HK shares extend fall to 2 pct; Shanghai up 0.9 pct

(Updates to midday)

HONG KONG/SHANGHAI, June 18 (Reuters) - Hong Kong shares extended their fall into a fourth consecutive session, weighed down by concern over ratings downgrades at U.S. banks and the spread of H1N1 influenza, while Shanghai stocks remained firm on optimism about China's economic recovery.

Late on Wednesday, the Hong Kong government announced that a nurse was the latest confirmed case of the H1N1 virus in the city.

Under worst-case contingency plans released by the mainland health ministry, the Chinese government said it might restrict movements in residential areas and shut down entertainment centres to prevent the virus from spreading.

Mainland financial stocks were backed by a favourable sector outlook given the continued strength of China's economic recovery and ample liquidity in the banking system, although CIMB analyst Alexander Lee warned that Chinese banks may not be able to sustain high liquidity without negative consequences.

Here are the index movers by midday:

HONG KONG

* The benchmark Hang Seng Index .HSI fell 356.52 points or 1.97 percent to 17,728.08.

* "Banks and property stocks are the leading losers of the day," said Steve Cheng, associate director at Shenyin Wanguo in Hong Kong. "We see profit-taking in these sectors, even though banks in the mainland market were firm. We didn't follow their trend."

* The China Enterprises Index .HSCE of top mainland companies fell 2.6 percent to 10,421.18.

* Turnover thinned to HK$36.7 billion from midday Wednesday's HK$40.4 billion.

* Top banks extended their losses, with ICBC (1398.HK) sliding 3.6 percent and Bank of China (3988.HK) retreating 3.1 percent. HSBC (0005.HK) lost more than 1 percent and China Construction Bank (0939.HK) dropped 2.6 percent.

* The property sub-index dropped 1.93 percent.

* Chaoda Modern Agriculture (0682.HK) tumbled as much as 17.6 percent to a low of HK$4.41, before ending the morning session at HK$4.48, cutting its losses to 16.3 percent.

The Chinese agricultural products maker and distributor on Thursday said it planned to sell up to $228 million shares at a discount. It said it would sell up to 388 million shares, or 12.8 percent of its enlarged share capital, to professional and institutional investors at HK$4.60 each, to raise HK$1.78 billion ($228 million). here

Trading in the stock, which was suspended on Wednesday afternoon, resumed on Thursday.