* HSI down on profit-taking; to remain between 21,000-22,000
* Shanghai index rebounds on retailer strength
* U.S. dollar rebound triggers selling of risky Asian assets * MCC, world's second-biggest IPO of 2009, up 28 pct (Updates to close)
By Nerilyn Tenorio and Claire Zhang
HONG KONG/SHANGHAI, Sept 21 (Reuters) - Hong Kong shares caved in to profit-taking pressure and ended 0.7 percent lower after hitting highs last week, while Shanghai stocks finished 0.2 percent firmer as retailers helped reverse earlier losses.
The rebound in the U.S. dollar in afternoon trade triggered selling of risky assets in Asia, including Hong Kong, which helped pull the bourse down in late trade, analysts said.
"That surprised the Hong Kong market a bit," said Jackson Wong, investment manager at Tanrich Securities.
But to put things in perspective, analysts said closing levels were little changed compared with Friday's prices, and Wong said the market would remain in a consolidation range of 21,000-22,000 points during the rest of the week.
"The Hang Seng index had been up too much. We we're going ahead of the A-share market. And today, when traders found no particularly good news to trade on, the market came under some profit-taking pressure," Wong said.
Analysts said investors still enjoyed a generally positive trading environment, with China's monetary and fiscal measures seen supportive of the market ahead of the National Day celebrations from Oct. 1.
"The mainland government wouldn't want to spoil the fun ahead of National Day," Steve Cheng, associate director at Shenyin Wanguo Securities in Hong Kong, said earlier in the day.
After hitting a 13-month high above the 21,700-point level last Thursday and easing slightly on Friday, Hong Kong's benchmark Hang Seng Index closed 150.6 points lower at 21,472.85, with turnover at HK$57.5 billion.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, dropped 1.56 percent to 12,418.34.
Banks fell following last week's rally on ample liquidity, with index heavyweight HSBC giving up early gains and slipping 0.27 percent to HK$90.95, while China's leading bank ICBC retreated 2.27 percent.
Galaxy Entertainment rallied 9.54 percent after two casino executives said China had eased its restrictions on travel to Macau by residents of China's Guangdong province.
Two casino sources told Reuters that China had quietly begun relaxing restrictions for its citizens from Guangdong travelling to Macau, leading to a strong showing for casinos so far this month and big hopes for October.
Melco International Development, parent of casino operator Melco Crown Entertainment Ltd, jumped 7.71 percent to HK$5.87 after the company said on Sunday that it would sell its remaining 160.9 million shares, or 43.24 percent of the issued share capital of securities broker Value Convergence at a discounted HK$1.92 each to third party investors.
FIRM MMC DEBUT
China's key stock index closed up 0.2 percent on Monday, with retailers helping to reverse earlier sharp losses, while Metallurgical Corp of China's (MCC) listing debut bolstered sentiment.
Trading was initially hit by worries over supply as the stock regulator was seen pushing more shares into the market, having approved more than a dozen companies for second-board listings on China's Nasdaq-style bourse in Shenzhen.
The Shanghai Composite Index closed at 2,967.011 points, bouncing off a fall of more than 3 percent in the morning. The index sank 3.2 percent on Friday.
Gaining Shanghai A shares outnumbered losers by 580 to 281, while turnover dropped to a one-week low of 145 billion yuan ($21 billion) from 181 billion yuan on Friday.
MCC, the Chinese construction and engineering company that completed the world's second-biggest initial public offering (IPO) this year, closed at 6.94 yuan, or 28 percent higher, on its first day of trade in Shanghai, near the top of analysts' expectations of between 6 and 7 yuan.
Retailers were strong ahead of the week-long National Day holiday, with Beijing Xidan Department Store racing up its 10 percent daily limit to 10.55 yuan.
"Trading volume became less active ahead of the week-long holiday, with the index expected to fluctuate around its key mark of 3,000 points," said the chief strategist at Hongyuan Securities in Beijing.
He added that the index may move in a narrow range as the economic recovery was on a solid track, stock valuations were generally in line with earnings, which could limit the index's fall, while the outlook for more share supply could put a cap on the market's rebound.
The average premium of Shanghai A shares over Hong Kong-listed H shares of the same companies fell as low as 12.2 percent on Monday, near the lowest level of 11.9 percent for the year hit in January.
Ten companies to be listed on China's second board said on Monday that they would take investor subscriptions this week.
"The subscriptions came much faster than investor expectations of at least after the National Day holiday, weakening sentiment," said Wen Lijun, an analyst from Nanjing Securities.
Fortis Haitong Investment Management Co Ltd said valuations of second-board shares were relatively higher but the size of the fundraising was smaller. Institutions are expected to adopt a wait-and-see stance and were not expected to actively participate.
Wen mentioned bearish factors such as more fundraising and looming share supply as encouraging profit-taking, but also noted that the index could consolidate around technical support.
Analysts said the index may find initial support at its 125-day moving average now at 2,840 points. (Reporting by Nerilyn Tenorio; Editing by Chris Lewis)