UPDATE 1-China's CDB Leasing falls as much as 7.5 pct on HK market debut

* CDB Leasing raised $800 mln in IPO last month

* Competition, interest rates cloud earnings outlook for lessors

* Rival BOC Aviation also down 7.6 pct since May IPO (Updates share price, adds analyst comment, context)

HONG KONG, July 11 (Reuters) - China Development Bank Financial Leasing Co Ltd stock fell as much as 7.5 percent on their market debut, after an IPO in which tepid demand led the aircraft and commercial vehicle lessor to price shares near the bottom end of the marketing range.

CDB Leasing, a subsidiary of state-owned China Development Bank Corp, last month raised nearly $800 million after pricing 3.1 billion shares at HK$2 each from an indicative range of HK$1.90 to HK$2.45.

But the stock ended its market debut on the Hong Kong Stock Exchange at HK$1.86, just one cent above its day low.

“People are not chasing this kind of business model,” said director Alex Wong at Ample Finance Group. “There is a lot more competition around and the leasing yield probably would be decreasing in a lower interest rate environment.”

Shares of rival lessor BOC Aviation Ltd have also fallen 7.6 percent from the price it set in the world’s biggest aircraft lessor IPO in May that raised $1.1 billion. The stock ended down 1.7 percent on Monday whereas the benchmark index closed up 1.5 percent.

Aircraft lessors are betting on increased air travel demand in Asia and particularly China, where passenger volume is rising at a rate of over 10 percent a year and reached 392 million people in 2014, official data showed.

Western rivals such as AerCap Holdings NV and GE Capital Aviation Services LLC dominate a sector that underpins the aviation industry. But China, through its banks, aims to create global champions - though a slowing economy and low interest rates threaten to dull any advance.

In the latest IPO, CDB Leasing sold 68 percent to 78 percent of shares to cornerstone investors - individuals or institutions who buy shares before the remainder is sold to the public.

Hong Kong stands out among financial centres for the high proportion of shares sold during IPOs to cornerstone investors, who agree not to sell their stakes for a specified period. (Reporting by Sumeet Chatterjee and Donny Kwok; Editing by Kenneth Maxwell and Christopher Cushing)