China shares inch up, outperform Asia; Hong Kong lower

* HSI down 0.1 pct, tracks weakness in rest of Asia

* CSI300, Shanghai Comp up 0.2 pct

* Reports of China govt funds, insurers buying sharessupport

* ZTE recovers after brokers recommend buying on weakness * China auto stocks rise on rural subsidy report(updates to close) By Vikram Subhedar

HONG KONG, Oct 10 (Reuters) - China shares outperformedAsian peers and inched higher on Wednesday led by brokers andoil producers for a second straight day on hopes that Beijingwill take more market-boosting steps.

The Hang Seng index , however, ended down 0.1 percent,dragged lower by a weak close overnight on Wall Street due toworries over corporate earnings. The main index of Chineseshares listed in Hong Kong rose 0.7 percent.

On the mainland, the CSI300 index of top Shanghaiand Shenzhen listings and the Shanghai Composite bothrose 0.2 percent.

China's major insurance companies increased their combinedstock holdings by more than 10 billion yuan ($1.6 billion) overthe last three trading days and will continue buying equities,the official Shanghai Securities News said on Wednesday.

The report comes after Chinese banking shares rallied in theprevious session on expectations that Central Huijin, a unit ofChina's sovereign wealth fund, would continue to increase itsstake in banks.

The Shanghai Securities said that Huijin had added 18.8million shares of Bank of China Ltd in thethird-quarter.

Bank of China shares in Hong Kong rose 1.4 percent whileIndustrial and Commercial Bank of China Ltd rose 1.5percent.

"Today's theme is more government support," said a HongKong-based trader at an Asian brokerage adding that a report onsubsidies for vehicle sales in rural areas was supporting autostocks.

"There is also speculation over the possibility of companiesbuying back shares in sectors like steel where prices are belowbook," said the trader.

Dongfeng Motor Group Co Ltd rose 4.9 percent whileShenzhen-listed FAW Car Co Ltd rose 7.9 percent thesecond-biggest gainer on the CSI300 after Shandong Iron

which rose 10 percent.

Shortly before the markets closed China Association ofAutomobile Manufacturers said vehicle sales in China fell 1.8percent in September, the first monthly fall since January 2012.

But Chinese automakers are expected to have gained somemarket-share last month after sales of Japanese car makerstumbled in September due to a territorial row between the twocountries.

Analysts at Deutsche Bank cut their earnings estimates forDongfeng, which has joint ventures with Japan's Nissan Motor Co

and Honda Motor Co in China, but still ratedthe stock a "buy" on valuation.

Shares of ZTE Corp , the target of a U.S.congressional report that urged American companies to stop doingbusiness with Chinese telecom equipment makers, recovered fromtwo days of losses and closed up 5.9 percent.

Several brokerages, including JPMorgan and Goldman Sachs,issued reports saying U.S. investigations are unlikely to havemuch impact on ZTE's profits, with investors switching focus to4G spending, which is expected to benefit the company.

(Editing by Simon Cameron-Moore)

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


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