Hong Kong shares slip further from 2012 highs, China weak too

* HSI -0.3 pct, H-shares -0.3 pct, CSI300 -0.4 pct

* Turnover stay subdued ahead of U.S. presidential election

* HSBC slides after saying U.S. fine may exceed $1.5 bln

* Steady demand for China Merchant Holdings block deal

HONG KONG, Nov 6 (Reuters) - Hong Kong shares slipped further from 2012 highs as investors took profits in some recent outperformers, with turnover subdued ahead of the U.S. presidential election later on Tuesday.

The Hang Seng Index slipped 0.3 percent to close at 21,944.4 points, slipping for a second day after closing at its highest level of the year on Friday. The China Enterprises Index of the top Chinese listings in Hong Kong also shed 0.3 percent.

The Shanghai Composite Index and CSI300 of the top Shanghai and Shenzhen listings each lost 0.4 percent.

``Funds are still flowing into Hong Kong, but everybody is holding off until the uncertainty from the U.S. election is resolved,'' said Jackson Wong, Tanrich Securities' vice-president for equity sales.

Bourse operator Hong Kong Exchange (HKEx) fell 2.1 percent from a 6-month high recorded on Monday.

After lagging the market for much of the year, it jumped 24 percent in two months prior to November on expectations that interest in Chinese equities would revive as the world's second-largest economy shows signs of perking up.

HSBC Holdings Plc lost 1.4 percent after Europe's largest bank said a U.S. fine for violating federal anti-money laundering laws could cost significantly more than $1.5 billion and is likely to lead to criminal charges as well.

China Merchants Holdings slumped 5.2 percent to HK$24.55, its lowest close since Oct 16, after an undisclosed investor raised $84 million selling 27 million shares in a deal priced between HK$24.20 and $25.10, representing a discount of 6.6 percent to Monday's HK$25.90 close.

Traders said institutional investors made up 80 percent of the orders for the deal and demand was double that of available sales, suggesting that demand for secondary offerings still exists if the discount is sufficient.

This contrasted with a failed Tingyi Holdings share placement on Oct. 16, when an undisclosed shareholder tried to price a $120 million share sale at a 1 to 2.1 percent discount to the previous day's close.


Mainland Chinese markets suffered their worst day in more than a week after a news report suggested that institutional investors sold into the rally last week ahead of a once-in-a-decade political transition that formally starts this Thursday with the 18th Communist Party Congress.

The state-run China Securities Journal reported on Tuesday that redemptions last week in exchange-traded funds tracking mainland markets topped 2 billion units for only the fifth time this year.

This was despite the fact that last week was the best one in a month for the Shanghai Composite and CSI300 indices. They rose 2.5 percent and 2.6 percent respectively.

``If redemptions were so high last week when the market had a good week, it shows that institutional investors still lack confidence and retail investors have reacted accordingly,'' said Cao Xuefeng, head of research at Huaxi Securities in Chengdu.

China Railway Construction slipped 1.7 percent from a 14-month high in Shanghai, while shedding 2.8 percent in Hong Kong. But it is still up 37 percent in Shanghai and 88 percent in Hong Kong for the year.

Kweichow Moutai lost 2.9 percent in Shanghai despite mainland media reports that the bigger producer of Chinese premium liquor had denied rumours that it had inventories almost equal to two years' supply and could face a collapse in its product prices.