* HK, Shanghai benchmarks down more than 1 pct as banks slide
* China lifts reserve requirements for some banks by 50 bps
* BoComm, Bank of China reserve ratio targets - sources
* Property issues hit by fundraising, tightening concerns
* Turnover high, suggests investors keen to lock in profit (Updates to midday)
By Vikram S. Subhedar and Farah Master
HONG KONG/SHANGHAI, Nov 10 (Reuters) - Shanghai and Hong Kong shares extended this week's retreat, with the benchmark indexes pulling back from overbought levels as banks succumbed to profit-taking on signs that China is tightening monetary policy to curb inflation and stem hot money inflows.
China lifted reserve ratios for some banks, sources told Reuters, confirming fears from Tuesday evening after the central bank's unexpected move to raise one-year bill yields at an auction had prompted speculation some form of lending curbs were on their way.
Hong Kong's Hang Seng Index was down 1.15 percent at the midday trading break, and the Shanghai Composite Index down 1.2 percent, with banking issues the biggest drag.
"Rumours about a rate increase or a rise in reserve requirements were doing the rounds earlier today," said Mark To, head of research at Wing Fung Financial Group in Hong Kong. "I think even further tightening is possible and that's going to keep bank shares under pressure and cause some pain for the broader market."
The targets of the latest 0.5 percentage point rise in reserve requirement included Bank of China Ltd and Bank of Communications Co Ltd, sources told Reuters.
BoComm was down 3.4 percent in Hong Kong and was the top loser on the benchmark. Bank of China followed with a 3.1 percent decline.
Chinese banks have put in a strong performance over the past six weeks, leading a market rally, as investor appetite for the sector rebounded on strong lending growth, attractive valuations and China's sustained economic growth.
Bank of China shares in Hong Kong are up nearly 20 percent since the start of October. Industrial & Commercial Bank of China is up about 14 percent.
The benchmark indexes in Hong Kong and Shanghai have been trading at the highest relative strength index levels among major Asian markets, suggesting they were relatively overbought, profit-taking pressure has been growing.
The move to absorb liquidity from the banking system may indicate rising official concern over inflation risks and asset bubbles as capital inflows grow, analysts said.
China is due to report inflation data for October on Thursday and expectations are consumer prices rose about 4 percent, fanning speculation of another rate rise soon.
In a research report, analysts at Macquarie said "quantitative easing" in the U.S. -- via asset purchases by the Federal Reserve -- means "quantitative tightening" for China.
Reserve rate rises and lending quotas in China should be hot topics for the next few months, said Paul Cavey of Macquarie.
DEVELOPERS SLUMP
Property counters, another heavily weighted sector in China and Hong Kong, were lower, adding pressure on concern over the prospect of further share sales and property curbs.
Shanghai's property sub-index fell 3.1 percent, easily underperforming the broader market, as developers were hit by a double-whammy of the reserve requirements increase and government data that showed real estate sales slowed in October.
In Hong Kong, Sun Hung Kai Properties Ltd was the top loser among large cap developers, falling 2.9 percent.
Sun Hung Kai shares saw as much as 33 percent of overall turnover on the short-side on Tuesday, sparking rumours it could be next to announce a share sale, said traders.
Speculation has been rife since last week that more developers would follow Hang Lung Properties Ltd, Sino Land Co Ltd and Evergrande Real Estate Group Ltd in raising capital via discounted shares sales to take advantage of lofty stock prices.
Evergrande fell 7.1 percent after company said late on Tuesday that it would raise up to $177 million.
The broad decline was accompanied by high turnover on the Shanghai and Hong Kong exchanges, a bearish sign suggesting investors may be looking to exit after recent gains. (Editing by Chris Lewis)