(Updates to midday)
* HSI up 1.1 pct at 5-mth high, H-share index up 2.1 pct * CSI300 up 2.4 pct, Shanghai Comp up 2.1 pct * Sinopec shares near 5-month high, lead energy sector rally
* ZTE shares slump 4.9 percent, extend drop on U.S. Congressreport
* China Molybdenum triples in Shanghai IPO debut, shareshalted
By Vikram Subhedar
HONG KONG, Oct 9 (Reuters) - Hong Kong shares rose to afive-month high and China shares gained more than 2 percent inactive trade on Tuesday, as hopes of more steps to support themarket from Beijing spurred rallies in large-cap banking andenergy shares.
A report in China Daily said market regulators had pledgedto speed up approvals for quotas for Qualified ForeignInstitutional Investors (QFIIs), the only way for offshoreinvestors to directly access China's domestic markets.
"A lot of investors are underweight China in theirportfolios so any talk on QFII is likely to encourage them tostart getting involved again," said Tom Kaan, a director atLouis Capital Markets in Hong Kong.
The Hang Seng rose 1.1 percent by the midday tradingbreak. Chinese banks and oil producers, which carry the biggestweightings in the local benchmark indexes, lifted the ChinaEnterprises index 2.1 percent higher.
The CSI300 index of top Shanghai and Shenzhenlistings rose 2.4 percent while the Shanghai Compositerose 2 percent. Volumes in Shanghai in the morning session wereequivalent to recent full-day totals.
The report of more reform comes after Chinese regulatorscleared the way for overseas investors to buy more than $30billion worth of stocks and bonds in China, exceeding theprevious programme limit, as Beijing seeks to attract moreforeign portfolio investors.
It also comes amid speculation of more government fundsbeing put to work to boost investor confidence.
China's largest listed broker Citic Securities rose 3.1 percent in Shanghai. Industrial Securities
rose 10 percent, the biggest gainer on the CSI300,while Haitong Securities rose 3.7 percent.
In a sign of returning risk appetite, shares of ChinaMolybdenum Co Ltd nearly tripled after listing inShanghai before trading was suspended.
But there was no respite for ZTE Corp shares whichextended losses to fall 4.9 percent after a U.S. congressionalreport said the company could pose a security threat dashinghopes of expansion plans.
ZTE shares are down 10.6 percent since last Friday's close. BANKS, OIL PRODUCERS UP
ICBC shares rose 2.2 percent and were the topboost on the Hang Seng after a report that China's CentralHuijin Investment, a state-owned asset management company, hadbought 6.3 million shares of the bank in the third quarter.
That led to speculation that Huijin may lift its stake inother Chinese banking shares, traders said, as authorities tryto restore confidence among the mainland's retail investors.
"Markets have gotten caught up in this talk of governmentfunds buying banking shares before and I'd be careful aboutchasing this move," said Kaan.
Chinese financials listed in Hong Kong are flat forthe year compared with a 14.2 percent rise on the Hang Seng.
Energy shares, in particular oil producers which havesuffered over the past week as crude prices weakened, alsorecovered with Sinopec surging 4.4 percent to breakabove its Aug. 17 high.
China Oilfield Services , which operates rigs, rose3.7 percent. Petrochina was up 2.9 percent.
(Editing by Edwina Gibbs)
((vikram.subhedar@thomsonreuters.com)(+852 28436975))
Keywords: MARKETS HONGKONG CHINA STOCKS/UPDATE 1