(Reuters) - Shanghai shares rose on Friday but posted their ninth-straight weekly loss on concerns about China's cooling economy, while Hong Kong stocks fell more than 1 percent and looked set for further losses as traders eyed Europe's festering debt crisis.

There were some rumors in the mainland about a cut in reserve requirements this weekend, but even if it were true, the cut would only serve to increase short-term liquidity before the Chinese New Year, said Alan Lam, Julius Baer's Greater China equity analyst.

Tight money supply conditions in China prompted the country's central bank to suspend bill sales until after the end of the Lunar New Year in late January and would also conduct reverse repo business to help inject money into the market if necessary.

The Hang Seng Index closed down 1.2 percent at 18,593.06 points, while the China Enterprises Index lost 1.5 percent. On the week, they eked out gains of 0.9 and 0.5 percent, respectively, largely due to strength in Chinese oil stocks as worries about Iranian supplies sent crude prices higher.

The Shanghai Composite Index ended 0.7 percent higher at 2,163.39 after briefing testing 2,133 in early afternoon trade, but gains came in weak turnover.

The index lost 1.6 percent on the week, putting it on track for its longest weekly losing streak since August-September 2008, and plumbed 34-month lows.

Weakness in shares of small- and medium-sized companies has dragged on the broader market, with the CSI 500 Index, a gauge of the sector, down 5.5 percent this week.

Small caps are subject to more speculation, so when sentiment is as adverse as it is right now in a market devoid of macro direction, they will be hit hardest, Wang Aochao, UOB Kay Hian's Shanghai-based head of research told Reuters.

China's economic data have largely been okay, which is actually hurting markets more than bad data because the data isn't bad enough to warrant any policy moves to support (growth), Wang added.

China is scheduled to report a slew of economic data for December over the next fortnight, including trade, money supply and loan growth next week that could give investors more clarity on the slowdown in the world's second-largest economy.

Strength in Chinese oil majors helped reverse early losses in Shanghai on Friday after Beijing reportedly raised the threshold for windfall tax on crude oil production, effectively cutting tax payments by the country's oil producers.

PetroChina Co Ltd and China Petroleum & Chemical Corp (Sinopec) were among the top boosts to the Shanghai benchmark, up 1.6 and 0.8 percent.

This week, PetroChina and Sinopec gained 2.3 and 4.2 percent respectively, also partly on higher oil prices spurred by fears of disruptions from Iran.

CEMENT DRAGS HONG KONG LOWER

In Hong Kong, Chinese oil stocks also saw strong gains, bucking broader weakness. PetroChina Co Ltd gained 2.3 percent, CNOOC Ltd rose 3 percent, and China Petroleum & Chemical Corp (Sinopec) firmed 1.9 percent.

For the week, CNOOC gained 13.7 percent, PetroChina 9.6 percent and Sinopec 7.7 percent.

In a note on Friday, Citi analysts replaced Sinopec with PetroChina as their top pick among the three Chinese oil majors, citing the former's higher sensitivity to the tax cut and Sinopec's recent outperformance.

Chinese cement issues, however, suffered steep losses after ratings agency Fitch warned that oversupply could further crimp cement prices in the mainland this year.

The sector was also hit by market talk that Beijing may levy a carbon tax on cement producers by 2013. Anhui Conch Cement Co Ltd tumbled 5 percent, while China National Building Material Co Ltd slumped 5.8 percent in almost three times its 30-day average volume.

The Hang Seng Index finished near the bottom of its trading range on Friday, coming off its 50-day moving average, seen at about 18,807.

Traders said the benchmark is likely to dip below 18,500 in the near term, but do not expect a sharp selloff, arguing that most speculative money has left the territory.