(updates to midday)
* HSI flat, H-shares index down 0.1 percent * China telecoms, AIA lead gains in HK * IATA profit forecast lifts Cathay Pacific * ADB cuts China GDP forecast, sees soft landing By Vikram Subhedar
Hong Kong, Oct 3 (Reuters) - Hong Kong shares were little changed on Wednesday as gains in Chinese telecom stocks, ahead of earnings this month, were offset by weakness in the energy sector due to falling oil prices.
With China's domestic stock markets shut through the week for the mid-Autumn festival, investors are likely to resist making big bets as uncertainty around Spain requesting a bailout keeps a lid on risk appetite.
The Hang Seng index , which had opened up 0.5 percent after a long weekend, drifted lower to end the morning session flat. The China Enterprises index of top locally listed mainland firms eased 0.1 percent.
Easing oil prices weighed on top Chinese producers. Petrochina fell 1.4 percent while CNOOC was down 0.9 percent and the two were the top drags on the Hang Seng after HSBC Holdings . HSBC was off 0.3 percent.
A rebound in Chinese shares had helped the Hang Seng to a 7 percent gain last month although short-selling in Hong Kong remained at relatively high levels suggesting some investors were betting on a short-lived rally.
"Short-selling last Friday was more than 10 percent of the cash market turnover so some covering expains the early spike," said a Hong Kong-based trader, adding that the market is likely to remain rangebound ahead of Friday's U.S. jobs data.
Further dampening sentiment China's official purchasing managers' index for the services sector fell to 53.7 in September from 56.3 in August in the latest disappointing data pointing to a protracted slowdown.
The Asian Development Bank cut its GDP growth estimate for China by nearly 1 percentage point to 7.7 percent from the previous 8.5 percent, warning that risks to the world's second-largest economy were likely to intensify in the short run.
DEFENSIVES BACK IN FAVOUR
Chinese telecom stocks, which underperformed markets in September as investors moved away from defensive sectors and into more growth-sensitive stocks, were stronger on the day.
China Mobile , expected to release third-quarter results later this month, was up 0.6 percent while smaller rival China Telecom was up 1.3 percent.
Insurer AIA Group Ltd. was up 1.2 percent having hit its highest level since going public in October 2010 earlier in the day.
Jefferies analyst Baron Nie initiated coverage on the stock last Friday with a "buy" rating, expecting the company to report strong third-quarter operating figures next week.
Nie prefers AIA to Chinese insurers and expects shares to rise a further 18 percent from current levels. AIA shares are up 20.6 percent this year compared to a 13 percent rise for the Hang Seng.
Shares of Cathay Pacific were up 2.9 percent after the International Air Transport Association (IATA) raised its forecasts for industry profits.
(Reporting by Vikram Subhedar; Editing by Sanjeev Miglani)
((vikram.subhedar@thomsonreuters.com)(+852 28436975))
Keywords: MARKETS HONGKONG CHINA STOCKS/UPDATE 1