* Shanghai shares end up slightly after Monday's 3 pct jump
* Hang Seng Index up 0.5 percent, turnover at 3-½ month low
* Energy, materials issues outperform on weak dollar, economy
* China Mobile slips as traders favour rival Unicom (Updates to close)
By Vikram S.Subhedar and Farah Master
HONG KONG/SHANGHAI, Dec 14 (Reuters) - Hong Kong and Shanghai stocks edged higher on Tuesday, helped by energy counters, although light turnover suggested that funds had begun closing their books for the year and inflation in China kept investors cautious heading into 2011.
The Shanghai Composite Index ended up 0.14 percent at 2,927.08. The benchmark had surged on Monday after China's central bank skipped an expected interest rate rise, opting instead to further increase bank reserve requirements, aiming to rein in inflation that hit a 28-month high in November.
Hong Kong's Hang Seng Index rose 0.49 percent to close at 23,431.19, with energy stocks tracking commodity prices higher on the back of a weaker U.S. dollar, and renewed optimism over the global economy. Shanghai's key stock index rose 0.1 percent.
"While there was short-term clarity after the rise in reserve requirements, investors are on guard against further tightening measures," said Guotai Junan Securities analyst Xu Yinhui in Shanghai.
China's key money market rate, the main barometer of short-term liquidity supply, jumped early on Tuesday, suggesting banks were reluctant to lend in anticipation of another rise in reserve requirements.
Economists polled by Reuters forecast that China would raise rates before the end of 2010 and twice again in 2011 as part of a campaign to control inflation.
At the same, concern over hot money inflows was expected to limit aggressive rate increase.
"If there were no external factors, China would definitely have to increase interest rates as quickly as possible," said Chen Dongqi, a senior researcher at the powerful National Development and Reform Commission, at the Reuters China Investment Summit.
While caution over how China will deal with inflation prevails, most analysts expressed confidence that strong earnings and a robust economy would underpin Chinese shares in 2011.
Hong Kong's market held within a narrow range through the day with turnover falling to the lowest in nearly 3-½ months, signalling that the holiday season slowdown could have begun.
Energy shares outperformed, with China Shenhua Energy Co Ltd, the top gainer on the index, rising 3.8 percent. China Coal Energy Co Ltd followed with a 2.9 percent jump.
A trader at a Japanese bank in Hong Kong said in an email that the upside for the Hang Seng Index was capped at 23,600, the highest level hit earlier this month.
The benchmark index would likely see rangebound trading but a break on the upside for the Shanghai Composite could lead the way for Hong Kong too, said the trader.
China Mobile Ltd fell 0.6 percent and was the biggest drag on the day, given its near 10 percent weight on the benchmark, the second highest after HSBC Holdings Plc. Traders preferred rival China Unicom (Hong Kong) Ltd, up 2 percent, as one agency broker executed a pair trade -- long China Unicom and short China Mobile -- earlier in the day.
China Unicom is expected to benefit in the short term after it introduced a cheaper 3G plan to draw customers, and from its position as Apple Inc's sole partner in China for the popular iPhone. (Editing by Chris Lewis)