HK index rises to near 21000, then slips back; China weaker - Reuters

(Updates to close)

* Hang Seng up 0.3 pct, Shanghai down 0.4 pct

* Beaten-down cyclicals lead HSI gains, Chalco outperforms

* Credit Suisse bullish on China beta plays

* Shanghai turnover at 2011 lows, oil names drag

By Clement Tan and Vikram Subhedar

HONG KONG, Sept 1 (Reuters) - Hong Kong's Hang Seng stock index edged up for a fourth-straight session on Thursday but closed at intraday lows after climbing back near 21,000, a level proving tough to breach as the market tries to recover from an August trough.

It was on August 5, prior to a 4 percent plunge during a global selloff, that the index law saw 21,000. On Thursday, it opened firmly and gained 1.5 percent, reaching 20,975.3. But then it fell further back from 21,000, which analysts now see as near-term resistance.

The Hang Seng Index closed up 0.3 percent at 20,585.3 points. The China Enterprise Index edged down 0.2 percent to close at 10,922.5 points.

"There is some short covering these two days. A more stable market outlook is also encouraging investors to bargain hunt names that have been oversold," said Peter So, a strategist with CCB International in Hong Kong.

Tracking Thursday's intraday retreat were beaten-down cyclicals as investors took profits. Aluminium Corp of China Ltd (Chalco) , the third biggest beta play among Hang Seng components, was up 6.7 percent at midday, but finished up 3.1 percent.

Chalco did not track the rebound on the Hang Seng Index in the second half of August, dragged lower primarily by weaker-than-expected first-half earnings, losing more than 22 percent on the month. The Hang Seng Index, by comparison, lost 8.5 percent.

A Credit Suisse report on Thursday recommended adding cyclical stocks, saying the recent market plunge has made China stocks look "rather attractive" from a price-to-book basis, despite expecting GDP and earnings growth to slow in 2012.

"We cut some weightings in the consumer sector and add some weightings to cyclical sectors such as transportation and materials," Credit Suisse analysts Vincent Chan and Peggy Chan wrote. Insurance and diversified financials were their biggest overweight sectors.

China Mobile Ltd was the top boost to the benchmark on Thursday and could extend its outperformance should the index breach 21,000. It gained 1.3 percent in August, but is not constrained by a vertical gap on the charts seen on the benchmark or its biggest weight, HSBC Holdings Plc .

SHANGHAI DOWN IN YEAR'S LOWEST TURNOVER

The Shanghai Composite Index closed down 0.4 percent at 2,556 points, with oil heavyweights Petrochina Co Ltd and China Petroleum & Chemical Corp (Sinopec) among its top drags.

A-share turnover sank to its lowest this year as expectations of more possible monetary tightening lingered.

With data published on Thursday suggesting that factory activity in the world's second-largest economy largely steadied in August, market watchers say this could embolden Beijing's aggressive approach towards reducing inflation.

China Premier Wen Jiabao signalled on Thursday that controlling inflation would remain a top priority in coming months even as the global economy wobbles.

Also weighing on mainland markets was profit-taking in alcohol-related names that outperformed on Wednesday after Wuliangye Yibin Co Ltd said it would raise its product price by 20-30 percent from Sept. 10.

Kweichow Moutai shed 1.5 percent and was among the top drags in Shanghai, while Wuliangye lost 1.9 percent in Shenzhen. (Editing by Richard Borsuk)

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