HK stocks fall 2 pct on China inflation woes

(For Shanghai market reports, click [.SS])
(Updates to Tuesday close)

By Alison Leung

HONG KONG, May 20 (Reuters) - Hong Kong stocks posted their
biggest loss in two weeks on Tuesday, sliding 2.2 percent as
China's devastating earthquake fuelled fears over inflation and
helped to drag Shanghai shares 4.5 percent lower.

Analysts said some foreign fund managers had unloaded their
holdings amid uncertainty over China's economic outlook, while
JP Morgan also turned cautious on China in the near term.

"About one-third of China inflation is related to food prices
and there are fears that high inflation may trigger further
monetary tightening policies from Beijing," said Ernie Hon,
strategist at ICEA Securities.

Property stocks led the blue chip slide, while index
heavyweight China Mobile (0941.HK: Quote, Profile, Research, Stock Buzz) slid 2.9 percent after it
reported slower subscriber growth in April.

Industrial and Commercial Bank of China (1398.HK: Quote, Profile, Research, Stock Buzz) tracked
losses in its Shanghai shares (601398.SS: Quote, Profile, Research, Stock Buzz), falling 2.8 percent.

The benchmark Hang Seng Index .HSI hit a day low of
25,042.09 before closing at 25,169.46, down 572.77 points.

The main board loss came one day after Beijing said the
economic losses from the quake would amount to about 67 billion
yuan ($9.6 billion) in Sichuan alone, while the deputy head of
the China Banking Association said the government would discuss
how to address bad loans linked to the disaster.

The China Enterprises Index of Hong Kong-listed companies
.HSCE, or H shares, dropped 2.74 to finish at 13,973.60 after
the benchmark Shanghai Composite Index .SSEC fell to a
four-week closing low.

Mainboard turnover rose to HK$82.8 billion ($10.62 billion),
from HK$70.49 on Monday.

CAUTIOUS ON CHIHA

JP Morgan said in a research report on Tuesday there would be
limited upside on major Chinese stocks listed in Hong Kong after
the H-share index jumped 29 percent from its March lows.

But the investment bank said it remained bullish on China for
the 6-18 month horizon and did not expect the impact of China's
earthquake on food prices to be prolonged.

Record oil prices continued to put pressure on crude
processors, sending Sinopec (0386.HK: Quote, Profile, Research, Stock Buzz) down 4.4 percent and
Petrochina (0857.HK: Quote, Profile, Research, Stock Buzz) down 3 precent.

One bright spot was Asia Cement (China) Holdings Corp
(0743.HK: Quote, Profile, Research, Stock Buzz), which jumped as much as 62 percent in its trading
debut, the strongest showing by a Hong Kong market newcomer this
year. [ID:nHKG14199]

Cement producers have been under the spotlight since China's
earthquake last week on optimism that demand for construction
materials will rise to meet reconstruction needs.

But the stock pared gains to close at HK$6.83 off a day high
of HK$8.0 and against an initial offering price of HK$4.95.

China's top cement maker, Anhui Conch (0914.HK: Quote, Profile, Research, Stock Buzz), also bucked
the negative market trend to gain 1.63 percent.

Shipping firms were lower despite the Baltic Exchange's dry
freight index .BADI hitting an all-time high on Monday.

"Pacific Basin's share sale last week could be a hint that
global freight rates are peaking," said Steve Cheng, associate
director at Shenyin Wanguo.

Dry bulk cargo ship operator Pacific Basin (2343.HK: Quote, Profile, Research, Stock Buzz) fell 3.7
percent and Sinotrans (0598.HK: Quote, Profile, Research, Stock Buzz) dropped 6 percent.

Some brokers believe Chinese shares listed in Hong Kong have
limited downside.

"The H-shares should find support at the current level as the
index, which is trading at around 20 times, looks reasonable,"
said Kenny Tang, associate director at Tung Tai Securities.
(Reporting by Alison Leung; Editing by Anne Marie Roantree)