Australia shares fall on likely friction with China over dairy firm buyout

* Energy and healthcare stocks weigh on benchmark

* Santos marks worst session since June 29 after HY profit dips

* NZ closes lower (Updates to close)

August 20 (Reuters) - Australian shares ended lower on Thursday as appetite for risky assets faded on fears that the country’s relationship with China could further sour following a report that the government would block a Chinese buyout offer of a local dairy firm.

The S&P/ASX 200 index slipped 0.8% to 6,120.00 at the close of trade. The benchmark gained 0.7% on Wednesday.

The Australian Financial Review reported that Australia will not approve China Mengniu Dairy Co’s proposed buyout of some of the country’s best-known milk brands from Japan’s Kirin Holdings Co.

“The reality what Australia can do to China is relatively minimal, what China can do to Australia is relatively high. In that context there is not a lot of bargaining power for Australia,” said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.

There “will be some implications for Australia becouse we have aligned with the United States to push back on China,” Somasundaram added.

Diplomatic ties between China and Australia have soured after Canberra called earlier this year for an independent inquiry into the origins of the new coronavirus and criticised a new security law in Hong Kong.

The energy sector was the worst performer falling 3.7% at close, in its worst session since July 31, hurt by lower oil prices.

Shares of oil and gas heavyweights Santos and Origin Energy closed about 4.8% and 6.1% down, respectively, after both reported a dip in underlying profits.

The healthcare index fell 2.7% pressed down by industry heavyweight CSL Ltd’s 3.9% decline, after analysts highlighted their concern over the potential impact of lower plasma collections on the drugmaker’s results amid coronavirus curbs.

ASX 300 metals and mining index fell 0.95% led by Imdex Ltd, down 4.2%, followed by West African Resources Ltd, losing 3%.

In New Zealand, the benchmark S&P/NZX 50 index fell 0.8% to 11,662.2.

Top losers on the were Mercury NZ Ltd, down 3.4%, followed by Vista Group International Ltd, losing 3.1%. (Reporting by Nikhil Subba in Bengaluru; Editing by Shailesh Kuber)