(Refiles to fix day reference in first paragraph)
* Energy counters offset losses in HK stocks
* Steel counters lead gains in China (Updates to midday)
By Yixin Chen and Clement Tan
SHANGHAI/HONG KONG, March 29 (Reuters) - Energy and steel counters outperformed as stock markets in Hong Kong and China shrugged off early losses to close marginally higher by midday Tuesday, with investors anticipating higher demand in the second quarter.
The Hang Seng Index was up 0.1 percent at 23,091.41 at the midday trading break, with CNOOC Ltd , China Shenhua Energy Co Ltd and PetroChina Co Ltd leading gains in low trading volume as investors close their monthly and quarterly positions.
The benchmark Shanghai Composite Index was up 0.2 percent at 2,991.2, just shy of the psychologically important 3,000-point resistance level.
"The index still has the potential to rise slightly as this is a strong earnings session," said China Development Bank Securities analyst Chen Shaodan in Beijing, adding that the index might reach 3,100.
Encouraged by a strong earnings season, analysts widely forecast the index would rise to about 3,100 next quarter, but serious inflation and uncertain tightening policies might cap a sharp rise.
Steelmakers were the biggest gainers on the Shanghai market. Inner Mongolia Baotou Steel Union Co Ltd , the most active issue in Shanghai, rose 6.9 percent. Hebei Iron and Steel Co Ltd , the third-most active issue on the Shenzhen market, was up 2.5 percent.
Analysts said demand for steel was traditionally stronger during the second quarter and they anticipated large-scale reconstruction following the Japan's earthquake to boost steel exports.
China's biggest listed brokerage Citic Securities Co Ltd jumped 3.7 percent on Tuesday after announcing its roughly $2.7 billion Hong Kong IPO plan, potentially boosting the company's global competitiveness. [ID:nL3E7ET051]
China Xd Electric Co Ltd was the biggest loser on the Shanghai market, after posting a net loss for 2010.
THIN VOLUME IN HONG KONG
Investors in Hong Kong are tending to stay away, concerned about their monthly and quarterly positions ahead of the month's end, accounting for low volume in recent sessions.
"Energy and commodities are safe bets in this directionless market," said Jackson Wong, vice president of Tanrich Securities. "Especially with Japan's situation still unresolved."
Analysts said lacklustre volume would likely continue until later this week with the release of key U.S. economic data likely to drive action at the start of April.
They forecast the Hang Seng Index to trade around the 23,000 level this week and climb in the second quarter, with 24,400 as a broad resistance level.
Better-than-expected economic recovery in the U.S. is likely to benefit technology and energy stocks. An anticipated increase in Japanese demand for more traditional energy is also seen as favoring traditional and non-traditional energy counters. (Editing by Chris Lewis)
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