* China stocks slip, with metal shares soft
* HK stocks down as China telecom plays weigh
* Huaneng Power gains after strong earnings (Updates to midday)
By Donny Kwok and Claire Zhang
HONG KONG/SHANGHAI, Oct 21 (Reuters) - Hong Kong and China stocks fell during Wednesday's morning session as investors locked in profit after recent gains, with telecommunications and metals shares weighing on the markets.
China telecommunication plays weighed on the Hong Kong market after weak earnings, while demand for asset plays because of a weak U.S. dollar slowed the slide.
"It was telecom stocks that dragged the market down, otherwise the market was not panicked and investors were seen looking to re-enter," said Alex Wong, a director at Ample Finance Group. "Asset plays are still a focus with no indication of any change in weak sentiment on the dollar in the short run."
Brokers said asset revaluations in the wake of the weak U.S. dollar had made local and China property stocks appealing, while power plays, which are sensitive to mainland economic policy changes, were also seen in demand, partly as a hedge against risk exposure to potential power tariff changes.
Huaneng Power, China's largest electricity provider, surged 7.5 percent to HK$5.56 after reporting that it had swung to a net profit in the third-quarter because of increased output from new operating units, two tariff rises in the second half of 2008 and lower coal costs.
A Deutsche Bank research note on Wednesday said it upgraded Huaneng to "buy" from "hold" with target price set at HK$6.30.
Index heavyweight China Mobile, the world's largest mobile carrier, fell 1.33 percent to HK$77.70. Tthe carrier faces limited profit growth in the coming quarters as costs of building a new 3G network weigh and increasing competition pushes it towards lower value subscribers.
China Telecom, China's top fixed-line phone company, lost 1.83 percent to HK$3.75 after it said its quarterly profit fell 48 percent as users of its core fixed-line services continued to migrate to mobile services.
The benchmark Hang Seng Index slid 0.14 percent, or 31.38 points to 22,353.58 at midday after closing at a 14-month high on Tuesday. Turnover was HK$35.43 billion ($4.6 billion), down from midday Tuesday's HK$38.64 billion.
The China Enterprises Index of top locally listed mainland Chinese companies eased 0.18 percent to 13,016.21.
China asset plays stayed firm with developer China Resources Land surging 7.7 percent and China Overseas Land <0688.HK> up 3.7 percent.
Guangzhou Investment was up 23.91 percent at HK$1.71 after it announced a plan to separate its toll road business and focus on its property business to capitalise on the robust growth of the Chinese property market.
SHANGHAI SURGES
China's key stock index was down 0.17 percent at midday Wednesday, retreating from a two-month intraday high with metals shares soft as profit-taking emerged. Analysts said the index needed to consolidate after breaking key resistance.
The Shanghai Composite Index ended the morning at 3,079.218 points, after earlier hitting an intraday two-month high of 3,094.457.
Losing Shanghai A shares outnumbered gainers by 583 to 353, while turnover slipped to 77.2 billion yuan ($11 billion) from Tuesday morning's 94 billion yuan.
"The index rose fast and reflected rosy expectations about economic data due for release on Thursday. It may test 3,000 to see if it can offer strong support," said Chen Huiqin, senior analyst at Huatai Securities in Nanjing.
She added that the index had limited upside because of worries about possible monetary tightening but could climb as high as 3,200 points.
China's central bank has pledged to maintain its loose monetary policy to support the economy and has said it would ensure sustainable credit growth without resorting to heavy-handed quotas to rein in a lending spree.
But analysts said informal lending controls were possible, and money tightening might start in mid-December, which could make investors more careful.
The official Shanghai Securities News cited Frank Gong, a prominent JPMorgan economist who has been bullish on China's yuan and economic prospects for years, as saying China's benchmarks stock index should exceed 3,600 points in three to nine months.
Shandong Gold sank 2.96 percent to 69.50 yuan after gold fell below $1,060 per ounce on Tuesday as the dollar rebounded from its weakest level in 14 months versus the euro.
Bank shares were firmer. Minsheng Bank, China's first listed non-state lender to plan a Hong Kong share offer, rose 2.36 percent to 7.81 yuan after saying it would earn a net profit of at least 11 billion yuan ($1.6 billion) in 2009.
Huaneng Power International, China's largest electricity provider, advanced 3.23 percent to 8.00 yuan after saying net profit in the third quarter grew nearly fourfold as new facilities went into production.
Guangdong Midea Electric Appliances and washing machine maker Wuxi Little Swan both raced up by their 10 percent daily limit after their shares were suspended since Sept. 30. Midea said it planned to increase its stake in Little Swan by merging its washing machine business with Little Swan.
Three firms debuted in Shenzhen. Fujian Sunner Development jumped 37 percent to 27.08 yuan, Fujian Nanping Sun Cable gained 80 percent to 36.93 yuan and Shenzhen Comix Stationery rose 43 percent to 28.56 yuan. (Editing by Chris Lewis)