* China's main index up after strong Sinopec earnings
* Chinese banks, refiners advance in Hong Kong
* Limited upside seen for China, HK after recent rally (Updates to close)
By Donny Kwok & Lu Jianxin
HONG KONG, Aug 24 (Reuters) - Hong Kong shares climbed 1.67 percent on Monday, tracking strength on mainland and overseas stocks markets, with refiners and Chinese finance stocks climbing after Sinopec and China Construction Bank reported strong earnings.
China's main stock index ended up 1.1 percent on Monday in rangebound trade, with strong earnings by index heavyweight Sinopec Corp and a rise on Wall Street helping to offset announcements of major new share offerings.
Analysts said the potential for the China index to rise sharply in the short term should be limited after the index plunged 20 percent over the two weeks to last Wednesday's close, followed by a technical bounce on Thursday and Friday.
"Both markets are seen having limited upsides as investors turned cautious after the rebound," said Conita Hung, head of equity research of Delta Asia Financial. "In Hong Kong, (thin) turnover did not match the rise, while in China, a possible tighter monetary policy is a main concern."
HONG KONG
The benchmark Hang Seng Index finished up 336.92 at 20,535.94, with HK$62.2 billion worth of shares changing hands. Profit-taking interest at about the 20,600-point level limited gains and triggered worries about a capital outflow, brokers said.
Sinopec, the world's second-largest refiner after Exxon Mobil, rose 4.9 percent to an 11-month high of HK$7.26 intraday before ended at HK$6.97, up 0.72 percent from its previous close. It forecast results for the first three quarters to be more than 50 percent higher than a year earlier.
PetroChina rose 2.4 percent to HK$8.80.
China Construction Bank rose 2.6 percent after the country's second-largest lender posted a forecast-beating 11.7 percent jump in second-quarter earnings. ICBC gained 0.95 percent, and China Life was up 1.5 percent.
China Resources Power rose 5.5 percent after the Chinese power producer posted a 125.5 percent rise in first-half profit and said it expected to see even stronger growth in power consumption in the second half as economy recovered.
Aluminum Corporation of China (CHALCO), rose 3.4 percent on hopes that the world's No.3 alumina maker will post a smaller quarterly loss paving way to a profit for the second half on rising demand and prices of the metal. It is due to announce its first-half earnings later on Monday.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, was up 2.1 percent at 11,703.49.
Bucking a market rally, Parkson fell 3.2 percent after the department store operator said the road to further recovery was likely to be bumpy as China's loose monetary policy and easy credit environment was expected to be tightened as the economy improved.
SHANGHAI
The Shanghai Composite Index finished up 32.658 points at 2,993.429 on Monday after U.S. stocks ended last week at 2009 highs, buoyed by a surprising rise in home sales and optimistic comments from U.S. Federal Reserve chief Ben Bernanke that reassured investors about prospects for an economic recovery.
Sinopec jumped 2.2 percent to end at 13.39 yuan after it posted a record quarterly profit that widely exceeded expectations.
Gaining Shanghai A shares outnumbered losers by 778 to 141, while turnover for Shanghai A shares rose slightly to 138 billion yuan ($20.2 billion) from Friday's 137 billion yuan.
Analysts said the index should hover in a tight range between its short-term five-day moving average, at 2,906, and its medium-term 60-day moving average at 3,059 this week.
"The index needs to fall back to confirm its breakthrough of the five-day moving average, and the 60-day moving average will offer major resistance as sentiment has not fully recovered," said Zheng Weigang, head of investment in Shanghai Securities.
China's stock regulator announced late on Friday that it would review an application this week by Metallurgical Corp of China for a Shanghai IPO aimed at raising 16.85 billion yuan, while approving a Shanghai IPO by train maker China CNR Corp to raise nearly $1 billion.
Fresh supplies of equity and tightening market liquidity added to stretched valuations as key factors sparking the share index's recent correction, after a 90 percent rally since the start of the year.
IPO-related worries pushed investors to dump recently listed shares. Everbright Securities, which debuted on the Shanghai market last week, slipped 1.7 percent to 24.25 yuan, while China State Construction Engineering Corp, the most active stock of the day, fell 1.7 percent to 5.31 yuan.
"The latest correction has washed out most of the profit-taking pressure and should ensure a relatively stable period in coming weeks," said Wu Haijun, Shanghai principal at Power Pacific Corp of Canada, a foreign investor in Chinese stocks.
"China's economy is still recovering, although not as quickly as the market implied earlier this year. Liquidity in the system is good but not as ample as many investors had expected."
State media said the two-thirds of China's 1,600-plus listed companies that have posted results for the first half of this year reported a 2.3 percent drop in combined net profit from a year earlier. But the companies' net profit in the second quarter was up 23 percent from the first quarter.
Analysts said the earnings were generally stronger than the market had expected, although companies with the worst results typically announce at the end of the reporting season. The current season will last until the end of August. (Editing by Chris Lewis)