(Updates to midday)
HONG KONG/SHANGHAI, Aug 6 (Reuters) - China shares dropped for a second straight day as worries mounted about possible liquidity tightening in the market after a central bank report that, while vowing to continue a loose monetary policy, said it would make minor adjustments.
Chinese stocks underperformed in Hong Kong, but the broad market was lifted by gains in blue chips HSBC and Chinese telecom companies China Mobile and Unicom.
"The market may have overreacted to the central bank's quarterly report ... But the overreaction has strong reasons behind it," said Qian Qimin, deputy research head at Shenyin & Wanguo Securities.
"The authorities, in particular the China Banking Regulatory Commission, have really tightened supervision of bank money with the aim of preventing it from flowing into the bubbling stock and property markets. This will hinder the flow of liquidity into the stock market."
China's central bank said late on Wednesday in its monetary policy report for the second quarter that it would deploy a variety of tools to tweak monetary policy.
Here are the index moves and top stock moves in both markets by midday--
HONG KONG
* The benchmark Hang Seng Index was 0.5 percent higher at 20,593.79.
* HSBC rose 1.9 percent, extending gains to more than 8 percent since its first-half earnings on Monday. Europe's biggest bank, has hired China International Capital Corp (CICC) and Citic Securities Co to help arrange an initial public offering in Shanghai, Reuters reported on Tuesday.
* The China Enterprises Index, which represents top locally listed mainland Chinese stocks, fell 0.6 percent to 11,893.82 as top lender ICBC and China Construction Bank gave up 1.3 percent each.
* "Lower loan growth at banks and a tightening of lending to the property sector are the biggest concerns," said Steven Leung, sales director with UOB Kay Hian.
* Chinese bulk carriers dropped, tracking an overnight fall in the main gauge for sea freight. China COSCO, the country's biggest shipping conglomerate, slid 2.6 percent to HK$11.44, while China Shipping Development sank 3.3 percent, following Wednesday's 3.4 percent drop in the Baltic Dry Index.
* The world's No.4 PC brand Lenovo dropped as much as 6.8 percent during morning trading as investors locked in gains on the recent sharp rally in its shares after the company reported a smaller-than-expected first-quarter loss.
* The stock trimmed losses to 0.3 percent at HK$3.64 after scraping a low of HK$3.40 earlier in the session, extending Wednesday's sharp losses. The stock jumped more than 50 percent in the three weeks to Tuesday when it scaled its highest level in more than 10 months.
* Cathay Pacific Airways extended losses, dropping 3.8 percent after the company sounded a cautious note on a recovery in premium passenger demand and climbing fuel prices. Cathay's management also raised the possibility of tapping equity markets for funds.
SHANGHAI
* The Shanghai Composite Index ended the morning down 2.44 percent at 3,344.973 points.
* The market fell for a second day, after coming under pressure from concerns about stretched valuations following this year's 90 percent surge, and about a possible regulatory crackdown on a jump in bank lending that has fed market liquidity.
* Losing Shanghai A shares outnumbered gainers by 752 to 182, while turnover for Shanghai A shares dropped to 115.4 billion yuan ($16.9 billion) from Wednesday morning's 128.4 billion yuan.
* "It seems to be the first time the central bank has said so publicly that monetary policy could be adjusted," said Huatai Securities analyst Li Wenhui. "Investors are jittery and were encouraged to take profit."
* The index has begun moving lower after a four-day rally stalled at a 14-month high near the psychologically key level of 3,500 points.
* Analysts said the index may initially dip to test the 30-day moving average, now at 3,213 points, while Li expected at this stage it would not fall below the bottom of a gap formed on the charts in mid-July at 3,147 points.
* Financial and property shares were weak, with Industrial & Commercial Bank of China, the country's biggest lender, dropping 2.49 percent to 5.10 yuan, while property developer China Vanke slid 2.21 percent to 12.86 yuan.
* Sector leaders among resource shares also fell, with Baoshan Steel dropping 5.24 percent to 9.05 yuan, China Shenhua Energy down 2.71 percent at 39.12 yuan and Jiangxi Copper down 4.70 percent at 44.41 yuan. (Reporting by Parvathy Ullatil in HONG KONG and Claire Zhang in SHANGHAI; Editing by Edmund Klamann and Chris Lewis)