HK shares race ahead but China stocks lag on IPO fears

* HK shares gain 1 pct with energy cos in the lead

* China shares slip on likely resumption of IPOs next week

* Chalco drops in HK on scrapped Rio deal but gains in China

(Updates to close)

By Parvathy Ullatil & Claire Zhang

HONG KONG/SHANGHAI, June 5 (Reuters) - Hong Kong shares rose on Friday, with energy stocks leading gains as crude oil hit a seven-month high, while electricity producers shot up after agreeing to a nominal increase in coal contract prices in two provinces of China.

In Shanghai, stocks slipped 0.48 percent but posted their biggest weekly gain in one month, with investors wary about a planned resumption of initial public offerings that could come as early as next week.

Aluminum Corp of China (Chalco) (2600.HK) dropped 2.1 percent in Hong Kong after Rio Tinto (RIO.AX) (RIO.L) scrapped its proposed $19.5 billion tie-up with the Chinese company's parent Chinalco. [ID:nRIO]

But in Shanghai, the company's shares (601600.SS), which trade at a more than 70 percent premium to its Hong Kong shares, ended 0.7 percent higher at 12.47 yuan. The stock rose as much as 7 percent intraday, as analysts asserted there would be no fundamental impact on Chalco's operations from the scuttled deal.

"However, investment sentiment could be negatively affected ... in the past, the Rio-Chinalco deal has been one of the key positives for sentiment and a major concern for short-sellers," Citigroup analysts Catherine Wang and Thomas P. Wrigglesworth said in a mote to investors.

ENERGY, POWER STOCKS SPARKLE IN HK

Huadian Power (1071.HK) vaulted 12 percent to HK$2.43 on reports coal miners and power producers had agreed to a 4 percent increase in contract coal prices in Shandong and Henan provinces after protracted negotiations.

Datang International Power (0991.HK) advanced 7.2 percent, while China Resources Power Holdings (0836.HK), which was trading lower earlier in the session after announcing a HK$6.05 billion (US$775.9 million) rights issue, recovered to close up 3.8 percent.

The benchmark Hang Seng Index .HSI was up 1 percent or 176.76 points at 18,679.53, shrugging off a 2 percent drop in heavyweight HSBC (0005.HK).

"With the economy still a while away from a complete recovery, stocks are looking quite overbought now," said Castor Pang, strategist with Sun Hung Kai Financial.

"But funds flooding the market don't seem to be paying any attention to valuations. This is very similar to a pattern we see in the mainland markets, which makes us think these are Chinese funds," he said.