(Updates to midday)
HONG KONG, July 7 (Reuters) - Hong Kong shares gained 0.7 percent as investors bought selectively, even as the lack of conviction in a global economic recovery kept turnover thin. Shanghai stocks stalled after a four-session rally.
A dry spell for positive news on the global economy has forced fund managers into wait-and-see mode following a four-month winning stretch by the market.
"Investors are still hesitant to give up on the market and miss their chance to capture this rebound, but with overseas markets losing momentum there is a total lack of direction," said Ben Kwong, chief operating officer with KGI Asia.
Here are the index moves and top stock moves by midday-
HONG KONG
* The benchmark Hang Seng Index was up 0.7 percent at 18,097.08, with HSBC Holdings leading gains with a 1.6 percent jump.
* The main index has been hovering between 17,800 and 18,200 points since late last week, but investors anticipate a bigger correction in the event of news that challenges the assumption of a gradual recovery in the global economy.
Analysts see the next major support for the index at around 16,000 points, close to its 38.2 percent Fibonacci retracement since the market bottomed in March and the double peak high it hit in April.
* China Unicom, the country's second-largest wireless service provider, rose 4.6 percent on speculation it was close to signing a deal to launch Apple's popular iPhone handset in China.
* The China Enterprises Index, which represents top locally listed mainland Chinese stocks, had risen 0.5 percent to 10,877.22.
* Cathay Pacific jumped 5.9 percent to HK$10.86 after JP Morgan raised its rating on the stock to "overweight" from "underweight" on expectations that the airline's earnings outlook will become more positive.
The brokerage increased its target price to HK$13 from HK$7, saying Asia's third-largest airline would outperform peers with a marginal profit in 2009, helped by better average loads, cost-cutting measures including capacity rationalization, and mark-to-market fuel hedging gains.
* China Mengniu Dairy gained after it said it would raise HK$3.058 billion ($394.6 million) from a share sale to China National Oils, Foodstuffs and Cereals Corp (COFCO) and Hopu Investment Management. Shares in the company, which saw sales drop sharply following last year's tainted milk scandal, were up 2.4 percent at HK$19.56.
* Huadian Power jumped 5.1 percent to HK$2.69 in Hong Kong and 7.7 percent to 5.71 yuan in Shanghai after it said it would acquire 70 percent stakes in two in Shanxi-based coal miners for about 760 million yuan ($111.2 million) to ensure coal supply to the company's power plants.
* Sportswear maker Li Ning rose 1.4 percent after it acquired Kason Sports, one of the top three badminton equipment brands in China, for a total 165 million yuan ($24.15 million).
SHANGHAI
* The Shanghai Composite Index ended the morning up 0.06 percent at 3,126.536 points on Tuesday. It eased after setting a new 13-month closing high for a fourth consecutive session in hectic trade on Monday.
* Gaining Shanghai A shares outnumbered losers by 581 to 327, while turnover for Shanghai A shares slipped to 96.7 billion yuan ($14.2 billion), from Monday morning's heavy 115.6 billion yuan.
* "Profit-taking pressure is increasing and weak oil prices are weighing on certain sectors. The index is likely to ease after its recent fast jump," said Western Securities analyst Cao Xuefeng.
* Steel shares were strong for the second day, with Baosteel up 3.8 percent at 8.21 yuan following a gain of 8.4 percent on Monday after the company said steel demand in July was set to remain high.
* Liuzhou Steel gained 8.8 percent to 7.70 yuan after saying its operations had been unaffected by heavy flooding in the region.
* Coal shares were hit after recent lower oil prices. China Shenhua Energy sank 1.16 percent to 33.10 yuan.
* Xinjiang-linked stocks were mixed for the second day, with Xinjiang Tianshan Wool Tex, based in Urumqi, rising 1.38 percent to 5.15 yuan after sinking 3.97 percent on Monday.
Hundreds of Uighur protesters clashed with Chinese anti-riot police in the capital of China's Muslim region of Xinjiang on Tuesday, two days after ethnic unrest left 156 dead and more than 800 injured.
"Urumqi has a limited number of listed companies, so the impact will also be very limited," Cao added. (Reporting by Parvathy Ullatil in HONG KONG and Claire Zhang in SHANGHAI; Editing by Ben Blanchard and Chris Lewis)