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Banks, infrastructure lead Hong Kong shares higher, China weak

(updates to midday)

* HSI up 0.2 pct, H-shares bounce 1.3 percent * CSI300, Shanghai Comp down 0.3 pct * Railway, coal stocks up on infrastructure spending hopes * China auto stocks weak after sluggish September sales By Vikram Subhedar

HONG KONG, Oct 11 (Reuters) - Hong Kong shares rose on Thursday helped by Chinese banks and infrastructure plays on expectations of more government support, although mainland markets eased following strong gains earlier this week.

The Hang Seng rose 0.2 percent by the midday trading break with the index of top Hong Kong-listed mainland firms

up 1.3 percent to be the best performing benchmark in Asia.

China Coal , up 3.1 percent, and Industrial & Commercial Bank of China , up 2.8 percent, were the top performers on the Hang Seng.

On the mainland, the CSI300 of top Shanghai and Shenzhen listings as well as the Shanghai Composite fell 0.3 percent, partly on profit-taking and on weakness in auto shares following weak September vehicle sales.

Central Huijin, a unit of China's sovereign wealth fund, said late on Wednesday that it had bought Shanghai-listed shares of the "Big 4" banks and would continue to increase its stakes.

Speculation about government support, including buying by Huijin, buoyed mainland markets earlier in the week and underpinned the strength in Hong Kong of Chinese banking shares, which have lost favour among foreign investors on worries about bad loans.

"We've seen similar promises by Huijin last year but this time it does show the government's intent on wanting to keep the market supported ahead of the leadership transition," said a Hong Kong-based trader at an Asian brokerage.

Along with the Huijin news, China's Ministry of Railways (MOR) showed in its latest bond prospectus that it had upped its projection of 2012 rail spending slightly, which according to Jefferies is the fourth increase in this year's budget.

China Railways Construction Corp jumped 4.7 percent in Hong Kong while its Shanghai listing rose 2.8 percent. China Communications Constructions Co Ltd rose 3.6 percent.

Hopes of more investment spending to counter a protracted economic slowdown in China also lifted construction-related sectors such as steel and cement.

Angang Steel Co Ltd rose 2.1 percent while cement producer Anhui Conch rose 1.9 percent in Hong Kong and 1.5 percent in Shanghai.

Analysts at Jefferies remain cautious on the railways sector saying that rail volumes remain sluggish and spending on new equipment remains unchanged, underscoring weak demand, despite the hike in the rail construction budget.

"Our suspicion is that MOR wants to indicate to NDRC, which has been adding pressure, that it's doing all it can," said Jefferies analyst Julian Bu, in a note, refering to China's top economic planner, the National Development and Reform Commission.

China's annual economic growth probably slowed for a seventh straight quarter in the July-September period to the weakest level since the depths of the global financial crisis, a Reuters poll showed, reinforcing the case for further policy stimulus.

The first monthly decline in eight months for vehicle sales in China weighed on the auto sector with SAIC Motor down 1.6 percent and FAW Car down 3.9 percent.

GAC Group eased 0.8 percent in Hong Kong.

(Reporting by Vikram Subhedar; Editing by Richard Pullin)

((vikram.subhedar@thomsonreuters.com)(+852 28436975))

Keywords: MARKETS HONGKONG CHINA STOCKS/