-biggest lender, is expected to post corporate earnings on Thursday, the first of the so-called Big Four Chinese banks to report this season.

AgBank was flat in Hong Kong, but smaller rival, China Minsheng Bank, also posting results on Thursday, shed 1.5 percent. China Construction Bank (CCB), posting earnings on Friday, lost 0.8 percent in Hong Kong.

Industrial and Commercial Bank of China (ICBC) and Bank of China , both posting earnings early next week, were also weak in Hong Kong and Shanghai.

HUANENG POWER RAPPED FOR WEAK EARNINGS

In a sign that the market has little tolerance for underwhelming earnings, Huaneng Power dived 7.5 percent to HK$4.30 in Hong Kong and 4 percent in Shanghai after its 2011 profit slumped 65 percent from the year before.

The results were reported late on Tuesday and the company was hit by a slew of brokerage downgrades on Wednesday, including Citibank and Macquarie. Citi downgraded Huaneng's Hong Kong-listed from buy to sell and its target price from HK$5.15 to HK$4, saying its profitability is over-estimated.

Chinese instant noodle and beverage maker Tingyi advanced 0.6 percent despite posting at midday, its first annual decline in net profits in 2011. Analysts said the company is well placed to benefit from government policies to boost consumption in the mainland.

Esprit Holdings jumped almost 7 percent, with gains accelerating in early afternoon trade after its rival, Spanish group Inditex, the owner of fashion chain Zara, posted perky 2011 net profits.

Esprit is up almost 70 percent this year after slumping 73 percent in 2011.