HK shares reverse gains on China telco profit taking

* HK shares reverse course as China telcos slide

* Local property stocks climb on improved home sales

* Turnover inches up to HK$30 billion by midday

(Updates to midday)

By Parvathy Ullatil

HONG KONG, Jan 6 (Reuters) - Hong Kong shares fell more than 1 percent on Tuesday, pulling back from a three-day, 9 percent rally, with Chinese telecom stocks retreating sharply as investors booked profits on recent gains.

China Mobile (0941.HK) fell 3.4 percent to HK$82.10 while smaller rival China Unicom (0762.HK) dropped 5.9 percent.

Both stocks had rallied sharply in the last two sessions on hopes that Chinese telecom companies will be able to offer third generation network services soon, after Beijing approved the long-awaited issuance of 3G licences last week.

China's state council did not say when the licences would be issued to the telecom operators, but market talk said they may be handed out as early as Wednesday, giving investors an opportunity to lock in gains.

"The mobile companies have said they don't have any information about when the licences will be issued plus these stocks have been overbought in the last couple of sessions," said Ben Kwong, chief operating officer with KGI Asia.

The new licences will see dominant player China Mobile forced to build and operate a 3G network based on a home-grown, experimental technology called TD-SCDMA.

The Hang Seng Index .HSI ended the morning session 1.1 percent or 175.90 points lower at 15,402.24 after opening 0.3 percent higher.

Shares in local property counters rose sharply after land registry data showed a significant improvement in December 2008 home sales as compared with the previous month.

The total number of property transactions for December rose 44 percent over November while the money involved in transactions shot up more than 90 percent, owing to a slight recovery in investor sentiment, Deutsche Bank said in a report on Tuesday.

Sun Hung Kai Properties (0016.HK), the territory's biggest developer, gained 3.8 percent, while Henderson Land (0012.HK) rose 3.6 percent.

Mainboard turnover rose to HK$30 billion ($3.8 billion) from HK$25.1 billion by midday on Monday.