HK shares seen rallying on China oil price surprise

HONG KONG, June 20 (Reuters) - Hong Kong shares are expected to open sharply higher on Friday after Beijing announced a bigger-than-expected fuel price hike much sooner than forecast.

In a bid to control demand, ease supply constraints and mollify its troubled refiners, China unexpectedly raised fuel prices by up to 18 percent overnight, taking the global market by surprise and sending U.S crude oil prices tumbling.

Most market watchers did not expect the energy price revision to be announced before the Beijing Olympics.

In addition to increasing gasoline and diesel prices, China also hiked jet fuel costs by 25.2 percent, increased retail electricity prices by an average of 4.7 percent and imposed a price ceiling on coal.

It was China's first fuel price hike since November last year and first power price revision since June 2006.

"We will see a sharp rebound in the market today, led by H-shares, as the sectors that stand to gain are heavyweights. But with yesterday's announcements, inflation has become a bigger concern than ever and the worst is definitely not over for investors," said Alex Tang, research director with Core-Pacific Yamaichi International.

The energy price hikes are expected to shore up the bottom lines of Chinese refiners Sinopec Corp (0386.HK), Sinopec Shanghai Petrochemical (0338.HK) and Petrochina (0857.HK), as well as power producers.

But shares in coal companies, airlines, car makers and non-ferrous metal producers are seen taking a hit from the latest round of government intervention.

The fuel and power price hikes will also put the spotlight on inflation, which eased to 7.7 percent in May from a 12-year high of 8.5 percent in February.