HK shares end up 1 pct in stagnant turnover

By Parvathy Ullatil

HONG KONG, July 4 (Reuters) - Hong Kong shares closed up 1 percent on Friday on the back of strong gains in Chinese financials after a positive earnings report from the country's biggest bank, but turnover dropped to its second-lowest level this year.

Bank shares rallied after Industrial & Commercial Bank of China (1398.HK: Quote, Profile, Research, Stock Buzz), the world's largest lender by market capitalisation, said on Thursday its first half profit grew at least 50 percent, based on Chinese accounting standards. [ID:nHKG350323]

ICBC rose 2 percent, while smaller rival China Construction Bank (0939.HK: Quote, Profile, Research, Stock Buzz) was 1.4 percent higher and Bank of Communications (3328.HK: Quote, Profile, Research, Stock Buzz) gained 1.1 percent. Merchants Bank (3968.HK: Quote, Profile, Research, Stock Buzz), the nation's sixth-largest lender, rose 2 percent.

Coal stocks tumbled, with Yanzhou Coal (1171.HK: Quote, Profile, Research, Stock Buzz) dropping 4.7 percent on talk of a possible tax adjustment to the commodity. But some analysts dismissed the speculation as it didn't appear to fit China's ongoing battle against rising inflation, and attributed losses to institutional selling.

The Hang Seng Index .HSI closed up 181.04 points at 21,423.82 after losing nearly 4 percent in the past two days. The index lost 2.8 percent over the week.

It was one of the only markets to close in positive territory on a generally grim day for nearby bourses, with Taiwan's main exchange dropping over 2 percent and South Korea's KOSPI index shedding 1.8 percent.

"Investors were reluctant to get into the market ahead of the holiday weekend in the U.S. and the release of a slew of key indicators, including consumer credit and pending home sales data next week," said Castor Pang, strategist with Sun Hung Kai Financial.

U.S. markets are closed for Independence Day on Friday.  Continued...