HK shares fall to two-week low as HSBC, HKEx drop

* Hong Kong shares fall to two-week low

* Chinese banks tumble on earnings outlook

* HSBC drops on uncertainty over U.S. bank bailout plan (Updates to close)

By Jun Ebias

HONG KONG, Nov 13 (Reuters) - Hong Kong shares fell 5.2 percent to a two-week low on Thursday, as HSBC (0005.HK: Quote, Profile, Research, Stock Buzz) dropped on concerns about the U.S. bank bailout plan and HKEx (0388.HK: Quote, Profile, Research, Stock Buzz) tumbled on lower quarterly earnings.

Asia's biggest listed bourse operator, Hong Kong Exchanges & Clearing, tumbled almost 8 percent after it reported that profit fell 43 percent in July-September, its second quarterly decline, due to sluggish trading volumes. [ID:nHKG191448]

BNP Paribas cut its target price on HKEx by 28 percent to HK$49.32 and its earnings forecast by 9 percent for this year and 3-12 percent in 2009 and 2010.

Properties extended their losses on a bleak outlook for the Hong Kong economy, which is expected to have slipped into a recession in the third quarter. Top local developer Sun Hung Kai Properties (0016.HK: Quote, Profile, Research, Stock Buzz) lost 7.1 percent, while Henderson Land (0012.HK: Quote, Profile, Research, Stock Buzz) fell 6.4 percent.

"Even if Hong Kong banks have lowered prime rates, it will not help the property sector. The problem is banks now are more cautious about lending and they need idle cash for emergency," said Daniel Chan, senior investment strategist at DBS Bank.

HSBC tumbled 6 percent amid concern over whether the United States will succeed in its banking rescue plan after the U.S. Treasury backed away from using a $700 billion bailout fund to buy bad mortgage debt from lenders.

A rally in shares of CITIC Pacific (0267.HK: Quote, Profile, Research, Stock Buzz) fizzled, as relief over a bailout by its parent gave way to worries over corporate governance and the outlook for the company's earnings.

The steel-to-property conglomerate rose as much as 17 percent before closing up 9.2 percent after its parent said it would buy $1.5 billion worth of convertible bonds from the firm and assume some of its liabilities which arose from unauthorised foreign exchange contracts. [ID:nHKG221109]

"Investors will still avoid this company because of issues on corporate governance," said DBS's Chan.

The benchmark Hang Seng Index .HSI closed down 717.74 points at 13,221.35, bringing its three day losses to 10.3 percent.

Mainboard turnover rose to HK$51.8 billion ($6.6 billion) from HK$47.2 billion on Wednesday.

The China Enterprise Index .HSCE of top locally listed Chinese companies fell 4.8 percent to 6,795.58, led by a 4.7 percent drop in China Construction Bank (0939.HK: Quote, Profile, Research, Stock Buzz)

Bank of Communications lost 5.4 percent, while bigger rival Bank of China (3988.HK: Quote, Profile, Research, Stock Buzz) gave up 4.6 percent.

"Falling interest rates in China will have a negative impact on bank margins because that would mean lower interest income," said Peter Lai, director at DBS Vickers.

Asia's biggest oil and gas company PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz) fell 6.4 percent after oil prices slid to a 22-month low. [ID:nSYD383548]

Shares of Industrial and Commercial Bank of China (Asia) (0349.HK: Quote, Profile, Research, Stock Buzz) fell 10.5 percent. The bank earlier fell to a five-year low after it said it would make a full provision of HK$600 million for the decline in the value of U.S. dollar and euro denominated bonds issued by three major banks in Iceland amid the global financial turmoil. The bank said the impairment loss will not have a significant impact on its business. (Additional reporting by Donny Kwok; Editing by Jacqueline Wong)