HONG KONG, Jan 31 (Reuters) - Hong Kong stock market took a breather on Friday after two sessions of declines, as investors hunted for bargains in consumer stocks battered by a recent selloff amid fears of the coronavirus outbreak in China.
** The Hang Seng Index was up 0.22% at 26,507.08 points by midday, but is set to close lower this week. The China Enterprises Index was flat at 10,324.91 points.
** An index tracking consumer goods and services companies gained 0.6%, after losing 6.7% in the last two trading sessions.
** In money markets, Hong Kong's offshore yuan overnight rate spiked to 4.9355, its highest since October 2018, reflecting tight supply of Hong Kong dollars and yuan.
** "Markets are afraid of possible disruption in both Hong Kong and Chinese financial markets, especially if there was any possibility of the Chinese government extending the holiday for banks," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong, adding banks would like to keep more cash in their accounts to avoid any such risk event.
** Fears of the spreading coronavirus have knocked global stock markets over the past week. Transport, tourism, retail and luxury stocks have been at the frontline.
** Hong Kong private home prices eased again in December, declining 1.7%, weighed down by a gloomy economic outlook of the financial hub that was hit by a series of violent anti-government protests last year.
** In China, growth in factory activity faltered in January as export orders fell and an outbreak of a new virus added to risks.
** Meanwhile, a Chinese international trade promotion agency said it would offer force majeure certificates to companies struggling to cope with the impact of the new coronavirus epidemic on their business with overseas partners.
** In other markets, Asian share markets battled to regain their footing as investors clutched at hopes China could contain the coronavirus, even as headlines spoke of ever more cases and mounting deaths.
** A number of recently stress-tested Chinese banks could require sizable recapitalizations, rating agency S&P said, singling out three - Bohai Bank, China Zheshang Bank, and Shengjing Bank - as potentially under pressure.
(Reporting by the Hong Kong and Singapore Newsroom, Editing by Sherry Jacob-Phillips)