* Hang Seng index slips 0.5 pct, turnover at 2-mo low
* Shanghai Composite down 0.9 percent, steel sector weak
* China Life leads weak financial sector in HK
* Energy shares see profit-taking amid pullback in oil prices (Updates to close)
By Vikram Subhedar and Yixin Chen
HONG KONG/SHANGHAI, April 26 (Reuters) - Hong Kong and China shares fell on Tuesday as oil majors and insurers weighed on the benchmark indices, but traders hoped that strong earnings from Chinese banks in coming days could reverse the weakness in financials and lift the market.
Caution ahead of a U.S. Federal Reserve policy meeting this week and profit-taking in commodities kept trading light with turnover on the Hong Kong exchange, which reopened Tuesday after a four-day holiday. Tuesday's turnover fell to HK$64.2 billion (US$8.3 billion), the lowest in over two months, from HK$77.5 billion on Thursday. [ID:nN20193559]
The Hang Seng fell 0.5 percent to 24,007.4 while the China Enterprises Index of top locally listed mainland firms dropped 0.7 percent.
Financials were the biggest drag on both indices with China Life , the country's biggest insurer, leading losses with a 2.2 percent drop after reporting a 22 percent drop in first-quarter profit due to weak investment returns. [ID:nL3E7FQ07P]
"There's a lot of money in the market still but I think after the sharp rebound since mid-March, we really need a new catalyst to lift the Hang Seng beyond its 2011 peak and then further above the 2010 high," said Larry Jiang, chief investment strategist at Guotai Junan Securities in Hong Kong.
The Hang Seng hit its highest level this year -- 24,468.6 -- on April 8 after a 10.6 percent rally from lows following the Japan's March 11 earthquake. The 2010 high was around 25,000, which is seen as a strong medium-term resistance.
One trigger to lift the market towards these levels could be a slew of first-quarter earnings from China's banks, often considered a proxy for the economy, which are expected to show robust profits despite the government's efforts to tighten lending. [ID:nL3E7FO09Q]
China Minsheng and Agricultural Bank of China are scheduled to kick off the reporting season for banks on Wednesday after the market close.
On Tuesday, weak earnings prompted investors to take money off the table, with Alumninum Corp of China (Chalco) down 3.2 percent after the company reported a bigger-than-forecast 47 percent drop in first-quarter profit. [ID:nL3E7FL12U]
Chalco shares were the most actively traded among benchmark constituents with volume hitting 2.4 times the average 30-day level.
SHANGHAI MARKETS WEAK, STEEL COUNTERS DOWN
China's main stock index ended down 0.9 percent on Tuesday to its lowest level in four weeks, as investors were cautious ahead of the coming long weekend and potential policy tightening.
The benchmark Shanghai Composite Index finished at 2,939.0 points, after it fell 1.5 percent on Monday.
"From the market liquidity situation, we can find that the tightening policies are having an effect," said Chen Shaodan, an analyst at China Development Bank Securities in Beijing.
In the money market, the weighted average seven-day repo rate , the main barometer of short-term liquidity supply, rose 32 basis points to its highest level since the end of February.
Additionaly, analysts said that investors would be very cautious ahead of the holiday as China's central bank has announced some major policy changes just before or during holidays.
The Chinese market will be closed on May 2 for the Labor Day holiday.
Steel makers underperformed, lead by Laiwu Steel and Jinan Iron and Steel , which tumbled their 10 percent daily limit after being suspended for two trading days. Before the suspension, they had jumped around 95 percent in just seven days.
Top oil majors fell as U.S. crude futures slipped more than 1.0 percent earlier in the day after Saudi Aramco's chief executive said the kingdom was not comfortable with current oil prices.
Sinopec closed down 1.2 percent in Shanghai while Petrochina fell 0.5 percent.
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