HK shares close 0.7 pct lower as properties fall

* Hong Kong shares fall on bleak economic outlook

* Li & Fung jumps on outsourcing agreement

* Hutchison Telecom soars on cash dividend

(Updates to close)

By Jun Ebias

HONG KONG, Nov 12 (Reuters) - Hong Kong shares fell 0.7 percent in a volatile session on Wednesday as local developers slid on a grim economic outlook, but Li & Fung (0494.HK: Quote, Profile, Research, Stock Buzz) jumped after it signed an outsourcing agreement abroad.

Other export-oriented stocks also gained, with sports shoemaker Yue Yuen Industrial Holdings (0551.HK: Quote, Profile, Research, Stock Buzz), supplier to the likes of Nike, up 7.5 percent and Foxconn International Holdings (2038.HK: Quote, Profile, Research, Stock Buzz), which makes mobile phones for Motorola, up 5 percent.

Consumer goods exporter Li & Fung (0494.HK: Quote, Profile, Research, Stock Buzz) gained 11.6 percent after it won a contract with fashion retailer Liz Claiborne Inc (LIZ.N: Quote, Profile, Research, Stock Buzz). [ID:nWNAB1564]

But Hong Kong's top developer, Sun Hung Kai Properties (0016.HK: Quote, Profile, Research, Stock Buzz), fell 4 percent, while smaller rivals Hang Lung Properties (0101.HK: Quote, Profile, Research, Stock Buzz) shed 2.8 percent and billionaire Li Ka-shing's Cheung Kong (Holdings) (0001.HK: Quote, Profile, Research, Stock Buzz) down 3.7 percent.

Hong Kong may have tipped into a recession in the third quarter for the first time since the SARS outbreak in the spring of 2003, half of the economists in a Reuters poll said. [ID:nHKG306628]

"We are going to see more volatility in the market, with more negative news expected from the U.S. this week. The market tends to react very quickly to anything negative and is very sceptical about any good news," said Howard Gorges, vice chairman at South China Securities.

The U.S. Commerce Department is due to release October retail sales on Friday, a key indicator for the state of the economy.

The benchmark Hang Seng Index .HSI ended the session down 101.81 points at 13,939.09, led by a 2 percent drop in HSBC (0005.HK: Quote, Profile, Research, Stock Buzz) on bad loan worries. [ID:nLA296008]

A total of HK$47.2 billion ($6 billion) changed hands, down from HK$54.4 billion on Tuesday.

Hutchison Telecommunications International Ltd (2332.HK: Quote, Profile, Research, Stock Buzz) surged 11.4. The stock rose as much as 31 percent earlier, its biggest one-day percentage gain ever afer it declared a bigger-than-expected special dividend. [ID:nHKG189764]

Alibaba.com (1688.HK: Quote, Profile, Research, Stock Buzz) rose 9.4 percent after China's biggest e-commerce firm said its board of directors had approved a plan to buy up to $258 million worth of shares. [ID:nHKG178202]

Coal producer China Shenhua Enery (1088.HK: Quote, Profile, Research, Stock Buzz) lost 2.1 percent, while offshore oil producer CNOOC (0883.HK: Quote, Profile, Research, Stock Buzz) shed 1.3 percent, after crude oil prices settled below $60 a barrel in Asian trade. The China Enterprise Index .HSCE of top locally listed mainland Chinese companies was steady at 7,134.54.

But China Merchants Holdings (0144.HK: Quote, Profile, Research, Stock Buzz) lost 6 percent after JP Morgan cut its target price on the company to HK$16.50 from HK$24.00 and its earnings forecast by 24 percent for 2009.

Insulator maker Vitar International (0195.HK: Quote, Profile, Research, Stock Buzz) rose 10.5 percent on its trading debut. The company issued 28 million new shares at HK$2.1 each, raising HK$58.8 million ($7.5 million).

Stocks due to be added to the MSCI China Standard Index .MICN00000PHK this month traded higher.

Beer maker Tsingtao Brewery (0168.HK: Quote, Profile, Research, Stock Buzz) gained 6.3 percent and juice maker China Huiyuan Juice Group (1886.HK: Quote, Profile, Research, Stock Buzz) rose 2.8 percent.

(With additional reporting by Donny Kwok; Editing by Anne Marie Roantree)