HK shares end up 2.7 pct on easier lending in China

* China banks, properties rise on signs of loan cap easing

* China Unicom extends losses after weak Q3

* HSBC underperforms on Goldman Sachs downgrade

By Parvathy Ullatil

HONG KONG, Nov 3 (Reuters) - Hong Kong shares rose 2.7 percent on Monday, with Chinese counters leading the charge after a central bank official indicated Beijing had eased lending restrictions, but the main index closed off highs in a late bout of profit taking.

State media also quoted a central bank spokesman as saying the People's Bank of China must flexibly adjust its economic policies, including monetary policy. [ID:nSHA270955] China has cut interest rates three times in six weeks after a series of tightening measures earlier to rein in runaway inflation.

"We are not sure about the impact this move will have -- whether banks will be willing to lend given the current global financial situation or whether there will be huge demand from property developers and industrial companies," said Steven Leung, sales director with UOB Kay Hian.

"But this is a major policy shift and that itself has improved sentiment greatly."

Index heavyweight HSBC (0005.HK: Quote, Profile, Research, Stock Buzz) lagged gains in the broader market, gaining 0.5 percent, after Goldman Sachs downgraded the stock to neutral from buy, citing headwinds in the global lender's Asia and Middle Eastern business. The U.S. investment bank also slashed its target price on Europe's largest lender to HK$102 from HK$150.

Wireless carrier China Unicom (0762.HK: Quote, Profile, Research, Stock Buzz), which announced a 13 percent drop in third-quarter earnings on Thursday, bucked the trend to fall another 6.7 percent, adding to Friday's 4.3 percent drop.

Analysts said the company's merger with fixed-line service provider China Netcom could be a drag on its business amid increased competition from rivals and a slowdown in China's economic growth.

The benchmark Hang Seng Index .HSI closed up 375.70 points at 14,344.37 in a strong start to a month investors hope will bring stability to the market after it posted its worst monthly drop in more than a decade in October.

The index had rallied to 14,889.13 earlier.

"We have a seen a bit of profit taking post-lunch today but the market will continue to rise in the near term," said Linus Yip, strategist with First Shanghai Securities.

"China is working hard to stimulate the markets and the correction in the last three months has been unprecedented. So we should see the market bounce at least till it hits 15,000 points."

Mainboard turnover fell to HK$52.1 billion ($6.7 billion) from HK$58.5 billion on Friday.

Offshore oil specialist CNOOC (0883.HK: Quote, Profile, Research, Stock Buzz) shot up 4.9 percent as commodity prices rose. Asia's largest oil and gas producer, PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz), jumped 4.4 percent.

The China Enterprises Index .HSCE of top locally listed mainland Chinese companies gained 3 percent to 6,806.33, led by a 5.1 percent surge in top lender ICBC (1398.HK: Quote, Profile, Research, Stock Buzz).

China Construction Bank (0939.HK: Quote, Profile, Research, Stock Buzz) gained 2.7 percent, while China Merchants Bank (3968.HK: Quote, Profile, Research, Stock Buzz) climbed 3.3 percent.

Property developer China Overseas Land Investment (0688.HK: Quote, Profile, Research, Stock Buzz) jumped 5.5 percent, with easier lending seen helping demand in the ailing sector. Guangazhou R&F Properties (2777.HK: Quote, Profile, Research, Stock Buzz) rose 5.6 percent.

Chinese footwear maker Walker Group (1386.HK: Quote, Profile, Research, Stock Buzz) plunged 28.9 percent after it issued a profit warning on Friday, indicating substantial losses on account of slower sales due to the Sichuan earthquake and the Olympics, as well as mark-to-market losses on its investments.

CITIC Pacific (0267.HK: Quote, Profile, Research, Stock Buzz) which was suspended on Friday after a 21 percent surge in its share price early in the day, remained suspended pending a price-sensitive announcement.

Speculation is rife that the Beijing-backed conglomerate, which announced a $2 billion potential loss from bad currency bets last month, will see an asset injection from its parent -- CITIC Group -- to help support its operations.

But sister company CITIC Resources (1205.HK: Quote, Profile, Research, Stock Buzz) surged 19.3 percent after saying one of its units was in advanced talks on a possible deal but no agreement had yet been reached.

Analysts said the announcement may signal the sale of the oil supplier's manganese unit. The stock soared more than 60 percent to HK$0.94 earlier in the day.

Hutchison Telecommunications International Ltd (2332.HK: Quote, Profile, Research, Stock Buzz) added 3.8 percent after the company said its board was meeting on Nov. 12 to consider payment of a dividend.

"Our recent cut in our target price reflected our view of bumper special dividends as unlikely in current financial conditions where cash is king. HTIL's announcement indicates we could be wrong and bodes an immediate catalyst for what we consider is anyway a great defensive investment case in these markets. We stay buyers," said Citigroup analyst Anand Ramachandran on Monday.

Johnson Electric (0179.HK: Quote, Profile, Research, Stock Buzz), which makes mini-motors, slid 12.5 percent after it said on Monday it expects second-half profit to be lower amid weakness in the automotive sector. (Editing by Anne Marie Roantree)