* HSI up 0.4 percent, China shares flat
* Turnover light as G7 emergency talks prompt short-covering
* HK property offers good risk-reward: Bofa Merrill Lynch
* China Coal closes at over 3-year low, Yanzhou down 3.3 pct
(Updates to close)
By Vikram Subhedar
HONG KONG, June 5 (Reuters) - Battered Hong Kong shares rose
slightly on Tuesday, partly on short-covering ahead of emergency
G7 talks on the euro zone debt crisis, although investors
remained reluctant to take on fresh positions because of the
increasingly gloomy global outlook.
The Hang Seng Index ended the day up 0.4 percent,
with beaten down financials supporting gains although turnover
on the exchange slumped nearly a third from the past month's
average, pointing to investor caution.
Mainland markets, which have outperformed Hong Kong and
other regional stock indices since last month's weakness, were
little changed. The Shanghai Composite closed up 0.2
percent while the large-cap focused CSI300 ended flat.
"With the G7 ministers & central bankers due to talk today
some investors are covering. I just don't see anything too
dramatic," said a Hong Kong-based trader at an American
Spain, the euro zone's fourth-largest economy, is quickly
becoming the biggest concern for investors as the region's debt
woes threaten to spread.
Finance chiefs of the Group of Seven leading industrialised
powers will hold emergency talks on the euro zone debt crisis in
a sign of heightened global alarm about the threat posed by
strains inside the 17-nation monetary union.
Investors took refuge in some of this year's outperformers
such as insurer AIA Group which is among a handful of
blue chips that has remained in positive territory for the year.
Its 2.2 percent gain on the day brought its year-to-date returns
to 3.7 percent.
Shares of Bank of China, the top performer amongst
the Big 4 Chinese banks this year, rose 1.4 percent.
HK PROPERTY A GOOD BET, SAYS BOFA MERRILL
Hong Kong property shares were broadly stronger after Bank
of American Merrill Lynch said in a note to clients rewards
outweigh the risks of buying into the sector at current levels.
The brokerage now projects Hong Kong residential prices to
rise 5 to 10 percent in 2012 versus a prior forecast that called
for a 10 percent decline largely due to the resilient
performance of homes prices year-to-date.
Analysts at BofA Merrill Lynch said the valuation gap
between physical property prices and stocks was at an all-time
high and the markets were pricing in a 30 percent drop in
Cheung Kong Holdings, up 0.2 percent, and
Henderson Land, which ended up 0.3 percent, were among
its top picks.
Shares of Wharf Holdings, which owns commercial
properties throughout Hong Kong, rose 1.5 percent after the
company agreed with the Hong Kong government on terms to renew a
Bucking the trend, cyclical stocks such as coal producers
and shipping stocks remained weak as the outlook on global
growth remains grim.
China Shenhua fell 1.7 percent while China Coal
lost 1.5 percent to close at an over three-year low.
Yanzhou Coal fell 3.3 percent to its lowest since
Rising inventory levels at power plants and ports will weigh
on thermal coal prices while a weak outlook for steel and coke
prices will limit coking coal prices, according to analysts at
Goldman Sachs who maintain their cautious view on the sector.
(Editing by Jacqueline Wong)