* Property sub-index falls to two-month low
* Sun Hung Kai, Cheung Kong down 4 pct, Midland drops 16 pct
* Analysts expect transactions to plunge, but not prices (Adds details, quotes)
By Lee Chyen Yee
HONG KONG, Nov 22 (Reuters) - The property sub-index of Hong Kong's stock exchange fell to a two-month low, led by losses among big players such as Sun Hung Kai Properties Ltd <0016.HK>, after the government imposed new measures to curb short-term speculation in the property market.
Analysts said property issues would come under pressure over the next few sessions, with real estate transactions expected to fall sharply as buyers become wary of flipping apartments because of a new hefty stamp duty and the possibility of further liquidity tightening measures.
In early trade, Sun Hung Kai, Asia's largest property developer by market value, and Cheung Kong (Holdings) Ltd <0001.HK>, owned by Hong Kong billionaire Li Ka-shing, each lost more than 4 percent. Hong Kong's only listed real estate agency Midland Holdings Ltd <1200.HK> slumped 16 percent.
The property sub-index <.HSNP> retreated as much as 3.8 percent to the lowest intraday level since Sept. 22, lagging the main Hang Seng Index's <.HSI> less than 1 percent fall.
"The government has imposed pretty strong measures that will cause a sudden freeze in the market and have a big hit on speculation," said Louis Chan, managing director for Hong Kong's Centaline Property Agency.
On Friday, the authorities raised stamp duty on some transactions and tightened mortgage restrictions in its latest move to avert a property bubble. [ID:nTOE6AI04Z]
Housing transactions conducted within six months of the purchase of property will now be subject to a stamp duty of 15 percent. A duty of 10 percent will apply on transactions within 6-12 months and 5 percent on those between one and two years.
Properties valued at HK$12 million ($1.5 million) or above will have a loan-to-value (LTV) ceiling of 50 percent, down from 60 percent, while the ceiling for properties valued at HK$8-12 million will fall to 60 percent from 70 percent.
RBS recommended investors consider defensive stocks, such as Cheung Kong and Hysan Development Co Ltd <0014.HK>.
Analysts said transaction volume would likely fall by 30-50 percent in coming months, although prices are expected to hold steady at most, or fall by about 5 percent.
"We believe the latest measures could slow the surge in property prices, but should not bring about a sharp correction, as we see a limited impact on fundamental supply and demand conditions," Morgan Stanley said in a report. "Nevertheless, we advise investors to stay alert for risks ahead, namely volatility in other investment assets in Hong Kong in face of capital inflows, and the risk of errors in the timing of policy measures."
(See www.reutersrealestate.com for Reuters' global service for real estate professionals) (Editing by Chris Lewis)