HK, China shares climb; headed for strong monthly finish

(Updates to midday)

HONG KONG, July 31 (Reuters) - Hong Kong and China stocks rose on Friday, steadily recapturing ground ceded during a mid-week sell-off after the central bank reassured nervous investors that Beijing would continue with a loose monetary policy.

Both markets are set to record another month of hefty gains in July, the seventh successive monthly gain for Shanghai and the fifth winning month for Hong Kong, fuelled by positive earnings momentum and analyst upgrades.

Power companies, which have lagged the market rally this year, jumped on Friday, after Datang International Power Generation (601991.SS) forecast a surge in first-half profit. [ID:nHKG92038]

Datang jumped its 10 percent daily limit to 10.47 yuan while its Hong Kong-listed shares (0991.HK) jumped 6 percent to HK$5.12

Yangtze Electric Power (600900.SS), operator of the country's largest hydropower project, the Three Gorges Dam, jumped 4.94 percent to 15.52 yuan. Huaneng Power (600011.SS), China's biggest power provider, rose 4.25 percent to 9.08 yuan.

Here are the index moves and top stocks on the move in both markets by midday-

HONG KONG

* The benchmark Hang Seng Index .HSI was up 1.8 percent at 20,592.72. HSBC (0005.HK) lead the charge with a 3.9 percent jump even as analysts predicted a loss for the global banker when it reports its first-half earnings next week on the back of write-offs at its U.S. unit.

* Local property developers surged after Morgan Stanley forecast a further 20 percent increase in home prices and a 15 percent rise for office real estate.

"The liquidity rush will continue to drive up Hong Kong asset prices and the performance of property stocks," said analysts with Morgan Stanley led by Derek Kwong.

* Henderson Land (0012.HK) jumped 4.6 percent, while Hysan Development (0014.HK) vaulted 7.2 percent.

* The China Enterprises Index .HSCE, which represents top locally listed mainland Chinese stocks, was 1.3 percent higher at 12,149.82.

* Other power producers also rallied, with Huaneng Power (0902.HK) gaining 6.4 percent and China Resources Power (0836.HK) climbing 5.2 percent.

China Resources Power Holdings plans to take a 25 percent stake in a 25 billion yuan ($3.66 billion) nuclear project in Hunan, China, chief financial officer Wang Xiaobin told Reuters on Thursday. [ID:nHKG283866]

* China Insurance International Holdings (0966.HK) gained 6.6 percent after its said it had completed an acquisition of 1.39 billion shares of Ming An (Holdings) 1389.HK, fulfilling a pre-condition of taking Ming An private.

Ming An shares were up 6.2 percent.

* BYD Company (1211.HK) jumped 5.9 percent after the China Securities Regulatory Commission granted approval for, and MidAmerican Energy, a unit of U.S. billionaire investor Warren Buffett's Berkshire Hathaway Inc (BRKa.N), completed its purchase of 225 million new H shares to give it a holding of 9.89 percent of the company. MidAmerican Energy Holdings said in September 2008 that it would pay $230 million for a 10 percent stake in the Chinese rechargeable battery company to support its 'green' technologies.

* Hutchison Whampoa (0013.HK) rose 2.6 percent following an upgrade from HSBC Global Equity Research to "neutral" from "underweight" after its 2009 recurring net profit forecast was raised by 12 percent on an improved outlook for its property, Asian retail and earnings at its Candian oil unit Husky Energy (HSE.TO).

SHANGHAI

* The Shanghai Composite Index .SSEC ended the morning 1.2 percent higher at 3,361.849 points, led by property developers and power generators.

* Gaining Shanghai A shares overwhelmed losers by 791 to 92. Turnover in Shanghai A shares eased to 111 billion yuan ($16 billion) from Thursday morning's 127 billion yuan.

* China's central bank pledged to maintain a loose monetary policy to support the economy, and said it would ensure sustainable credit growth without resorting to heavy-handed quotas to rein in lending.

* The central bank statement was released after Wednesday's 5 percent stock market fall, its biggest daily drop in eight months, in record volume.

* "Apparently, the government doesn't want to see the market slide further, so the central bank came out to clarify that bank lending wouldn't be restricted," said Chen Daqing, analyst at First-Trust Fund Management Co.

"Yes, stock valuations are not cheap, but as long as the loose monetary policy is not reversed, liquidity will remain ample and there're always good stories to tell in a bullish market."

* China's 4 trillion yuan stimulus package, unprecedented lending growth and stabilising economy have helped propel a more than doubling of the Shanghai index from last October's two-year low.

* Steel companies rose on prospects of rising demand and after the China Iron and Steel Association vowed on Friday to keep pressing for favourable results in annual iron ore price negotiations, raising hopes that costs could be lowered.

Angang Steel (000898.SZ) rose 1.18 percent to 17.18 yuan.

* Brokerage shares rose as China Everbright Securities prepared to set the price range for its pending initial public offering in Shanghai, the second IPO by a Chinese securities company. Guoyuan Securities 000728.SZ rose 1.51 percent to 25.57 yuan. (Reporting by Parvathy Ullatil in HONG KONG and Samuel Shen in SHANGHAI; Editing by Edmund Klamann and Chris Lewis)