(Updates to midday)
* HSI up 0.3 pct, Shanghai Comp down 0.3 pct
* HSBC, Chinese oil majors drive HSI gains
* Chinese banks weak, hit by fears of weak loan growth
* Chinese property stocks extend downward spiral in mainland
By Clement Tan and Vikram Subhedar
HONG KONG, March 19 (Reuters) - Hong Kong shares rose at midday on Monday, with strength in HSBC Holdings Plc helping produce outperformance over mainland Chinese markets, dragged lower by Chinese banks on fears of weak quarterly loan growth.
The official China Securities Journal reported on Monday that new yuan loans by Chinese banks are expected to reach about 800 billion yuan ($126.53 billion) in March, suggesting total new loans issued in the first quarter may fall short of the 2.4 trillion yuan target.
The Shanghai Composite Index and the China Enterprises Index of the top mainland listings in Hong Kong each shed 0.3 percent, while the Hang Seng Index rose 0.3 percent.
"Chinese banks are weaker on news of loan growth today, but earnings later this week could provide a way back into the sector for investors," said Edward Huang, an equity strategist with Haitong Securities International.
HSBC , Europe's largest bank and the biggest Hang Seng Index component stock, rose 2 percent in relatively strong volume, tracking gains on Friday in its London listing, to near a more than seven-month high in Hong Kong.
Chinese oil majors were also stronger on higher oil prices. CNOOC Ltd rose 2.3 percent, while China Petroleum & Chemical Corp (Sinopec) gained 1.4 percent and PetroChina Co Ltd advanced 0.7 percent.
CHINESE BANKS, PROPERTY WEAK
Strength in HSBC and Chinese oil majors offset weakness in Chinese banks, which as a sector, have underperformed this year. According to Thomson Reuters StarMine, Chinese banking components on the China Enterprise Index are up about 6 percent, compared with an 11 percent rise for the benchmark.
On Monday, a gauge of Chinese financials listed in Hong Kong slipped 0.7 percent, with Industrial and Commercial Bank of China (ICBC) down 0.4 percent and China Construction Bank (CCB) losing 0.3 percent.
ICBC is down 7 percent in March, while CCB has lost more than 4 percent. This compares to the 1.4 percent loss on the Hang Seng Index and a 5.4 percent loss on the China Enterprises Index in the same time period.
Fears of fund raising in the sector that could dilute stakes of existing stakeholders, combined with Chinese Premier Wen Jiabao's hawkish comments on the property sector last Wednesday, have kept people cautious.
But improving liquidity conditions in the mainland money markets and corporate earnings expected to start streaming in from the bigger Chinese banks this week could trigger fresh interest into the sector.
In the mainland, Bank of China shed 0.7 percent, while smaller rival Industrial Bank slipped 0.9 percent.
Chinese property stocks extended their downward spiral, with the Shanghai property sub-index down 0.9 percent. It has slumped 5.6 percent since Wen's comments last Wednesday that curbs on the sector will remain.
In February, Chinese home prices fell from January for a fifth consecutive month and are expected to continue heading south in coming months, underlining the success of Beijing's long campaign to cool property market speculation. (Editing by XXX)
