HK shares slide 5.5 pct, but HSI above 12,000 pts

* Stocks track global slide, but HSI holds above 12,000

* Decliners beat advancers, 648 to 64

* Telco equipment makers defy with strong gains on 3G hopes

By Parvathy Ullatil

(Updates to midday)

HONG KONG, Nov 20 (Reuters) - Hong Kong shares dropped 5.5 percent to a three-week low on Thursday, tracking a steep drop on Wall Street after dismal economic data prompted a global flight to cash, but the main index held above the 12,000-point level.

Unwinding carry trades amid a global equities sell-off pushed the Hong Kong dollar to the upper limit of its pegged trading band against the greenback. The territory's central bank has injected more than $2 billion into the banking system this week in a bid to curb the appreciation in the local currency.

The benchmark Hang Seng Index .HSI ended the morning session 704.29 points lower at 12,111.51, with stocks across the board notching up hefty losses.

"Even though Beijing said it will issue 750 billion renminbi in bonds next year as part of the stimulus plan to boost the economy, those fiscal events cannot encourage investors to buy stocks in Hong Kong," said Huang Shin Hui, analyst with CSC Securities.

"The HSI will test the support of 11,000 points by the end of November."

The Hang Seng Index sunk below 11,000 points on Oct. 27 for the first time in 4-½ years.

Only 64 of 1,091 traded issues were in the black in Thursday morning trade.

Telecom equipment makers bucked the broad trend, cementing Wednesday's sharp gains on hopes that China will issue 3G licences before the end of the year, flagging off multi-billion investments in network infrastructure.

ZTE Corp (0763.HK) gained 2.5, percent while Comba Telecom System (2342.HK) rallied 6.2 percent.

Mainboard turnover rose to HK$23.5 billion ($3 billion) from HK$20.9 billion at midday on Wednesday.

"Early signs of deflation in the U.S. seems to suggest a long, painful journey before the economy recovers," said Patrick Yiu, associate director with CASH Asset Management.