(Updates to midday)
* HSI down 2.1 pct, Shanghai Composite down 1.4 pct
* China Coal slumps 17 pct in HK, shares suspended
* Esprit plunges 17 pct, set for worst 3-session loss
* Shanghai lower, starved money supply limits turnover
By Clement Tan
HONG KONG, Sept 19 (Reuters) - Hong Kong shares dropped in thin Monday trade, led by Esprit Holdings Ltd and China Coal Energy Co Ltd , with midday turnover nearing a two-month low as investors stayed away amid concern over lingering risks in Europe.
Markets are expected to stay weak during a week that will present policy risks on both sides of the Atlantic ahead of the United States Federal Reserve's two-day meeting and as European policymakers aim to craft a resolution for Greece.
"Some institutional investors are finding it difficult to make calls on which sectors will lead the rebound, given the multiple risks that exist," said Edward Huang, a strategist with Haitong International in Hong Kong. "Even with the China consumption story, which most see as a safer bet, investors are now more sceptical of the high price-to-earnings ratios. Investors are assessing more factors now as we enter a period of slower growth."
For instance, Hengan International Group Co Ltd is trading at 25 times its forward 12-month earnings, which is 22 times above its historical median, according to Thomson Reuters Starmine.
While it is 27 percent off its highest forward 12-month earnings in 2008, the H-share listing of China's largest maker of sanitary napkins could still prove prohibitive for investors in this market environment.
The Hang Seng Index was down 2.1 percent at 19,047.15 at the midday trading break. The China Enterprises Index lost 2.79 percent to fall below 10,000 points, around which it had see-sawed for much of the previous week.
China Coal plunged 16.8 percent in volume more than twice its 30-day average to the lowest in more than a year before trading was suspended. Its Shanghai-listed shares lost 5.8 percent.
Mainland state media reported on Sunday that the company's mining operations in the northern province of Shanxi were suspended after eight miners died in a colliery flooding at a subsidiary there.
Europe-focused retailer Esprit plunged 17.2 percent, poised for its worst-ever three-session performance after posting a worse-than-expected 98 percent decline in full-year net profit.
The stock is at the most oversold level ever on the charts, with its 14-day relative strength index value below 10 for the first time.
CYCLICALS LEAD SHANGHAI LOWER
The Shanghai Composite Index had declined 1.41 percent to 2,447.38 by the midday trading break, weighed by cyclicals as fears over tightening money supply kept A-share turnover low.
This was compounded by news on Monday that Sinohydro Group Ltd, builder of the Three Gorges Dam, was planning to launch a $2.7 billion initial public offering this week.
China's money market rates are expected to rise this week because of forthcoming cash calls ahead of the week-long National Day holiday from Oct. 1 to 7 -- when mainlanders typically withdraw savings from banks to spend on tourism and other leisure activities.
Banks were among the worst hit, with the mainland's largest lender, Industrial and Commercial Bank of China Ltd down 0.7 percent and Bank of China Ltd down 1.4 percent.
PetroChina Co Ltd was the Shanghai benchmark's top drag, down 0.9 percent, while China Shenhua Energy Co Ltd lost 2 percent. Both helped drag the Shanghai energy sub-index down 1.89 percent. (Editing by Chris Lewis)