* HK shares mark best quarter in 15 years
* China shares tack on 63 percent in first half
* Sinopec gains after China's surprise fuel price increase (Updates to close)
By Parvathy Ullatil and Claire Zhang
HONG KONG/SHANGHAI, June 30 (Reuters) - Hong Kong shares finished their best quarter in more than 15 years with a whimper on Tuesday, as investors locked in some of the gains made during a stellar four-month rally that began in March.
The index tacked on 35.4 percent in its biggest quarterly advance since the Oct.-Dec. period in 1993 when low interest rates in the U.S. and China's economic awakening drove investors into Asia's high-growth "tiger" economies.
Chinese stocks snapped a four-day winning streak on Tuesday, as steel and auto shares fell, but they added a quarter to their value in the second quarter fuelled by signs of economic recovery and ample liquidity in the financial markets.
But the strong rebound in share valuations, which has outstripped the recovery in real economic activity, has made analysts cautious about the market's prospects in the second half.
"Investors wouldn't dare be too optimistic about first-half earnings, while the pace of IPOs will also be in focus in the third quarter," said Western Securities analyst Cao Xuefeng.
Market watchers also expect new lending in China, which soared to 7 trillion yuan ($1.025 trillion) in the first half of the year and were a key driver of the stock market gains, to ease in the rest of the year.
SINOPEC GAINS IN HONG KONG
The benchmark Hang Seng Index finished down 0.81 percent at 18,378.73, but tacked on 1.1 percent in its fourth straight month of gains in June.
The 42-stock gauge rose 27.7 percent in the first half, buoyed by signs of a likely early recovery in the Chinese economy, and is valued at 16.5 times estimated earnings in 2009, compared with less than 10 times at the beginning of the year.
"What we saw was the reversal of the panic selling in the fourth quarter of 2008, with central governments across the world doing the right thing. But from here on it is a lot harder to see where we are headed," said Winson Fong, managing director with SG Asset Management in Hong Kong.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, slipped 0.2 percent to 10,962.61.
Oil refiners outperformed after China increased gasoline and diesel prices for the third time since late March to their highest levels ever.
PetroChina, the most heavily weighted stock on the Shanghai index, gained 0.3 percent to 14.48 yuan while its Hong Kong-listed shares dropped slightly in late-session profit-taking.
Asia's top refiner Sinopec Corp advanced 0.7 percent to 10.66 yuan in Shanghai and 3.3 percent to HK$5.91 in Hong Kong.
Chinese sportswear retailer 361 Degrees International rose 7.8 percent from its initial public offering price on its debut on the Hong Kong stock exchange.
The stock closed at HK$3.89 after opening at HK$4.13 and soaring to high of HK$4.28 soon after, compared with its initial public offering price of HK$3.61 per share.
SMIC rose 4 percent after China's biggest contract chipmaker raised its revenue growth forecast for the second quarter to between 76 and 78 percent compared with the previous three months.
Bank of Communications, the country's fifth-largest lender, jumped 3.5 percent to HK$8.69 following a broker upgrade on Tuesday.
Merrill Lynch raised its rating on the stock to "buy" from "underperform", saying it had underperformed peers in 2008 and so far this year. The investment house set a target price of HK$9.52 for the stock.
SHANGHAI INDEX SHIES AWAY FROM 3000 POINTS
The Shanghai Composite Index ended down 0.54 percent at 2,959.362 points, after an assault on the psychologically important 3,000-point level in the morning faltered at a fresh one-year intraday high of 2,997.272.
Air China slipped 1.4 percent to 7.02 yuan, while SAIC Motor sank 4.11 percent to 14.95 yuan after China's unexpected fuel price increase.
Losing Shanghai A shares outnumbered gainers by 575 to 328, while turnover in Shanghai A shares rose to 143.2 billion yuan ($21.0 billion) from Monday's 136.5 billion yuan.
"Liquidity has flowed into stocks, spurring the index to such a strong performance in the first half of 2009, but investors are cautious about the interim earnings reporting season," said Haitong Securities analyst Zhang Qi.
The official China Securities Journal reported that the combined market capitalisation of the Shanghai and Shenzhen stock exchanges on Monday exceeded 20 trillion yuan ($2.9 trillion) for the first time since June of last year.
But several analysts sounded a note of caution.
China has resumed initial public offerings, suspended since last September, with three small listings in Shenzhen, but analysts said the bigger Shanghai market would not remain out of the IPO fray for too much longer, and would provide the real test for the balance of new supplies of equity and market liquidity.
Steel shares were weak, with Baosteel sinking 2.76 percent to 7.04 yuan, as investors worried that China may fail to obtain favourable terms in annual iron ore price talks with global miners before a deadline at the end of the day.
Financial shares were mixed, with Shenzhen Development Bank rising 1.02 percent to 21.82 yuan after shareholders approved its plan to sell shares to Ping An Insurance in a private placement worth up to 10.68 billion yuan. Ping An jumped 2.68 percent to 49.46 yuan as the approval removed one element of uncertainty hanging over the deal.
Industrial and commercial Bank of China, the country's biggest lender, sagged 2.52 percent to 5.42 yuan. (Editing by Edmund Klamann and Chris Lewis)