HK shares fall 1.2 pct on properties,Hang Seng Bank

* Investors ignore bailout vote, focus on weak outlook

* Local properties continue slide on mortgage rate hike

* Hang Seng Bank plunges on Wamu exposure

(Updates to mid-day)

By Parvathy Ullatil

HONG KONG, Oct 2 (Reuters) - Hong Kong shares fell 1.2 percent in skittish trade on Thursday as sliding local property stocks and Hang Seng Bank's 9.2 percent plunge overshadowed the U.S. Senate's green light for a financial sector bailout package.

But Chinese property stocks bucked the trend, soaring on Thursday after state media reported that regional governments were propping up the ailing sector with measures including subsidies for home buyers.

"Although Beijing has not loosened restrictions on the property sector, a number of local governments have found leeway to implement stimulative measures, following the apparent relaxation in the central government's macro-tightening policies," said analysts with JP Morgan in a note to investors.

"With land sales accounting for approximately 30 percent of local government revenues, officials are eager to forestall an excessive property slowdown that might impact local finances."

Shares in China Overseas Land Investment (0688.HK) vaulted close to 9 percent, before scaling back gains to 7.6 percent. China Resources Land (0291.HK) gained 6 percent. Guangzhou R&F Properties (2777.HK) shot up 10.2 percent.

The benchmark Hang Seng Index .HSI was down 222.69 points at 17,793.52 after a short-lived rally earlier today.

Investors largely brushed off the U.S. Senate's approval of the revised $700 billion bank bailout plan ahead of a vote by the House of Representatives, which already rejected the rescue package on Monday.

"The package itself is mainly facilitating a wealth transfer from shareholders of failed financial institutions to shareholders of the surviving giants. The survivors are going to be in good shape," said Erwin Sanft, head of China and Hong Kong research at BNP Paribas.

"In terms of what's happening in the real economy, it looks impossible at this point to avoid a global recession next year...we see the Hang Seng breaking below 16,000 in the next six months."

Mainboard turnover fell to HK$35.9 billion ($4.6 billion) from HK$39.2 billion at mid-day on Tuesday.

The Hong Kong market was closed on Wednesday for the Chinese national day celebrations.