Hong Kong shares fall 0.8 pct as Li & Fung slides

(Updates to close)

By Parvathy Ullatil

HONG KONG, June 26 (Reuters) - Hong Kong shares reversed early gains to close 0.8 percent lower on Thursday, hurt by losses in retail-focused Li & Fung (0494.HK) and cellphone maker Foxconn (2038.HK) on broker downgrades as U.S. consumption falters.

Shares in Li & Fung slid nearly 7 percent to a three-month low after Merrill Lynch downgraded the trading firm on fears that a slowdown in U.S. consumer spending will eat into margins.

Other export-oriented companies, such as Yue Yuen Industrial (0551.HK), the world's largest maker of athletic footwear and apparel retailer Esprit Holdings (0330.HK), also fell as recent data showed a sharp decline in consumer confidence in the U.S. and Europe.

Yue Yuen gave up 4 percent and Esprit dropped 4.1 percent.

"Given their exposure to the U.S and European markets and the weak economic data coming out of there, investors have become very cautious and are happy to lock in any gains," said Andrew Sullivan, sales trader with Mainfirst Securities.

The Hang Seng Index .HSI closed 179.49 points lower at 22,455.67 after touching 22,885.35 earlier, while the China Enterprises Index .HSCE slipped 0.8 percent.

Mainboard turnover stood at HK$59.46 billion ($7.62 billion) on Thursday. On Wednesday, the morning session of trade was cancelled after typhoon signal No. 8 was hoisted.