* China mkt falls on inflation concern, despite strong data
* Hong Kong stocks down as telecom, property plays weigh
* Esprit down on weak sales; Little Sheep up on Yum's move (Updates to close)
By Claire Zhang, Edmund Klamann and Donny Kwok
HONG KONG/SHANGHAI, Oct 22 (Reuters) - Hong Kong and China stocks fell on Thursday, weighed down by government comments that stirred concern about inflation and possible monetary tightening while economic data came in strong as expected, bolstering confidence in the economic recovery.
China's key stock index, the Shanghai Composite Index, slid 0.62 percent to end at 3,051.412 points. Losing Shanghai A shares edged out gainers by 443 to 433, while turnover slipped to 119 billion yuan ($17.43 billion) from Wednesday's 155 billion yuan.
China's annual GDP growth accelerated to 8.9 percent in the third quarter from 7.9 percent in April-June, in line with forecasts, buoyed by strong investment spending and bank lending that more than made up for a slump in exports.
"The data was as strong as expected so the index was stable, but government comments about keeping a close eye on controlling inflation suggest inflation pressures are increasing and monetary policy may move toward tightening," said Wen Lijun, an analyst at Nanjing Securities.
A National Bureau of Statistics spokesman told a news conference on Thursday: "At present China faces no inflation problem, but China must pay close attention to inflation expectations."
Deflation eased in September, with consumer prices falling only 0.8 percent from a year earlier compared with a 1.2 percent drop in August, Thursday's data showed.
China's State Council, or cabinet, late on Wednesday voiced confidence that the economy had recovered from the global financial crisis, sending its clearest signal yet that it might gradually unwind its ultra-loose, pro-growth policies.
Nanjing Securities' Wen added that firm third-quarter earnings could support the index above 3,000 points although it may slip back to its 60-day moving average, now at 3,027 points, as it consolidates, while the government comments highlighting inflation would outweigh the strong economic data.
Steel shares were soft, with industry leader Baoshan Iron and Steel down 1.11 percent at 7.10 yuan. The official China Securities Journal reported that iron ore prices may rise 30 percent in 2010. Foshan Plastics Group climbed 9.85 percent to 9.26 yuan after saying it had expanded a project with Chinese electric car and battery maker BYD Co Ltd, which it forecast could contribute 62.5 million yuan to net profit after tax each year.
ChiNext, China's long-awaited Nasdaq-style second board for start-up stocks, will hold an official launch ceremony on Friday, although trade on the first 28 stocks will not begin until Oct. 30.
HONGKONG DOWN IN CAUTIOUS TRADE
Hong Kong stocks closed down 0.48 percent on Thursday with telecom and property counters weighing as the market turned cautious despite strong China data and as the U.S. dollar rebounded from 14-month lows.
Index heavyweight China Mobile, the world's largest mobile carrier, extended its losses to fall another 1.23 percent to HK$76.30. Sun Hung Kai Properties lost 2.76 percent to HK$123.30 as investors locked in recent gains.
"Although the market was overdone and sentiment turned cautious, it is still early to say the rally has come to end," said Andrew To, a sales director at Tai Fook Securities said, adding that abundant liquidity could give support.
The benchmark Hang Seng Index lost 107.59 points to 22,210.52. The China Enterprises Index of top locally listed mainland Chinese stocks slid 0.32 percent to 12,959.93. Turnover rose to HK$69.95 billion ($9.02 billion), from Wednesday's HK$67.71 billion.
Brokers said sentiment on the local market weakened but the underlying tone remained positive as longer term sentiment on the U.S. dollar remained weak, while abundant liquidity because of the weak U.S. dollar could lend support to the market.
Hong Kong's central bank, the Hong Kong Monetary Authority, sold more than HK$5 billion ($650 million) into the money market on Thursday to stem an appreciating Hong Kong dollar as the territory continued to attract fund inflows.
Esprit fell to a session low of HK$53.10 before ending at HK$53.55. The clothing retailer said its sales fell 8 percent in the quarter ended September amid weak global demand. A Deutsche Bank research note on Thursday said it had maintained a "buy" rating on the stock as performance was largely on track.
Restaurant chain operator Little Sheep <0968.HK> rose to a record high of HK$4.69 before closing at HK$4.40, up 1.62 percent from the previous close. The operator said Yum! Brands Inc would raise its stake in the company to 27.3 percent from 20 percent for about $39 million and would remain the second-largest shareholder after the deal.
A Bank of America Merrill Lynch research note on Thursday said the deal underscored Yum's interest in Little Sheep and could help with investor sentiment. (Editing by Chris Lewis)