HK, China shares advance; Geely up on Volvo deal

* HK shares up 0.88 pct; finance, property issues lead

* China stocks up as China State Construction rises

* Geely rises as parent nears agreement with Ford
(Updates to midday)

By Donny Kwok and Lu Jianxin

HONG KONG/SHANGHAI, Dec 24 (Reuters) - Hong Kong shares
gained for three straight sessions on Thursday aided by property
plays on hopes for a strong response to a government land auction
next week, and China stocks rose on optimism over China's
economic recovery.

Geely Auto (0175.HK) rose 8.04 percent to a weekly high of
HK$4.30, before closing at HK$4.26, up 7.04 percent. Ford Motor
(F.N) said that it was nearing an agreement to sell its Volvo
unit to Geely, the parent of Geely Auto. [ID:nLDE5BM0VB]

The benchmark Hang Seng Index .HSI ended up 0.88 percent,
or 188.26 points, at 21,517 in a half-day of trading, its highest
close in over a week. The index ended the four-day week 1.61
percent higher.

The China Enterprises Index .HSCE of top locally listed
mainland Chinese stocks rose 1.16 percent to 12,673.74.

Market turnover increased to HK$27.55 billion ($3.55
billion), from midday Wednesday's HK$21.86 billion.

The market closed at midday for the Christmas holiday.

"The market was quiet and steady this morning," said Alfred
Chan, chief dealer at Cheer Pearl Investment. "Players took a
breather after recent volatility while property stocks stayed
firm ahead of a land auction."

Local property stocks extended their advance on hopes for a
strong response to an upcoming auction of two plots of land for
residential purposes in Hong Kong on Monday. Market watchers
expected the auction to draw keen competition among developers.

New World Development (0017.HK) rose 1.15 percent, Wharf
(0004.HK) climbed 1.41 percent, Sun Hung Kai Properties (0016.HK)
gained 0.70 percent, and Sino Land (0083.HK) was up 0.83 percent.

"Despite the firmer market, participants were still cautious
on concern over further Chinese government measures to tackle
asset bubbles," Chan said. He expects the market to be capped at
around 21,800 before the end of this year.

Insurers and banks advanced further, with China Construction
Bank (0939.HK) rising 1.69 percent and HSBC (0005.HK) up 0.91
percent. China Pacific Insurance (2601.HK), China's third-largest
life insurer, which struggled to stay above its issue price
during its Wednesday trading debut, climbed 4.42 percent to
HK$29.55 as the most active stock on Thursday morning.

Larger rival China Life (2628.HK) gained 0.53 percent and
Ping An Insurance (2318.HK) was up 0.45 percent.

Brokers said the China insurance sector was promising for
longer term investment because of optimism over the country's
economy growth.

Knitted fabrics maker Hontex International (0946.HK) dove on
its trading debut to HK$1.97, down 8.4 percent from the issue
price of HK$2.15, and off a session high of HK$2.08.

Zijin Mining (2899.HK) rose 3.62 percent to HK$7.72 after the
gold producer said it would subscribe to $200 million worth of
convertible bonds due in 2014 issued by Swiss mining group
Glencore International [GLEN.UL], a deal enabling the company to
invest in overseas mining assets.

SHANGHAI RISES

China's key stock index rose 1.87 percent by midday, partly
led by China State Construction Engineering Corp (601668.SS) on
news that its parent was buying more shares in the listed unit,
as prospects for China's economic recovery offset the negative
impact of heavy new share supplies.

The Shanghai Composite Index .SSEC ended the morning at
3,131.212 points, regaining the key 125-day moving average now at
3,098.

The market was also aided by an easing of year-end cash calls
as most institutional investors, including mutual funds and
brokerages, had completed their year-end settlements.

"Despite the market's recent fall, the fundamentals including
China's steadily improving economy and prospects for corporate
earnings do not justify lingering weakness," said Chen Jiuhong,
strategist at Haitong Securities in Shanghai.

"We are quite optimistic over the market's trend in the first
quarter of next year," he said.

China State Construction, China's top building company, was
one of the morning's most actively traded stocks, rising 1.55
percent to 4.60 yuan after its parent bought 5 million more
shares in the listed unit and promised to buy more over the next
12 months to support the share price.

Some other shares that have newly listed this year, including
China Merchants Securities (600999.SS) and Metallurgical Corp of
China (601618.SS), have fallen below their initial public offer
prices during the market downtrend of the past few weeks.

The downtrend was partly driven by an official campaign to
clamp down on excessive asset prices, including adding share
supplies and abolishing some preferential property policies.

Thirty-five firms are launching IPOs on the Shanghai and
Shenzhen bourses in December, the biggest monthly total in 12
years, the official China Securities Journal said this week.

In the latest, building company China National Chemical
Engineering Co, said on Thursday it planned to raise as much as
6.70 billion yuan ($980 million) in a Shanghai IPO, after it set
a price range of 4.90 to 5.43 yuan per share. [ID:nTOE5BM04D]

Coming next is Shenzhen Gas Corp, which will list a 904
million-yuan IPO on the Shanghai Stock Exchange on Friday, and a
second batch of eight companies which will debut on China's
Nasdaq-style ChiNext market in Shenzhen, also on Friday.

On Thursday, banking stocks rebounded after China's banking
regulator backed away from reports earlier this week of comments
by a senior official indicating banks would need to raise 500
billion yuan from the capital markets next year. [ID:nTOE5BN00U]

Top lender Industrial and Commercial Bank of China (601398.SS)
added 0.99 percent to 5.12 yuan while smaller rival Minsheng Bank
(600016.SS) rose 2.21 percent to 7.40 yuan.

Gaining Shanghai A shares prevailed over losers by 865 to 21,
while turnover picked up to 60 billion yuan from Wednesday
morning's 44 billion yuan.
(Editing by Jonathan Hopfner)