* HK shares pushed up by bargain-hunters
* Brief oil price fall drives HK airlines up, China hit
* Energy stocks lead China market to two-week closing low
* More IPO shares to enter mainland market (Updates to close)
By Nerilyn Tenorio and Claire Zhang
HONG KONG, Sept 22 (Reuters) - Hong Kong shares closed up 1.06 percent on bargain-hunting interest in a consolidating market on Tuesday, while Shanghai stocks slid 2.34 percent to a two-week closing low on lower fuel prices and worries about share supply.
The overnight drop in crude oil prices drove Hong Kong-listed airline stocks higher, but put oil and energy producers in mainland China under pressure.
Airline stocks were also underpinned by mainland initiatives to restructure the aviation freight industry, while Hong Kong investors in general were encouraged by a firm start in European equities trading on Tuesday afternoon during Asian trading.
"In the morning, the movement wasn't that good but sentiment continued to improve in the afternoon when the European markets opened a bit higher, and because of expectations of better economic data from the U.S," said Kenny Tang, head of research at Redford Securities in Hong Kong.
The Hong Kong and Shanghai markets are expected to be range-bound this week as they continue to digest the implications of recent IPO approvals and the resurgence of the U.S. dollar.
The benchmark Hang Seng Index closed up 228.29 points at 21,701.14, with turnover down at about HK$50 billion ($6.45 billion) from Monday's HK$57.5 billion.
The China Enterprises Index of top locally listed mainland Chinese stocks firmed 0.75 percent to 12,511.55.
Cathay Pacific jumped as much as 3.7 percent intraday while China Southern Air spiked 4.7 percent, bolstered by a brief fall overnight in crude oil prices and mainland initiatives to restructure the aviation freight industry. By the close of trade in Hong Kong, Cathay Pacific was up 3.51 percent at HK$12.98, parent Swire Pacific was up 1.76 percent at HK$92.50, and China Southern was up 3.95 percent at HK$2.63.
The Chinese measures include complete policy support for aviation freight companies in terms of market access, the management of flights and routes, transportation prices, and the protection of newly-opened routes.
NYMEX crude oil dropped $2.33 to $69.71 per barrel on Monday, but rose again on Tuesday, reaching $70.50 by late afternoon.
Sinopec, Asia's top oil refiner, also benefitted from the brief fall in crude oil prices, although the company said earlier that demand for industrial fuels remained depressed in China, the world's second-largest oil consumer. The stock hit a high of HK$6.90, up 1.62 percent, before shaving the gain to 0.59 percent at HK$6.83.
Sun Hung Kai Properties, rallied 2.12 percent to close at HK$115.50, on brisk project sales.
ENERGY LEADS SHANGHAI FALL
China's key stock index sank 2.34 percent to a two-week closing low on Tuesday, led by energy shares after crude oil slid overnight, while sentiment was hurt by worries over a slew of fund-raisings and more share supply.
The Shanghai Composite Index ended at 2,897.553 points, after eking out a gain of 0.15 percent on Monday as retailers helped to reverse earlier sharp losses.
Losing Shanghai A shares outnumbered gainers 764 to 114, while turnover dropped to 138 billion yuan ($20 billion) from 145 billion yuan on Monday.
The stock regulator said late on Monday it had granted approval for another four companies to go public on the Nasdaq-style second board to be launched soon on the Shenzhen Stock Exchange, following news 10 companies to be listed would take subscriptions from investors this Friday.
China's top travel agency, China International Travel Service Corp, also set the price range for its upcoming Shanghai listing at a high valuation and said it would take subscriptions over the next two days.
"Fundraising and upcoming IPOs hit sentiment, and with more uncertainties likely to emerge after the National Day holiday, investor confidence is waning," said Chen Shaodan, senior analyst at Stockfly Securities in Beijing.
She added that the index may test support at its 125-day moving average, now at 2,845 points before the holiday.
Metallurgical Corp of China, the company that helped build Beijing's "Bird's Nest" Olympic stadium and the most actively traded share in Shanghai, dropped 8.5 percent to 6.35 yuan after managing a modest debut in Shanghai on Monday. [ID:nSHA168528]
PetroChina, the most heavily weighted stock in the index, sank 2.18 percent to 12.99 yuan, while China Shenhua Energy lost 3.97 percent to 31.94 yuan.
Guoyuan Securities fell 6.7 percent to 19.30 yuan after saying on Tuesday that it had won China Securities Regulatory Commission (CSRC) approval to raise up to 10 billion yuan in a new stock offer.
Steel shares were weak, with Tangshan Iron and Steel, the most actively traded in Shenzhen, Handan Iron and Steel and ferroalloy producer Chengde Xinxin Vanadium and Titanium dropping more than 6 percent after being suspended since Sept. 16.
Their parent Hebei Iron and Steel Group, the world's fourth-largest steel maker, said on Tuesday that they had won regulatory approval to combine and form the country's No.2 listed steel maker.
CITIC Securities said in its latest research note that the Shanghai index may move between 2,700 and 3,200 points, suggesting investors could keep eye on sectors such as autos, banks, papermaking, home appliances and construction. (Editing by Jacqueline Wong and Chris Lewis)