UPDATE 5-At least 36 dead after Hong Kong ferry sinks following collision

* Ferry with 120 aboard sinks after collision

* At least 36 dead, more than 100 taken to hospital

* Survivors say passengers trapped in flooded ferry

* Government vows thorough investigation

(Adds ferry ownership details, fresh passenger quotes)

By Tan Ee Lyn and Donny Kwok

HONG KONG, Oct 2 (Reuters) - At least 36 people died anddozens were injured when a ferry carrying more than 120revellers on a company outing collided with another ferry andsank near an island south of Hong Kong on Monday night, in oneof the city's worst maritime accidents.

The ferry belonging to the Hongkong Electric Company,controlled by billionaire Li Ka-shing, was taking staff andfamily members to watch fireworks in the city's Victoria Harbourto celebrate China's National Day and mid-autumn festival whenit hit the other ship and began sinking near Lamma island.

Survivors said they had little time to put on life jacketsbefore the ferry flooded, trapping passengers.

"Within 10 minutes, the ship had sunk. We had to wait atleast 20 minutes before we were rescued," said one malesurvivor, wrapped in a blanket on the shore.

Some survivors said people had to break windows to swim tothe surface. "We thought we were going to die. Everyone wastrapped inside," said a middle-aged woman.

HongKong Electric, a unit of Power Assets Holdingswhich is controlled by Asia's richest man Li, said the boat hadcapacity to hold up to 200 people.

The tragedy was the worst to hit Hong Kong since 1996 whenmore than 40 people died in a fire in a commercial building.

The other ship, owned by Hong Kong and Kowloon FerryHoldings, suffered a badly damaged bow in the collision but madeit safely to the pier on Lamma, an island popular with touristsand expatriates about a half-hour boat ride from Hong Kong.

Several of its roughly 100 passengers and crew were taken tohospital with injuries.

"After the accident, it was all chaos and people werecrying. Then water began seeping in and the vessel began to tiltto one side and people were all told to stand on the other sideand everyone started putting on life jackets," a male passengerwho was on the Lamma ferry told reporters.

SEARCH FOR SURVIVORS CONTINUES

Hong Kong is one of the world's busiest shipping channels,although serious marine accidents are rare.

The waters around Hong Kong were busy on Monday withnumerous passenger ferries, private leisure boats and fishingvessels out to watch the city's fireworks, but it is unclear whythe two ferries collided.

"Our ferry left Lamma island at 8.15 pm to watch thefireworks display out at sea, but within a few minutes, atugboat (ferry) smashed into our vessel," Yuen Sui-see, adirector for Hongkong Electric, one of the city's two mainelectricity generators, told reporters.

A spokeswoman for Hong Kong and Kowloon Ferry said they wereassessing what had happened.

"Our captain is not well and we have not been able to talkto him so far," the spokeswoman told local television.

A maritime department spokesman told reporters: "Normallyvessels ought to stay and help other vessels in distress. Butwhat we heard was that the other ship had passengers who wereinjured and needed help."

The nighttime collision sparked a major rescue operationinvolving dive teams, helicopters and boats that saw scores ofpeople plucked from the sea.

Television pictures showed the red and blue bow of the HongKong Electric Company ferry pointing skywards, surrounded byrescue vessels. By Tuesday a large crane on a barge had beenconnected to the stricken ferry.

"We will continue our search. We also don't rule out thatsome may have swam to shore themselves and haven't contactedtheir families and so may not be accounted for," Ng Kuen-chi,acting deputy director of fire services told local television.

The search was hampered by the vessel being partly sunken,poor visibility and too much clutter inside the vessel, Ng said.

Teams of men in white coats, green rubber gloves and yellowhelmets carried corpses off a police launch in body bags onTuesday. Local media reported that children were among the dead.

At one of the city's public mortuaries around 50 grievingrelatives gathered, some crying, while others were called intoidentify the dead.

More than 100 people were sent to five hospitals and ninepeople suffered serious injuries or remain in criticalcondition, the government said in a statement.

Hong Kong leader Leung Chun-ying visited survivors of thecollision and pledged a thorough investigation into the crash.

Flags flew at half mast at Li's Cheung Kong Groupheadquarters in the heart of the city's financial district onTuesday, as well as at government headquarters.

Thousands of Hong Kong residents live on outlying islandssuch as Lamma, which lies about three km (two miles) southwestof Hong Kong island.

(Additional reporting by Stefanie McIntyre, James Pomfret,Farah Master, Venus Wu and Tyrone Siu; Editing by Anne MarieRoantree and Michael Perry)

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Keywords: HONGKONG FERRY/COLLISION