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HK, China shares fall; profit-taking hit banks

* China regulator denies talk of suspended IPO approvals

* Chinese banks succumb to profit-taking (Updates to close)

HONG KONG/SHANGHAI, Feb 4 (Reuters) - Shares in Hong Kong and China weakened on Thursday, as mainland banks succumbed to profit-taking, while concerns over more share supply weighed on the Shanghai stock market.

Investors sold Hong Kong-listed Chinese lenders after the investment arm of China’s sovereign wealth fund denied a newspaper report that it would buy new shares from the country’s top lenders.

China’s key stock index fell 0.28 percent, with large-capitalisation shares relinquishing some of the previous day’s gains after China’s securities regulator denied rumours that it had suspended the review and approval of new IPOs.

The benchmark Hang Seng Index .HSI ended down 1.84 percent or 380.44 points at 20,341.64, snapping a three-day rise.

Turnover fell to HK$61 billion ($7.9 billion), the lowest since Jan. 4, from Wednesday’s HK$68.64 billion, with investors sidelined ahead of U.S. jobs data due on Friday.

“The U.S. government is going to release important data tomorrow, keeping players cautious,” said Kenny Tang, research head at Redford Securities. “Sentiment may improve after the Lunar New Year holiday, with a lot of bargain-hunting interest.”

The China Enterprises Index .HSCE of top locally listed mainland Chinese stocks shed 1.97 percent to 11,605.88.

Some investors took profit after the HSI gained 3 percent in the last three sessions, dealers said.

Industrial and Commercial Bank of China (ICBC) 1398.HK fell 2.4 percent, reversing Wednesday's 2.3 percent rise. China Merchants Bank 3968.HK slipped 1.7 percent after rising more than 6 percent in the last two sessions.

Gold counters eased, as gold prices retreated. Realgold Mining 0246.HK fell 3.9 percent and Zijin Mining 2899.HK was down 1.2 percent. [ID:nTOE61303L]

Chinese computer maker Lenovo Group 0992.HK erased earlier losses to end up 0.2 percent, after it reported forecast-beating results. [ID:nTOE611060]

MORE SUPPLY WEIGHS SHANGHAI

China’s stock market has been weighed down in recent weeks by worries about heavy share supplies, fuelled by steady approvals of new initial public offerings.

The Shanghai Composite Index .SSEC ended down at 2,995.308 points, after rising 2.4 percent on Wednesday in its biggest daily percentage gain in nearly six weeks.

But gaining Shanghai A shares outnumbered losers by 568 to 311, while turnover slipped to 114 billion yuan ($16.70 billion), from Wednesday’s 119 billion yuan.

The official Securities Times reported on Thursday that the China Securities Regulatory Commission had denied a repeated rumour that it suspended the review and approval of new stock initial public offerings.

Four new companies to be listed on the ChiNext market for startups will take IPO subscriptions on Friday, when three new stocks will also debut in Shenzhen.

“The policy news front is expected to turn quiet with the approach of the Lunar New Year holiday (from Feb. 14),” said Zhang Xiang, chief strategist at Guodu Securities in Beijing.

He added that investors were reluctant to hold on to resources shares, which helped drive Wednesday’s rise, on uncertainty about activity in overseas markets during the one-week holiday.

After a shake-out in the market last month, when the benchmark index dropped 8.8 percent in only its second monthly decline in 15 months, analysts expect the index to stick to a relatively narrow range below the psychologically key 3,000 point mark going into the holiday.

“Several sectors were actively traded today and sentiment has partially recovered after the recent sell-off,” added Qian Xiangjing, senior analyst at CITIC-Kington Securities in Hangzhou.

China Erzhong Heavy Industries 601268.SS jumped by its 10 percent daily limit to 8.90 yuan, rebounding above its IPO price of 8.50 yuan after falling below that level during its Tuesday debut.

Companies based in Hainan province shone, with Hainan Airlines 600221.SS, China's fourth-largest carrier, also up by its 10 percent daily limit.

The China Index Academy said in a research note that Hainan property prices bucked the national trend and rose in January, backed by government designation of the island as an international tourism area.

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