HSBC pushes HK shares down 1.6 pct; turnover drops

* Turnover lowest since March 2007

* HSBC drops despite Citi bailout

* CNOOC, Zijin buck trend on firmer commodity prices

* Air China tumbles after warning of more hedging losses

By Parvathy Ullatil

(Updates to close)

HONG KONG, Nov 24 (Reuters) - Hong Kong shares fell 1.6 percent in dismal volumes on Monday, led by global lender HSBC, as the U.S. government's lifeline to global banking giant Citigroup (C.N: Quote, Profile, Research, Stock Buzz) failed to ignite buying in financial counters.

Mainboard turnover languished at HK$35 billion ($4.5 billion), its lowest in 20 months, excluding half days and typhoon-interrupted sessions, as investors kept away from the market amid predictions it will soon slip below its October low. Monday's turnover is slightly over half the average daily turnover in the third quarter.

"Two months ago, something like a Citigroup bailout would have set fire to the market but now people have understood that you just sell into strength," said Benjamin Collett, head of hedge fund sales with Daiwa SMBC.

Europe's largest bank, HSBC Holdings, pared losses to 3 percent at HK$74.75 after it opened at a seven-year low of HK$73. HSBC arm Hang Seng Bank (0011.HK: Quote, Profile, Research, Stock Buzz) dropped 2.4 percent while another local lender, BOC Hong Kong (2388.HK: Quote, Profile, Research, Stock Buzz), shed 7 percent.

Emerging markets lender Standard Chartered (2888.HK: Quote, Profile, Research, Stock Buzz) dropped 6.3 percent before its shares were suspended following the announcement of a $2.69 billion rights issue to strengthen its balance sheet. [ID:nHKG43672] The bank has so far been spared the worst of the global financial turmoil.

The benchmark Hang Seng Index .HSI closed 201.26 points lower at 12,457.94.

The index had briefly moved to positive territory, supported by Chinese banking counters and commodity-linked stocks as oil prices stayed near $50 per barrel.

Gold miner Zijin Mining (2899.HK: Quote, Profile, Research, Stock Buzz) bucked the broad trend to jump 3.1 percent after the price of the precious metal rose to a five-week high, driven up by a weaker dollar and firm oil prices. Lingbao Gold (3330.HK: Quote, Profile, Research, Stock Buzz) notched up a 2.4 percent gain.

CNOOC bulked up 2 percent after oil prices held steady on hopes that producer cartel OPEC may cut output again to buoy demand. China Shenhua Energy (1088.HK: Quote, Profile, Research, Stock Buzz), the world's most valuable coal miner, added 1.4 percent.

"It's very easy to drag Hong Kong shares lower, especially with the volumes bordering on next to nothing as we go into the year-end holidays. HSBC is already at a new low and if China Mobile catches up we may see the HSI breaking below 10,000 points," said Daiwa's Collett.

The China Enterprises Index of top locally listed mainland Chinese firms .HSCE had fallen 0.8 percent to 6,376.96.

Shares in Air China (0753.HK: Quote, Profile, Research, Stock Buzz) slid 10.2 percent after the mainland's largest international airline said on Saturday potential losses from its fuel hedging contracts had tripled to $454 million from the third quarter, as energy prices plunged amid a global economic slowdown.

China's largest air carrier by fleet size, China Southern Airlines (1055.HK: Quote, Profile, Research, Stock Buzz), dropped 13.6 percent, while the smallest of China's three major airlines, China Eastern (0670.HK: Quote, Profile, Research, Stock Buzz), fell 15.1 percent. (Editing by Anne Marie Roantree)