(Updates to midday)
* HSI crawls up 0.2 pct, CSI300 down 1.1 pct
* ZTE slumps after profit warning, FBI investigation
* Higher oil prices buoy PetroChina, CNOOC in Hong Kong
* Property sector weak in China as investors await policy cues
By Clement Tan
HONG KONG, July 16 (Reuters) - China shares tumbled on Monday, underperforming Asian peers and limiting gains in Hong Kong, hit by a slew of profit warnings that suggest the slowdown in the world's second-largest economy is hitting its companies harder than expected.
Shares of ZTE Corporation slumped 14.4 percent in Hong Kong and the maximum 10 percent in Shenzhen after the world's fifth-largest telecommunications equipment maker, and subject of an ongoing FBI criminal investigation, warned of lower profits.
Several brokerages downgraded ZTE's Hong Kong listing in response. Analysts at JP Morgan slashed their rating on ZTE from "overweight" to "underweight" while cutting their price target by more than 50 percent.
"There's going to be more of such profit warnings in the next few weeks, leading up to the earnings season in August. Even with policy easing, it's going to take a while before earnings improve," said Jackson Wong, Tanrich Securities' vice-president for equity sales.
The Shanghai Composite Index fell 1.2 percent at midday, while the large cap-focused CSI300 Index that tracks the top 300 companies listed in Shanghai and Shenzhen shed 1.4 percent.
Sunning Appliance, among the biggest privately-owned electrical applicance retailers in China, dived 9 percent in Shenzhen, hitting the lowest since March 2009 after it warned of a 20 to 30 percent slump in first half profit.
Strength in Chinese oil majors helped the Hang Seng Index creep up 0.2 percent. The China Enterprises Index of the top Chinese listings in Hong Kong inched up 0.1 percent as overall bourse turnover stayed weak.
PetroChina jumped 2.1 percent, while CNOOC Ltd rose 0.5 percent largely on rising oil prices.
PetroChina closed at its lowest this year last Friday and is down more than 4 percent in 2012 to date. By contrast, CNOOC is up more than 11 percent over the same time period.
MAINLAND INVESTORS TRIM PROPERTY OUTPERFORMANCE
Chinese property stocks were a major drag in onshore Chinese markets as investors took some profits in a sector that has outperformed the broader market this year on expectations the sector would benefit from policy easing.
Poly Real Estate shed 3.5 percent, dragging the Shanghai property sub-index down 2.4 percent and trimming its gains on the year to 22.6 percent. This compares to the 1.8 percent loss on the Shanghai Composite Index.
"Premier Wen didn't mention anything specific on the sector in his comments over the weekend and with so many profit warnings, investors are choosing to clock some gains for now," said Chen Yi, a Shanghai-based Xiangcai Securities analyst.
China's Premier Wen Jiabao, who has repeatedly reiterated curbs on the property sector will remain, said on Sunday that efforts to stabilise the economy are working and the government will step up efforts in the second half of the year to increase policy effectiveness and foresight.
Data released last Friday showed China's growth rate slowed for a sixth successive quarter to its slackest pace in more than three years, highlighting the need for more policy vigilance from Beijing even as signs emerge that action taken so far is beginning to stabilise the economy. Investors had reacted with relief on Friday as the 7.6 percent growth in GDP in the second quarter was no worse than expected, allowing the main share indexes to post small gains.
China's government could hold its mid-year economic meeting as early as Wednesday this week to lay out a policy programme designed to stabilise the economy in the second half of the year, the official China Securities Journal report on Monday.
(Additional reporting by Vikram Subhedar; Editing by Simon Cameron-Moore)