* China implements rise in bank reserves on Tuesday * Cancelled warrants up, suggests Asia demand may be rising (Recasts, updates prices, adds comment) By Rujun Shen and Edmund Klamann SHANGHAI, Jan 26 (Reuters) - London copper prices fell more than a percent on Tuesday after China enforced a rise in bank reserves, rekindling concerns of more tightening policies from the world's top consumer of industrial metals. China's central bank last week told some banks to raise their reserve ratios, and banking sources said the hike came into effect on Tuesday. [ID:nSGE60P039] The news weakened investor sentiment and hurt equity markets, sending the benchmark Shanghai Composite Index .SSEC down 2.4 percent and Hong Kong shares to a four-month low. "There are worries about tightening of credit. Even though the interest rate wasn't raised on the one-year bills, everybody is still talking about it," a Shanghai-based trader said. A series of moves from China's central bank to rein in excessive credit and U.S. President Barack Obama's plan to restrict risk trading at banks have sent jitters across the financial markets. Shanghai's benchmark third-month copper futures contract SCFc3 pared early gains to end at 59,350 yuan, down 0.8 percent. The most-active contract for May delivery SCFK0 fell 1.2 percent to 59,210 yuan a tonne. Three-month copper on the London Metal Exchange MCU3 declined 1.7 percent to $7,341.25 a tonne, reversing gains in the previous session. Copper prices have fallen by almost 6 percent since peaking at $7,796 a tonne in early January. Zinc has dropped 16 percent and lead has lost nearly 19 percent since their January peaks, while aluminium is down almost 7 percent. "The sell-off can be attributed to a number of factors, including long liquidation after the recent strong price rally," said a Macquarie research note. Macquarie expects copper to remain strong in the short term. Strong Chinese import demand as a result of the opened arbitrage window is likely to keep prices at lofty levels, the Macquarie research note said, adding that copper consumption in China would not be affected by tightening policies. "The Chinese government has yet to tighten monetary policy, merely act to bring the monetary stance towards neutral, while leaving fiscal measures designed to encourage domestic consumption largely intact," it said. Copper stocks registered with the London Metal Exchange fell by 800 tonnes on Monday, but cancelled warrants -- materials earmarked for delivery -- rose nearly 60 percent in the past two days to stand at 11,300 tonnes. "The rising cancelled warrants in January suggests the demand from Asia may be rising in the first quarter, which will not support a sharp correction in prices," said Peng Qiang, an analyst at COFCOFutures. Shanghai aluminium SAFc3 fell 1.3 percent to 16,975 yuan a tonne, and LME aluminium was down $18 to $2,225 a tonne. China's top aluminium maker, Aluminum Corporation of China (Chinalco), is shifting its development focus to copper, which has great potential in China than aluminium, and its next overseas acquisition is likely to be a copper mining and smelting project. [ID:nSGE60O0FW] Shanghai zinc SZNc3 dropped 3.4 percent to a one-month low 19,195 yuan a tonne, and LME zinc MZN3 fell 0.8 percent to $2,296. Base metals prices at 0701 GMT Metal Last Change Pct Move End 2009 YTD pct chg LME Cu 7341.25 -123.75 -1.66 7375.00 -0.46 SHFE Cu* 59350.00 -500.00 -0.84 59900.00 -0.92 LME Alum 2225.00 -18.00 -0.80 2230.00 -0.22 SHFE Alum* 16975.00 -220.00 -1.28 17160.00 -1.08 COMEX Cu** 335.00 -3.40 -1.00 332.75 0.68 LME Zinc 2296.00 -19.00 -0.82 2560.00 -10.31 SHFE Zinc 19195.00 -680.00 -3.42 21195.00 -9.44 LME Nickel 17950.00 -200.00 -1.10 18525.00 -3.10 LME Lead 2180.00 -40.00 -1.80 2432.00 -10.36 LME Tin 17750.00 -190.00 -1.06 16950.00 4.72 LME/Shanghai arb^ -714 Dollar/yuan 6.8267 \ 6.8269 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month (Editing by Himani Sarkar)

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