CITIC Pac,China Mobile drag HK shares down 1.8 pct

* Volatile market ends 1.8 pct lower amid low turnover

* China Mobile slides on disappointing earnings

* CITIC Pacific plunges on forex loss warning

* China Shenhua gains on stronger commodity prices, upgrade

(Updates to close)

By Parvathy Ullatil

HONG KONG, Oct 21 (Reuters) - Hong Kong shares erased a firm start to fall 1.8 percent on Tuesday, with CITIC Pacific losing more than half its market value after it warned of forex losses and China Mobile, Asia's largest wireless carrier, sliding on disappointing earnings.

Shares in CITIC Pacific (0267.HK: Quote, Profile, Research, Stock Buzz) hit a 17-year low of HK$6.52, notching up their biggest percentage drop ever, at 55.1 percent, after the Chinese steel-to-property conglomerate warned of potential foreign exchange losses of nearly $2 billion.

"There is much more to come in the way of profit warnings and trading losses. With the economy getting hit from every direction there will be more companies hurt by falling commodity prices and fluctuating currencies," said Linus Yip, strategist with First Shanghai Securities.

"We have been advising clients to be extra cautious with investing in manufacturing companies that hedge on raw materials."

The benchmark Hang Seng Index .HSI closed 281.84 points lower at 15,041.17 after opening 1.9 percent higher. The index fell to 14,884.07 earlier.

Asia's largest wireless service operator, China Mobile (0941.HK: Quote, Profile, Research, Stock Buzz), fell 5 percent after it posted lower-than-expected quarterly earnings amid slowing growth in China's economy.

But shares in fixed-line operator China Telecom (0728.HK: Quote, Profile, Research, Stock Buzz), which posted an anaemic 1.3 percent increase in its third-quarter net profit, gained 1.1 percent as its results were in line with analysts' expectations.

Mainboard turnover dipped to HK$50.7 billion ($6.5 billion) from Monday's HK$53.7 billion.

"Many other Asian markets have also been moving in this directionless manner, suggesting that confidence in the market is yet to be restored," said Steven Leung, sales director with UOB Kay Hian.

Seoul's KOSPI also gave up early gains to drift lower on Tuesday, while the Shanghai Composite Index .SSEC seesawed in and out of positive territory before closing lower. Early gains were spurred by U.S. Federal Reserve chairman Ben Bernanke's support for another round of government spending to shore up the ailing economy.

The China Enterprises Index .HSCE of top locally listed mainland Chinese companies fell 2.3 percent to 7,267.12.

Oil stocks jumped after crude prices gained more than 1 percent, rising for a third consecutive session on expectations that OPEC will cut output this week to lift prices.

Offshore oil specialist CNOOC (0883.HK: Quote, Profile, Research, Stock Buzz) led gainers on the main index with a 3.3 percent rally.

China Shenhua Energy (1088.HK: Quote, Profile, Research, Stock Buzz), the world's most valuable coal miner, jumped nearly 11 percent amid stronger international commodity prices on improving credit market conditions. The stock scaled back gains to close 5.3 percent higher.

Credit Suisse upgraded the stock to outperform from neutral on Tuesday, citing the company's defensive strength amid fluctuating coal prices.

Chinese financial and property stocks retreated as investors locked in gains from Monday's steep increases in these counters.

Top lender ICBC (1398.HK: Quote, Profile, Research, Stock Buzz) fell 3.4 percent, while the nation's biggest insurer, China Life (2628.HK: Quote, Profile, Research, Stock Buzz), dropped 3.7 percent.

Shares in Singamas Container Holdings (0716.HK: Quote, Profile, Research, Stock Buzz) clawed back 15.7 percent from Monday's steep drop after the world's No. 2 shipping container maker told Reuters it would remain profitable in 2008 despite a challenging industry environment and lower output this year. [ID:nHKG74429]

Fears that the global credit crunch will hurt highly geared companies, such as Singamas, sent shares of the firm down more than 30 percent on Monday. (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)