HONG KONG, Aug 18 (Reuters) - Hong Kong shares were flat by midday Thursday, outperforming Asian peers largely on gains in Hong Kong Exchanges and Clearing Ltd (HKEx) after it announced joint venture talks with two mainland China bourses.

Gains by the world's largest exchange operator by market capitalisation in midday volume of more than twice its 30-day average set it apart from a market that remained otherwise fragile, with overall turnover staying below average.

"Smaller investors are liquidating stocks they bottom-fished earlier this week and late last week," said Wing Fung Financial Group head of research Mark To, suggesting that HKEx gains could be muted by market conditions. "People are hesitant to chase good performers, worried that risk aversion might reignite anytime."

The Hang Seng Index barely changed at 20,288.82 points by the midday trading break, capped in the near term by its Aug. 2010 low at 20,379 points, a level the benchmark tested but failed to finish above in the previous two sessions.

HKEx gained 6.9 percent, while Bank of China Hong Kong (Holdings) Ltd , the only clearing bank for offshore yuan, gained 4.7 percent, a day after Chinese Vice-Premier Li Keqiang announced measures to further liberalise cross-border investments between Hong Kong and China.

This includes the possible introduction in the mainland of exchange-traded funds (ETF) linked to Hong Kong that analysts suggested HKEx could help develop.

Chinese brokerages licensed to trade in mainland China and Hong Kong extended gains. Shenyin Wanguo (HK) Ltd rose 7.2 percent in more than eight times its 30-day average volume.

SHANGHAI DOWN ON PROPERTY, CEMENT NAMES

The Shanghai Composite Index was down 0.3 percent at 2,592.4 points at midday, with property and cement issues extending losses in the lowest midday A-share turnover in two weeks.

Official data on Thursday showed China's annual housing inflation quickened in July for a second straight month this year, keeping pressure on Beijing to rein in the red-hot property sector.

The Shanghai Securities News reported on Thursday the terms the mainland's housing ministry had set for a proposed extension of home purchase restrictions to more second- and third-tier cities. It had reported on Wednesday that the central government could release the list of cities affected by the end of August.

Anhui Conch Cement Co Ltd lost more than 5 percent in midday volume exceeding its 30-day average, while Tanshang Jidong Cement lost 3.5 percent.

Beijing Vantone Real Estate Co Ltd , with a market cap of $846.6 million, lost 2.5 percent, while Poly Real Estate Group Co Ltd , China's second-largest realtor by sales volume, lost 1.4 percent.