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.

The guage has climbed 5 percent since March and its constituents are valued at over 16.5 times their estimated earnings in 2009, a big leap from less than 10 times in October 2008.

The China Enterprises Index .HSCE of top mainland companies rose 1.5 percent or 155.37 points to 10,862.05.

Turnover dropped to HK$80.4 billion from HK$83 billion on Thursday.

Offshore oil specialist CNOOC (0883.HK) was up 4.7 percent as oil prices stayed above $69 per barrel, a seven-month high, with a set of strong U.S. data feeding expectations of an economic recovery that could revive ailing energy demand.

Other energy stocks were also buoyant, with Yanzhou Coal (1171.HK) up 5.9 percent at HK$11.22 after Citigroup raised its rating on the stock to buy from hold on an improved price outlook for coal as steel ouput recovers. The brokerage set a target price of HK$14 on the stock.

Another big gainer, Foxconn International Holdings (2038.HK) soared 17.4 percent to HK$6.20 after Morgan Stanley upgraded shares in world's largest contract manufacturer of cellphones to an "overweight" rating from "equalweight" on expectations of a recovery in the handset market.

IPO WOES HAUNT SHANGHAI

The Shanghai Composite Index .SSEC ended up 13.353 points at 2,753.891 after climbing to a 10-month intraday high of 2,791.649 in early trade. The index has risen 4.6 percent this week, buoyed by ample market liquidity.

Losing Shanghai A shares outnumbered gainers by 530 to 373, while turnover in Shanghai A shares shrank to 153.5 billion yuan ($22.5 billion) from Thursday's heavy 179.0 billion yuan.

Analysts said a restart of IPOs, which have been suspended for more than eight months but could resume any time after a comment period on new rules ends today, could weigh on the market and spur profit-taking, although they did not predict a sharp decline.

"IPOs will not alter the index's uptrend. The liquidity situation still looks good," said CITIC-Kington Securities analyst Qian Xianjing.

Property shares were hit by profit-taking, with industry leader China Vanke (000002.SZ) losing 1.6 percent to 10.69 yuan after rising 11 percent during the previous four sessions.

Shipbuilders outperformed, with China State Shipbuilding Co (600150.SS) advancing 2.3 percent to 65.50 yuan.

The China Association of National Shipbuilding Industry said China would support plans by qualified shipbuilders to list shares and issue bonds, as part of an aid plan for the industry. [ID:nSHA372192]

(Editing by Edmund Klamann & Chris Lewis)