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Banks, infrastructure lead Hong Kong shares higher, China weak

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(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 onThursday helped by Chinese banks and infrastructure plays onexpectations of more government support, although mainlandmarkets eased following strong gains earlier this week.

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

up 1.3 percent to be the best performing benchmark inAsia.

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

On the mainland, the CSI300 of top Shanghai andShenzhen listings as well as the Shanghai Composite fell0.3 percent, partly on profit-taking and on weakness in autoshares 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 sharesof the "Big 4" banks and would continue to increase its stakes.

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

"We've seen similar promises by Huijin last year but thistime it does show the government's intent on wanting to keep themarket supported ahead of the leadership transition," said aHong 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 itsprojection of 2012 rail spending slightly, which according toJefferies is the fourth increase in this year's budget.

China Railways Construction Corp jumped 4.7percent in Hong Kong while its Shanghai listing rose2.8 percent. China Communications Constructions Co Ltdrose 3.6 percent.

Hopes of more investment spending to counter a protractedeconomic slowdown in China also lifted construction-relatedsectors such as steel and cement.

Angang Steel Co Ltd rose 2.1 percent while cementproducer Anhui Conch rose 1.9 percent inHong Kong and 1.5 percent in Shanghai.

Analysts at Jefferies remain cautious on the railways sectorsaying that rail volumes remain sluggish and spending on newequipment remains unchanged, underscoring weak demand, despitethe hike in the rail construction budget.

"Our suspicion is that MOR wants to indicate to NDRC, whichhas been adding pressure, that it's doing all it can," saidJefferies analyst Julian Bu, in a note, refering to China's topeconomic planner, the National Development and ReformCommission.

China's annual economic growth probably slowed for a seventhstraight quarter in the July-September period to the weakestlevel since the depths of the global financial crisis, a Reuterspoll showed, reinforcing the case for further policy stimulus.

The first monthly decline in eight months for vehicle salesin China weighed on the auto sector with SAIC Motordown 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/

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