* Shanghai slips 0.3 percent; Hong Kong down 0.38 percent
* Sinopec, China banks lower in Shanghai on inflation worry
* Wharf jumps after HK retail data; China Gold dives on debut (Updates to midday)
By Donny Kwok and Farah Master
HONG KONG/SHANGHAI, Dec 1 (Reuters) - Shares in Shanghai had eased 0.3 percent by midday on Wednesday, with a liquidity squeeze and concerns about inflation data to be released next week discouraging risk-averse investors.
Mainland factories ramped up production in November, but a big jump in input prices pointed to more inflationary pressure in the pipeline and a need for further monetary tightening, two surveys showed on Wednesday.
The Shanghai index, which dropped more than 5 percent in November, compared with a 12 percent gain the previous month, had slumped on Tuesday, with a liquidity crunch in the domestic money market weighing.
Speculative retail investors, who make up two-thirds of turnover, extended their recent risk-policy play, albeit in much lower volume than the previous session. They sold heavily weighted commodities, banking and transportation issues, sectors they eye as vulnerable in a policy tightening environment.
The Shanghai Composite Index was at 2,812.3 by the midday break.
Analysts said the index had solid support at its 125-day moving average at 2,698 points. Firm resistance is seen at the 250-day moving average at 2,877 points, a mark the index plunged from on Tuesday.
"Investor expectations for a rise in interest rates are persistently fierce. Additionally, moves by the authorities to control agricultural prices are having an impact on the market," said Zhang Gang, analyst at Central Securities in Shanghai.
Volume slumped to levels seen in November's lacklustre trading. Turnover of Shanghai A shares dropped to 55 billion yuan ($8.25 billion) from 99 billion yuan at the same time on Tuesday.
China Petroleum & Chemical Corp (Sinopec), the biggest weight on the index on Wednesday, slipped 0.6 percent. SAIC Motor Corp Ltd fell 1.5 percent, while China Southern Airlines Co Ltd dropped 1.1 percent.
Banks, among the most actively traded, retreated. China Everbright Bank Co Ltd eased 0.3 percent, Agricultural Bank of China Ltd was off 0.4 percent, and China Minsheng Banking Corp Ltd slipped 0.2 percent.
Official inflation data is due to be released on Dec. 13.
HONG KONG SHARES TRACK CHINA EASIER
The benchmark Hang Seng Index was down 0.38 percent at 22,921.49 at the midday trading break, after China's latest PMI data failed to lift the risk appetites, which remain weak on concern over Europe's debt crisis and tensions on the Korean peninsula.
"Judging from today's market performance, the impact (of those factors) was pretty neutral," said Alex Wong, a director at Ample Finance Group. "The market was cautious but not bearish. Investors were just not willing to build up positions."
Instead of exiting the market, investors shifted to defensive sectors such as retail-related sectors after the recent strong retail sales data, brokers said.
Wharf (Holdings) Ltd, a landlord of major shopping malls in Hong Kong, rose 4.41 percent. Shoe retailer Belle International Holdings Ltd gained 1.1 percent, and Cathay Pacific Airways Ltd climbed 4 percent.
On Tuesday, Hong Kong posted a 21.6 percent rise in October retail sales by value from a year earlier and said visitor arrivals in October rose 18 percent from a year earlier.
Macau casino operator SJM Holdings Ltd, added to the MSCI index for Asia in a semi-annual review, was down 5.8 percent after its biggest single-day decline in two weeks on concern over intensifying competition. MGM Resorts International's joint venture in Asia's gambling centre Macau said it could launch an initial public offering in Hong Kong in the first quarter of 2011.
Hutchison Whampoa Ltd rose 1.1 percent after the conglomerate said it had agreed to buy $337 million-worth of Husky Energy Inc shares to maintain its stake in Canada's No.3 oil producer and refiner.
Canadian mining company China Gold International Resources Corp Ltd, which raised $309 million in an IPO, dived as much as 8.2 percent below its issue price on its trading debut.
United Company RUSAL Ltd fell 2.4 percent after the Russian aluminium producer said it planned to place up to $2 billion worth of depository receipts on a Moscow exchange by the end of the year. (Editing by Chris Lewis)