* HK shares finish pre-Lehman Brothers collapse level
* China shares post weekly gains in more than two months
* China Shenhua soars in both mkts on new project (Updates to close)
By Parvathy Ullatil and Claire Zhang
HONG KONG, July 24 (Reuters) - Hong Kong and China shares scaled new highs on Friday, recording their best weekly gain in two months, propelled by earnings momentum and Beijing's reiteration of its commitment to a loose monetary policy.
Analysts in Shanghai said the market may be forming a bubble, but expressed doubt any correction would occur before the fourth quarter, as liquidity remained ample.
The government is unlikely to adopt any policies that would have a major negative impact on the market before celebrations on Oct. 1 to mark the 60th anniversary of the founding of the People's Republic of China, said analysts
The Chinese Communist Party's decision-making Politburo said on Thursday that recovery in the world's third-largest economy was not yet on a solid footing and that Beijing would stick to an appropriately loose monetary stance and proactive fiscal policy.
"We are definitely on the riskier side now, but the market is still hot and people can't let go," said Jackson Wong, investment manager with Tanrich Securities in Hong Kong.
HSI SCALES 10-MONTH HIGH
The benchmark Hang Seng Index trimmed gains to close up 0.8 percent at 19982.79, after breaching 20,000 points for the first time since the Lehman Brothers debacle in September 2008.
The gauge posted its best weekly win in eight weeks, advancing 6.3 percent despite a two-session pullback.
Turnover rose to HK$83.6 billion from Thursday's HK$74 billion.
"The market is unlikely to go much further without a correction. There should be a pullback after the IPO excitement next week," said Tanrich's Wong.
On Thursday, BBMG Corp, a leading building materials maker in China, raised $768 million in a Hong Kong IPO at the top end of an indicative range to become one of the largest such deals this year, and setting a positive tone for other big listings to follow. The stock will commence trading next Wednesday.
The index fell off early highs as investor took profit on local property stocks following their strong run-up. Top developer Sun Hung Kai Properties fell 1.7 percent, while conglomerate Swire Pacific shed 3 percent.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, rose 1.4 percent to 11,984.36.
Foxconn International Holdings, a unit of Taiwan's Hon Hai Precision, retreated after the cell phone manufacturer said it might record a loss in the second half on lower demand and pricing for its products amid the global economic downturn. [ID:nHKG260440]
The stock dropped 7.1 percent to HK$5.23.
Chinese frozen meat processor China Yurun Food slid 12 percent to HK$12.58 after it said it would sell HK$1.72 billion (US$222 million) worth of new shares to its controlling shareholder, raising capital for the expansion of production capacity.
China Yurun was the top traded stock in the morning session with shares worth HK$3.7 billion changing hands.
SHANGHAI INDEX AT 13-MONTH PEAK
Chinese stocks climbed 1.33 percent to a 13-month closing high on Friday, posting their best weekly performance in more than two months as energy and metal shares surged after Beijing reiterated its easy monetary policy.
The Shanghai Composite Index ended at up44.113 points at 3,372.603, a gain of 5.7 percent for the week.
The Shanghai index has more than doubled since hitting a two-year low of 1,665 points in October 2008.
Losing Shanghai A shares outnumbered gainers by 586 to 342, however, while turnover for Shanghai A shares rose to 223.0 billion yuan ($32.7 billion) from Thursday's 194.9 billion yuan.
"The market is likely to gain next week. The loose monetary policy will remain in place for the rest of this year, which will directly bolster investor confidence," said Li Wenhui, an analyst at Huatai Securities in Nanjing.
Energy shares led gains, with PetroChina, the most heavily weighted share in the index, up 5.41 percent at 16.18 yuan.
Li said China appeared unlikely to cut retail fuel prices this month, given recently firm international crude oil prices.
Coal plays surged, with China Shenhua Energy climbing 6.23 percent to 40.07 yuan after saying construction had begun on a $331 billion project in Indonesia, in which it holds a 70 percent stake. The company'as Hong Kong-listed stock rose 4.2 percent to HK$30.75.
Coal shares were also lifted by positive power data. China's power output in mid-July via major grids was up 7.9 percent on the year at an average 11.572 billion kilowatt hours (KWh) per day, the official Shanghai Securities News reported on Friday.
Metal shares jumped, with Aluminum Corp of China up by its 10 percent daily limit at 17.89 yuan.
Major shipbuilders rose, with Guangzhou Shipyard and China State Shipbuilding climbing about 4 percent after China's stock regulator said it would review on Monday an application by China's top shipbuilder for an initial public share offering worth around $1 billion.
Property stocks were soft. China Vanke fell 1.39 percent at 14.22 yuan after the official Financial News reported that China's banking regulator said it saw signs of an asset price bubble in a recent surge in house prices, although it reiterated it had not changed its policy on purchases of second homes and would maintain it. (Editing by Edmund Klamann and Chris Lewis)