* HK shares gain for third session to end at 11-month high
* China shares scale 14-month peak, recoup last Wed's losses
* PMI data spurs buying in metal, energy, shipping stocks (Updates to close)
By Parvathy Ullatil and Claire Zhang
HONG KONG/SHANGHAI, Aug 3 (Reuters) - Hong Kong and China shares rose for a third day on Monday as positive factory activity data for July prompted strong buying in the power, metal and oil sectors.
CLSA's China Purchasing Managers' Index (PMI), a key gauge of the country's manufacturing sector, rose to a one-year high in July as resurgent domestic demand spurred manufacturing activity in the world's third-largest economy. The CLSA data dovetailed with that of China's official PMI released on Saturday. [ID:nPEK360544]
Investors appeared to shrug off worries about a possible clampdown on bank lending or even a tightening of monetary policy, which triggered last Wednesday's sell-off.
Analysts predicted a continued strong run for the stock markets as industrial stocks find favour on the back of improved economic data from major economies, but warned that a downside surprise in key earnings could throw a spanner in the works.
"After five months of the PMI staying above the 50 level, investors are convinced the economy in China will keep improving and exports will pick up eventually," said Philip Chan, head of research with CAF Securities.
METAL, SHIPPING STOCKS SHINE
The benchmark Hang Seng Index .HSI finished up 1.14 percent or 233.93 points at 20,807.26, its highest closing level since early September 2008.
Turnover slipped to HK$77.9 billion from Friday's HK$79.6 billion.
The China Enterprises Index .HSCE, which represents top locally listed mainland Chinese stocks, was 2.02 percent or 244.61 points higher at 12,368.20.
Tencent (0700.HK), which operates China's largest online messaging community, jumped 5.1 percent to HK$109.90 after Credit Suisse raised its target price on the stock to HK$118.20 from HK$86. The investment house reiterated its "outperform" rating on the stock and raised Tencent's estimated earnings per share for 2009 by 6 percent on higher gaming and advertising revenues.
The strong PMI data spurred buying in metal, shipping and refinery stocks, helping Sinopec Shanghai Petrochemical (0338.HK) soar 10.1 percent to HK$3.93.
Gold miner Zijin Mining (2899.HK) gained 6.9 percent as the price of the precious metal built on Friday's steep gains while the dollar slid to its lowest level in 2009 amid growing investor risk appetite.
Aluminum Corp of China (2600.HK) shot up 7.2 percent after the world's third-largest alumina producer lifted the spot price of alumina by 4.35 percent last Friday.
China Shipping Container Lines (2866.HK) vaulted 9.9 percent despite flagging a loss in the first half of 2009, as investors bet trade would pick up in coming months as the global economy shows signs of improvement.
Port operator Cosco Pacific (1199.HK) bulked up 17.9 percent to finish at a one-year closing high of HK$12.76.
RALLY NOT YET OVER
The Shanghai Composite Index .SSEC ended 1.48 percent or 50.528 points higher at a 14-month closing high of 3,462.590 points, climbing for a third session in a row as the market recouped all of the losses from last Wednesday's sell-off, which marked its biggest one-day loss this year.
Gaining Shanghai A shares outnumbered losers by 772 to 160, while turnover for Shanghai A shares rose to 235.8 billion yuan ($34.5 billion) from Friday's 223.0 billion yuan.
"The rally is not over yet," said Huatai Securities analyst Zhou Lin, who added that the uptrend would remain intact as long as China's basic policies remained unchanged.
Steel shares climbed after the official Shanghai Securities News reported that Chinese steel industry profit in July may have exceeded 20 billion yuan, for its largest monthly gain in eight years, as domestic prices rose. [ID:nSHA165085]
Steel reinforcing bar futures <0#SRB:> traded on the Shanghai Futures Exchange also surged 4 percent on Monday. [ID:nSHA371607]
Wuhan Steel (600005.SS) jumped 6.5 percent to 12.28 yuan.
Spirits makers outperformed, with Kweichow Moutai (600519.SS) up 3.8 percent at 155.71 yuan and Sichuan Swellfun (600779.SS) up 3.1 percent at 17.79 yuan.
China levied higher consumption taxes on high-end spirits makers effective from Aug. 1, but the stocks rose on expectations that the tax increase would provide a pretext for significant product price increases.
China Southern Airlines (600029.SS) advanced 3 percent to 7.22 yuan after saying it planned to sell six A300 aircraft for $125 million in a deal that would generate about 46.58 million yuan in profit.
Shenzhen Development Bank (000001.SZ) lost 1.26 percent to 25.85 yuan after saying it had not yet made any decision on its mid-year dividend plans. Its shares had been suspended since July 30, during which time the index gained 4.25 percent.
The shares climbed 3 percent last Wednesday, when the index dived 5 percent, after domestic media reported it would announce a bonus share plan for shareholders. (Editing by Edmund Klamann and Chris Lewis)