HK shares fall 2.5 pct; worst monthly drop in 11 yrs

* HSI posts biggest monthly drop since Oct. 1997

* HK shares fall, led by 3.6 pct drop in HSBC

* Chinese property stocks firm after mainland rate cut

By Judy Hua

HONG KONG, Oct 31 (Reuters) - Hong Kong shares fell 2.5 percent on Friday, with the index posting its worst monthly drop since Oct. 1997 as renewed worries over the global economy and the outlook for earnings snapped a three-day, 30 percent rally.

Bank of Communications (3328.HK: Quote, Profile, Research, Stock Buzz), China's No.5 lender, fell as much as 9.6 percent after it said third-quarter profit growth slowed sharply from the first half. [ID:nSHA224654] The stock closed down 5.4 percent after it jumped 15 percent on Thursday in a technical rebound.

But property shares such as China Overseas Land (0688.HK: Quote, Profile, Research, Stock Buzz) remained firm after China lowered borrowing costs on Wednesday.

"I do believe the rebound hasn't come to an end yet because interest rate cuts will continue worldwide over the next few weeks," said Andrew To, sales director of Tai Fook Securities.

He expects the Hang Seng Index .HSI to touch 15,000 in two weeks.

"After the technical rebound, the market may come down again to reach the previous low. Hopefully 10,600 might be the bottom unless there is more fresh negative news to come."

The benchmark index .HSI fell as much as 5 percent on Friday after sharp gains this week fuelled in part by another round of rate cuts worldwide.

The index ended down 361.18 points at 13,968.67, taking its losses for the month to about 22 percent, the biggest monthly fall since October 1997.

The blue chip index is now about 57 percent off its life high hit in October last year.

Recent high-fliers fell, with heavyweights China Life (2628.HK: Quote, Profile, Research, Stock Buzz) and HSBC (0005.HK: Quote, Profile, Research, Stock Buzz) leading the slide.

Shares of HSBC (0005.HK: Quote, Profile, Research, Stock Buzz) slid 3.6 percent to HK$92.00 after the bank's stock had soared more than 10 percent to end at an intraday high of HK$95.4 on Thursday.

China Life (2628.HK: Quote, Profile, Research, Stock Buzz), which had risen rose more than 12 percent on Thursday, eased 4.5 percent to HK$20.35.

Consumer goods exporter Li & Fung (0494.HK: Quote, Profile, Research, Stock Buzz) plunged 13.14 percent after the stock surged about 20 percent on Thursday. PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz) fell 3.4 percent after its roughly 20 percent gain the previous day.

Mainboard turnover fell to HK$58.47 billion ($7.5 billion) from HK$75.1 billion on Thursday.

The China Enterprises Index .HSCE of top locally listed mainland Chinese companies slid 2.3 percent to 6,611.15.

Chinese property shares bucked the down trend, with China Overseas Land (0688.HK: Quote, Profile, Research, Stock Buzz) up 6 percent, smaller rivals Country Garden (2007.HK: Quote, Profile, Research, Stock Buzz) up 4.7 percent and Agile Property (3383.HK: Quote, Profile, Research, Stock Buzz) up 5.1 percent.

Shares of Huadian Power International (1071.HK: Quote, Profile, Research, Stock Buzz) fell 6 percent after the Chinese power firm on Thursday said it expected to see a loss for 2008 due to a significant increase in coal prices. It posted 1.23 billion yuan profit in 2007.

Stock of China Unicom Ltd (0762.HK: Quote, Profile, Research, Stock Buzz)(CHU.N: Quote, Profile, Research, Stock Buzz) fell 4.4 percent after the smaller of the country's two mobile operators posted a 13 percent drop in third-quarter earnings due to lower mobile usage and subscriber growth during the Beijing Olympics. [ID:nHKG262429] (Reporting by Judy Hua; editing by Anne Marie Roantree)