* Shares fall 0.7 pct vs broader market's 1.7 pct
* Modest debut could damp outlook for HK tech listings
* IPO's retail tranche was 2.4 times oversubscribed (Adds Hong Kong tech fundraising, co-founder comments)
By Elzio Barreto
HONG KONG, Dec 15 (Reuters) - Meitu Inc stock edged lower on its Hong Kong trading debut on Thursday, dampening hopes of the Chinese photo app maker sparking a revival of the city's appeal as a place to list tech startups.
Meitu's $630 million initial public offering (IPO) was Hong Kong's biggest from the technology sector since the business-to-business unit of e-commerce firm Alibaba Group Holding Ltd in 2007.
The city has since struggled to attract tech startups even though it has been the world's biggest IPO venue for the past two years. The majority of Chinese internet firms and software makers have been won over by exchanges in New York instead.
Meitu's modest first-day performance could therefore dull hopes for more Chinese tech startups to follow suit.
"Can the Hong Kong market support high growth technology companies with not much track record of earnings? Meitu was a test. It passed, but with a C, not an A," said a tech-focused investment banker in Hong Kong, who declined to be identified when discussing the industry.
Meitu makes mobile phones as well as video streaming and photo apps, such as BeautyCam that lets users beautify self portraits. As at October-end, Meitu said its apps logged 456 million monthly active users, mainly in China.
Its stock rose as high as 3.3 percent soon after trading began on Thursday, but drifted as low as 2 percent below its initial public offering price (IPO) of HK$8.50 - a price already at the low end of the IPO marketing range.
As at early afternoon, the stock was down 0.7 percent compared with a 2 percent decline in the benchmark Hang Seng index.
Tech firms' fundraising accounted for an average 2.5 percent of all Hong Kong IPOs since the global financial crisis in 2008, Thomson Reuters data showed. That compared with 13.6 percent at the New York Stock Exchange (NYSE).
The dearth of tech deals increased the focus on Meitu and its post-listing performance, as other Chinese tech startups and IPO underwriters look for signs of investor appetite for similar listings in the city.
The popularity of Meitu's apps and their celebrity users raised expectations for a strong IPO and debut.
Yet the number of shares retail investors wanted to buy was just 2.4 times the number on offer - a relatively low amount considering Meitu's strong brand. The number wanted by institutional investors was a little more than those available, Meitu said.
Meitu co-founder and chairman Cai Wensheng was nevertheless optimistic at the debut ceremony. He previously said Hong Kong's proximity to China, Meitu's biggest market, could help draw investors, particularly as Chinese investors can now buy Hong Kong shares via exchanges in Shanghai and Shenzhen.
"We just opened today and there's still some time until the close," Cai said at the ceremony at the Hong Kong exchange. "We are very satisfied" with the decision to list here. (Reporting by Elzio Barreto; Editing by Denny Thomas and Christopher Cushing)