* HSI -0.1 pct, H-shares -0.2 pct, CSI300 +0.9 pct
* ICBC down after Goldman Sach unloads $1 bln stake
* Smaller China banks up, hopes of possible loan-to-deposit relaxation
* China brokers lead A-share index gains
By Clement Tan
HONG KONG, Jan 29 (Reuters) - Hong Kong shares came off the previous day's 20-month high on Tuesday, as weakness in heavyweight Industrial and Commercial Bank of China (ICBC), following a $1 billion stake sale by Goldman Sachs, offset strength in its smaller rivals.
The Hang Seng Index inched down 0.1 percent to 23,655.2 on Tuesday, slipping from its highest closing levels since May 31, 2011. The China Enterprises Index of the top Chinese listings in Hong Kong fell 0.2 percent.
In the mainland though, benchmark indexes rose to their highest since mid-2012. The CSI300 of the top Shanghai and Shenzhen listings climbed 0.9 percent. The Shanghai Composite Index gained 0.5 percent.
Volume in Shanghai was above its 20-day moving average for the first time in three sessions, but Hong Kong turnover was still about 3 percent below average.
"The Chinese banking sector is actually holding up quite well, but the Goldman sale is triggering some profit taking and rotation from the larger banks into some laggard energy names today," said Jackson Wong, Tanrich Securities' vice-president for equity sales.
After the market closed on Monday, Goldman Sachs offered shares of ICBC in Hong Kong at HK$5.77, a 3 percent discount to the day's near 2-year close at HK$5.95.
On Tuesday, the shares slid 2.2 percent to HK$5.82 which pointed to a healthy demand for the stake sale, given that the stock dropped less than 3 percent.
Most of the Chinese banking sector reversed early losses as investors chased gains particularly in mid-sized banks in the mainland on hopes that regulators may relax loan-to-deposit ratio limits as interest rates are gradually liberalised.
China Minsheng Bank added another 2 percent to a record closing high in Hong Kong and 2.6 percent to a successive five-year closing high in Shanghai on Tuesday, following its market leading gains on Monday.
Minsheng Bank's Shanghai shares have surged 88 percent from a Sept. 5 nadir, while its Hong Kong listing have bounced 98 percent over the same time period.
A China Business News report said the China Banking Regulatory Commission Chairman Shang Fulin told a recent internal meeting that extensive research would be carried out on current rules on loan-to-deposit ratios and the methodology would be enhanced.
The report did not specify how the regulator would reform the ratio, which many bankers say should be raised, or if it would simply be replaced with a new measurement tool.
"In the current mood, the market will probably take a relaxation as positive because this will allow banks to keep injecting credit into the economy," Credit Suisse analysts said in a note on Tuesday.
The note, which identified Minsheng as a likely beneficiary of any relaxation of the current 75 percent loan-to-deposit limit, however said credit quality will re-emerge as a concern if growth starts to slow in the mainland in a few months.
Investors chased gains for Chinese brokerages in afternoon trade, anticipating more foreign interest in the A-share market as the country's top securities regulator visited Taiwan. Reports in official newspapers on Tuesday said foreign investors have accounted for most of the surge from December lows.
After markets closed, Guo Shuqing, the chairman of the China Securities Regulatory Commission said the country will give investment quotas for Taiwanese seeking to put money into its financial markets under the Renminbi Qualified Foreign Institutional Investor (RQFII) programme.
In Shanghai, shares of China's second-largest listed brokerage Haitong Securities surged 7.3 percent to its highest close since November 2010, while its larger rival Citic Securities jumped 4.3 percent.
Energy counters were also strong after China's National Energy Administration said investment in the country's energy sector is expected to total 13.5 trillion yuan during the 12th five-year development plan (2011-2015) period.
The agency also added that the government will encourage direct financing of energy companies and also loosen the threshold for investment.
Chinese shale gas producer Kunlun Energy climbed 2.3 percent, while the country's oil giants also saw gains. CNOOC Ltd gained 1.3 percent, also helped by rising oil prices.