HK shares erase early gains as local developers weigh

* HK shares turn lower as investors dumped local developers

* Financials rise on China measures to boost liquidity

* Telecoms gain on 3G licence speculation

(Updates to close)

By Jun Ebias

HONG KONG, Dec 4 (Reuters) - Hong Kong shares fell 0.6 percent on Thursday, wiping out a 2 pecent gain earlier in the day, as investors dumped local developers after lenders such as HSBC (0005.HK) raised their Hong Kong mortgage rates.

But Chinese financial stocks held on to their gains in response to Beijing's planned measures to further boost liquidity.

The benchmark Hang Seng Index .HSI closed the session 78.88 points lower at 13,509.78, led by a 2.2 percent drop in HSBC.

Sentiment turned grim in the afternoon session after Swiss lender Credit Suisse (CSGN.VX) said it had a net loss of $2.5 billion at the end of November and it was shedding 5,300 jobs. [ID:nL4454056]

"The report that Credit Suisse will cut its work force dominated the market after lunch," said Benjamin Collett, head of hedge fund sales trading at Daiwa Securities SMBC Co. "This is yet another downside of the financial distress."

Billionaire Li Ka-shing's flagship property firm Cheung Kong (Holdings) (0001.HK) fell 3.4 percent, while rivals Henderson Land (0012.HK) shed 2.5 percent and Sun Hung Kai Properties (0016.HK) lost 1.2 percent.

Bank of China (Hong Kong) and HSBC this week raised their mortgage rates by between 50 and 75 basis points.

China's top lender, ICBC (1398.HK), gained 1.8 percent, while smaller rival China Construction Bank (0939.HK) rose 2.1 percent, on hopes China will further cut the reserve requirement on deposits to spur lending.

"There is an economic conference by top leaders in China right now and the market is expecting more stimulus. That's supporting investor sentiment," said Y.K. Lee, analyst at Core-Pacific Yamaichi.

China's cabinet on Wednesday approved measures aimed at keeping the stock market steady, boosting bond issuance and increasing the supply of credit. [ID:nPEK83991]

The nation's No.1 insurer, China Life Insurance (2628.HK), rose 1.2 percent, while smaller rivals Ping An Insurance (2318.HK) soared 5.4 percent and PICC P&C (2328.HK) surged 10.2 percent.