(Updates to close)
* HSI down 0.2 pct, CSI300 up 0.5 pct
* HSBC slides to 4-mth low, Europe remains key risk
* Hong Kong markets vulnerable to short squeeze
* China railway firms boosted by policy change
By Clement Tan
HONG KONG, May 21 (Reuters) - Hong Kong shares fell for a fourth consecutive day on Monday, dragged lower by weakness in HSBC Holdings Plc, Europe's largest bank, as investors look for concrete measures to keep debt-crippled Greece in the euro zone.
Renewed fears over Europe's debt crisis and data showing the Chinese economy slowing more than expected have inflicted two straight 5-percent weekly losses on the Hang Seng Index, shaving its 2012 gains down to 2.6 percent.
But mainland Chinese markets continued to outperform Hong Kong, boosted on Monday by shares of rail firms after the government announced it would allow private investment in railway projects.
The CSI300 Index, which tracks the top 300 companies in Shanghai and Shenzhen, rose 0.5 percent, while the Shanghai Composite Index gained 0.2 percent. The China Enterprises Index of the top Chinese listings in Hong Kong edged up 0.1 percent.
The Hang Seng Index closed down 0.2 percent at 18,922.3. Resistance is seen at 18,985.4, the lower end of a gap that opened up on the charts between May 17 and 18 - a level that could be overcome if there was positive news from Europe, dealers said.
World leaders backed keeping Greece in the euro zone on Saturday, vowing to combat financial turmoil while revitalising a global economy increasingly threatened by Europe's debt crisis, but details were scant.
Reflecting concerns over Europe, HSBC sank 1 percent to a four-month closing low, and was the top drag on the Hang Seng Index. It has lost 10.7 percent this month, but bounced off the session's low at HK$62.55.
Chinese internet giant Tencent Holdings Ltd, slumped 3.4 percent as funds continued to exit one of the top performers this year. Tencent has lost 12 percent from its all-time high of HK$246.80 on May 3.
Turnover on the Hong Kong market remained low, nearing four-month lows and about 13 percent below its 20-day average.
"We are trading tight and light today," said Jackson Wong, vice-president for equity sales at Tanrich Securities. "There's little buying interest and very passive trading."
CHINA RAILWAY SECTOR JUMP ON POLICY SWITCH
But Chinese railway plays stood out after the railways ministry said that private investors will be encouraged to bid for contracts, subsidiaries will be allowed to list shares, and pension funds welcomed to invest in railway companies.
Shanghai-listed China Railway Erju Co Ltd surged the maximum 10 percent. Bigger sector player CSR Corp jumped 6.8 percent in Hong Kong and 3.4 percent in Shanghai.
The moves to liberalise the railway industry come at a time the sector is struggling with mounting debts and a corruption scandal while attempting to resolve the country's infrastructure bottlenecks.
With headline growth slowing in China, investors also viewed Premier Wen Jiabao's pledge to support growth as directly positive for fixed-asset investments such as infrastructure-related sectors including railways.
In a note on Monday, Citi strategists said this was the first time Wen had indicated that stabilising growth should at the top of the country's economic agenda. "In our view, this signals that policy is shifting to defend growth," they said.
Investors will be looking to the HSBC China Flash PMI for May, a preliminary survey of manufacturing data activity the world's second-largest economy expected on May 24, for fresh clues on the extent of the slowdown.
Still, measures to bolster domestic consumption are unlikely to help Chinese sports brands such as Anta Sports Products Ltd , which are struggling with inventory-related issues and competition from foreign brands.
Anta declined 2.8 percent in more than double its 30-day average volume to the lowest since April 2009.
This follows a more than 9 percent plunge last Friday after the company warned that orders for the fourth quarter fell more than 10 percent in value terms year on year as competition intensified. (Editing by Sanjeev Miglani)