Hong Kong shares rose 0.3 percent in lackluster Friday trade, but slumped to a third-straight weekly loss that pared 2012 gains to 1.5 percent, with the European debt crisis and slowing Chinese economy unnerving investors.

Friday's gains gave the Hang Seng Index some respite after 14 losses in the previous 16 sessions have plunged it into technically oversold levels. After losing 1.3 percent this week, it has tumbled 11.3 percent in May.

Mainland Chinese markets were weaker for a third-straight session, with the large cap-focused CSI300 Index down 0.9 percent to finish flat this week. The Shanghai Composite Index shed 0.7 percent and lost 0.5 percent for the week.

Turnover on the Hong Kong bourse sank for a third-straight session and was 14 percent below its 20-day average. Shanghai bourse volume was the lowest in more than a month and almost 19 percent below its 20-day average.

We are trading at low valuations, but nobody is buying because of the various sources of uncertainty now, said Wang Ao-chao, UOB Kay Hian's Shanghai-based head of research. Funds are still cutting positions, with some seeing some redemption pressures.

HSBC Holdings Plc, Europe's largest bank, rose 0.9 percent to bounce off four-month lows reached on Thursday. The stock, top boost to the Hang Seng benchmark on Friday, is down 11.3 percent this month because of escalated Europe concerns.

GOME Electrical Appliances gained 1.6 percent ahead of its quarterly earnings, but was still down 27 percent for the year after plunging 36 percent in 2011.

After markets closed, GOME reported an 87.8 percent slide in first quarter net profit from a year earlier. The Chinese electrical appliance brand warned of a significant decline in quarterly profits on April 30, due to losses in its e-commerce business.

Shares of GOME are trading at 8.1 times forward 12-month earnings, a 52.6 percent discount to its historical median, according to Thomson Reuters StarMine.

Corporate governance was once again a focus in Hong Kong.

Chinese lighting company, NVC Lighting plunged 20 percent in more than 27 times its 30-day average volume on chatter that some major investors have called for the resignation of its chairperson.

CHINA ECONOMY IN FOCUS

Chinese railway stocks were strong on Friday, as they have been through the week on hopes the sector will benefit from a spurt in fixed asset investment as Beijing seeks to combat the slowdown in the world's second-largest economy.

The railways ministry said at the start of the week that private investors will be encouraged to bid for contracts, subsidiaries will be allowed to list shares, and pension funds welcomed to invest in railway companies.

In Shanghai, China Railway jumped a maximum 10 percent for the day, taking its gain for the week to 27 percent. In Hong Kong, China Rail Construction gained another 2.9 percent, for a weekly total of almost 13 percent.

But since the end of April, short-selling interest in the China railway stocks in Hong Kong has stayed high, suggesting some investors remain sceptical any moves to liberalise the railway industry will succeed as the sector is struggling with mounting debts and a corruption scandal.

On Friday, negative views about Chinese banks, barometers of growth, were increased by a report that Chinese banks may fall short of loan targets this year for the first time in seven years.

Industrial and Commercial Bank of China (ICBC) lost 0.2 percent each in Hong Kong and China. Smaller rival, Citic Bank shed 3.9 percent in more than triple its 30-day average volume.

In a note on Friday, Credit Suisse's global equity strategist said while Thursday's HSBC flash PMI showed new orders in China fell in May from April, they remain more concerned about the deterioration in the money supply situation.

Annual deposit growth has slowed to 11.4% from 12.5% in March and is now the lowest since the series began in 1998, Credit Suisse's Andrew Garthwaite wrote.

This indicates a higher real cost of deposits that could lead to a rise in the real cost of capital and this in turn would increase the downward pressure on China's investment share of GDP, he added.