HK stocks flat amid weak AgBank debut, China lower

* China Shipbuilding $2.6 bln share issue weighs on Shanghai

* Fundraising concerns, worries about China's economy drag

* Zijin at 17-mth low after firm is forced to halt production (Updates to midday)

By Sui-Lee Wee and Chen Yixin

HONG KONG/SHANGHAI, July 16 (Reuters) - China's key stock index was down 1.2 percent by midday Friday in thin volume, led by banks and construction companies, after China Shipbuilding Industry Co (601989.SS) announced a private share placement worth 17.3 billion yuan ($2.6 billion), adding more funding pressure to the market.

In Hong Kong, shares were flat at midday as bargain-hunting in heavyweights such as HSBC Holdings (0005.HK) was restrained by a weak market debut for Agricultural Bank of China (1288.HK) and fears of slowing economic growth in China.

The benchmark Hang Seng Index .HSI was down 0.07 percent or 14.33 points at 20,241.29, with a 1.2 percent rise in HSBC capping losses. The China Enterprises Index .HSCE of top locally listed mainland Chinese companies was down 0.37 percent at 11,385.34.

AgBank (1288.HK)(601288.SS) rose about 3 percent in early trading in Hong Kong. Its Shanghai-listed shares rose less than 1 percent on their first day's trade on Thursday. [ID:nSGE66E0CI]

Even with the massive AgBank initial public offering out of the way, the market would have little room to recover, dealers said.

"Investors are treading water to cross the river," said Jackson Wong, an investment manager at Tanrich Securities. "There's a lot of uncertainty. Data from China showed the economy did slow in the second quarter and it seems the economy will slow down more in the third and fourth quarters. In light of this, people won't make big bets."

China would stick to an appropriately loose monetary stance and a proactive fiscal policy, Premier Wen Jiabao said on Friday, a day after China reported a cooling of growth in the second quarter. [ID:nBJC002602]

The charts show near-term resistance for the Hang Seng Index at 20,800, its July 14 high, and support at 19,800, its June 22 high.

AgBank's soft debut bodes ill for upcoming fundraisings by peers including Industrial and Commercial Bank of China (1398.HK) (601398.SS) and Bank of China (3988.HK)(601988.SS), who are returning to capital markets to raise tens of billions of dollars to supplement their capital.

China Grand Forestry Green Resources Group (0910.HK) tumbled to a 20-month low after the company said it expected to record a significant loss for the year ended March because of non-cash revaluation losses of biological assets, impairment losses of intangible assets and a decrease in sales.

The stock, which was among the top percentage losers in Hong Kong, was down 11 percent by midday.

Zijin Mining Group Co (2899.HK) hit a near 17-month low after the company was ordered to halt production after waste water discharges from its copper mine polluted a river and reservoir in Fujian province, the China Business News reported on Friday. [ID:nTOE66F009]

Zijin, among the most actively traded stocks in Hong Kong, was down 5.8 percent by midday.

SHANGHAI FALLS

The Shanghai Composite Index .SSEC was at 2,395.3 points by midday after closing down 1.9 percent on Thursday, the biggest percentage fall in two weeks. Agricultural Bank of China (601288.SS) disappointed with a lacklustre Shanghai debut on Thursday.

The index has dropped 3.1 percent so far this week.

China's stock market is one of the world's worst performers, down 27 percent this year, second only to Greece, after Beijing put in place a range of policies to cool the mainland's red-hot property sector. The Hong Kong market has fallen 7.5 percent.

"The main reason for the fall is the market's lack of funds," said Chen Yi, analyst at Xiangcai Securities in Shanghai. "And investors still have no faith in the market."

Almost all 15 banks listed on the Shanghai and Shenzhen markets fell, with AgBank, the most active stock, down 0.7 percent at 2.68 yuan, trading around its IPO price. It rose about 3 percent in its Hong Kong debut on Friday. [ID:nTOE66E08A]

China Shipbuilding (601989.SS), the second-most active stock on the Shanghai market, dropped its 10 percent daily limit, while property developer Gemdale Corp (600383.SS) fell 2.0 percent.

Volume weakened, reflecting waning investor appetites for A shares, falling to 28 billion yuan ($4.13 billion) in the morning session from Thursday morning's 39 billion yuan. Losing share outnumbered gainers 751 to 138. (Editing by Chris Lewis)