Hong Kong snaps 5-day gaining streak, weak China outlook weighs

* HSI down 0.9 percent, H-share index off 1.3 percent

* Weak China markets weigh, CSI300 falls 1 percent after holiday

* Focus on profits, not policy in China: JPM's Mowat * Tencent, AIA pull back from record highs

* ZTE shares slip 6 percent in HK after draft U.S. Congress report

(updates to close) By Vikram Subhedar

HONG KONG, Oct 8 (Reuters) - Hong Kong shares snapped a five-session streak of gains on Monday as Chinese markets turned down after a week-long holiday on concerns growth in the world's second-largest economy could slow further.

The Hang Seng Index fell 0.9 percent to 20,824.6 points while the index of top locally listed Chinese shares

fell 1.3 percent and was the weakest among regional benchmarks in Asia.

On the mainland, the CSI300 of top Shanghai and Shenzhen listings fell 1 percent while the Shanghai Composite

was down 0.6 percent as domestic investors returned to the market after the Mid-Autumn Festival and National Day holidays.

PetroChina , down 0.7 percent, and coal producer China Shenhua , off 1.6 percent were the top losers on the CSI300 followed by major producers of premium liquor such as Kweichow Moutai , down 2.4 percent, partly on worries about weak sales over the Golden Week holiday.

Chinese shares in Hong Kong led losses with China Mobile

down 1.4 percent while Tencent Holdings dropped 1.3 percent, pulling further away from a record high hit last week.

Hong Kong shares rose for five straight sessions before Monday's fall on hopes that China would take steps to lift growth and boost the market heading up to the once-in-a-decade leadership transition expected to get under way next month.

"I think investors are barking up the wrong tree here," said Adrian Mowat, JPMorgan's chief emerging markets strategist who maintains an "underweight" rating on China stocks.

"Our mantra on China is focus on profits not policy," said Mowat, adding that excess capacity is still a problem in China that continues to weigh on profit margins.

Also pressuring domestic markets in China was a report in the Shanghai Securities journal which said that regulators would resume initial public offering approvals after a two-month halt, a move that could pressure liquidity in the A-share markets.


While the pace of cuts in earnings forecasts has slowed analysts are still trimming estimates for Chinese profits.

Over the past month, analysts have cut expectations for forward 12-month earnings for MSCI China constituents by 0.3 percent, according to Thomson Reuters I/B/E/S.

Earnings season in the United States gets under way on Tuesday with aluminum producer Alcoa expected to show it broke even in the third quarter although investors will likely focus more on comments about global demand.

The World Bank cut its growth forecasts for the East Asia and Pacific region on Monday and said there was a risk the slowdown in China could get worse and last longer than expected.

Worries over growth spurred profit-taking in cyclical sectors such as energy and mining shares while defensives such as utilities outperformed.

Hong Kong & China Gas rose 0.8 percent while conglomerate Hutchison Whampoa rose 1.1 percent. Insurer AIA Group eased 0.8 percent.

The materials sector in Hong Kong , which rose nearly 10 percent in September, fell 1.6 percent and was the top loser followed by telecom-related shares which dropped 1.4 percent.

ZTE Corp fell 6 percent, the biggest loser on the China Enterprises Index, after a draft report by the U.S. Congress said China's top telecommunications gear makers should be shut out of the U.S. market because they pose a security threat.

(Editing by Jacqueline Wong)

((vikram.subhedar@thomsonreuters.com)(+852 28436975))