China stocks at 5-wk low, HK market retreats

* China, HK shares fall on Beijing policy tightening fears

* China Shenhua at two-week low in HK on downbeat profit

* Increased share supply haunts Chinese market
(Updates to close)

By Jun Ebias and Farah Master

HONG KONG/SHANGHAI, March 15 (Reuters) - Shares in China
ended at a five-week closing low on Monday, weighing on Hong
Kong's market, amid investor expectations the central bank would
step up policy tightening measures after the release of
higher-than-expected inflation data last week.

The Shanghai Composite Index .SSEC finished down 1.21
percent at 2,976.939 points, extending Friday's 1.24 percent drop
and breaching the psychologically important 3,000-point level.

"The market is eyeing an imminent rise in bank reserve ratios
and there is growing concern over further policy tightening,"
said Xu Yinhui, analyst at Guotai Junan Securities.

The Chinese central bank is expected to increase bank
reserve requirements as early as this week, although some players
said it may wait a while before raising benchmark deposit and
lending rates.

Losing Shanghai stocks outnumbered winners by 631 to 255,
while turnover fell to a one-month low of 75 billion yuan ($10.99
billion) from Friday's 84 billion yuan.

Concerns about additional share supplies continued to haunt
the Chinese stock market after regulators allowed eight
companies, including Chongqing Water Group Co, to launch initial
public offerings this week. [ID:nTOE62A07X]

"Investors see no opportunities to make a profit under
current market conditions and many are choosing to get out for
the time being or to stay on the sidelines, making trade very
sluggish," said a senior trader at a major Chinese brokerage in
Shanghai.

Trade was dominated by speculation in small-cap shares, with
a decline in the volume of funds flowing into the market
weakening the ability of investors to trade index heavyweights,
traders said.

Small-cap Taiji Computer Corp 002368.SZ was the day's
biggest faller, tumbling by its 10 percent daily limit to 54.19
yuan after more than doubling on Friday, its first day of
trading, reflecting typical speculative trade in shares of market
newcomers.

Sichuan Danfu Compressors 002366.SZ was down 9.96 percent
at 25.05 yuan and Canny Elevator 002367.SZ fell 9.94 percent to
32.90 yuan, becoming the day's second- and third-biggest losers,
also after a surge during their debuts on Friday.

Citic Securities Co (600030.SS) edged up 0.22 percent to
27.77 yuan after it said over the weekend that it planned to give
up part of its stakes in two subsidiaries to bring it in line
with regulatory requirements. [ID:nTOE62C00P]

HONG KONG LOWER

The benchmark Hang Seng Index .HSI slid 0.62 percent or
130.64 points to 21,079.10, retreating from a seven-week closing
high posted on March 11.

Turnover was slightly higher at HK$49.4 billion ($6.4
billion) from Friday's HK$48.29 billion, a three-week low, but
down from Thursday's HK$57.30 billion. Volume was thin as
investors stayed out of the market ahead of the outcome of a U.S.
Federal Reserve meeting.

"The Hong Kong market was hurt by the weakening mainland
stock market. Most investors are staying on the sidelines and
selling pressure is not strong, as you can see from the low
volume," said Linus Yip, strategist at First Shanghai Securities.
"The market is waiting for more news from overseas such as the
Fed meeting and any major policy announcement from China."

The China Enterprises Index .HSCE of top locally listed
mainland Chinese stocks fell 1.66 percent to 11,971.49.

China Shenhua Energy Co Ltd (1088.HK) fell 3.89 percent to
close at its lowest in more than two weeks. The world's most
valuable coal producer said government policies could raise its
costs after reporting weaker-than-forecast quarterly profit.
[ID:nTOE62808A]

China Merchants Bank (3968.HK) slid 2.36 percent amid strong
interest in its rights issue of yuan-denominated A shares.
[ID:nTOE62D01V]

China Taiping Insurance (0966.HK) eased 3.21 percent. The
insurer said on Monday that it had entered into an agreement to
sell Ming An Insurance Company (China) outright.

Chinese car and battery maker BYD Co (1211.HK) was up 0.22
percent, retreating from earlier gains, after posting a
forecast-beating quarterly profit. [ID:nTOE62E049]

CNOOC (0883.HK) reversed earlier gains to end down 0.47
percent. China's biggest offshore oil explorer is planning a
venture with Argentina's Bridas Energy and will pay $3.1 billion
for a 50 percent stake in Bridas Corp. [ID:nTOE62D01I]

Dynamic Energy Holdings (0578.HK) also narrowed gains,
closing up 2.86 percent. The gold producer said it would issue
HK$1.2 billion ($154.7 million) in convertible notes, raising
proceeds to repay a bond and to finance acquisitions and the
restructuring of 22 coal mines in Henan province.