HK,China stocks up on policy news; Li&Fung at 2-yr high

* HK, China up after Beijing reaffirms easy monetary policy

* Li & Fung at more than two-year high on US recovery hopes

* Hang Seng index newcomers down as investors lock in gains (Updates to close)

By Donny Kwok and Claire Zhang

HONG KONG, March 5 (Reuters) - Hong Kong shares rose on Friday, with exporter Li & Fung (0494.HK) leading gains on hopes of a recovery in the U.S. economy, while Premier Wen Jiabao's reaffirmation of China's monetary and fiscal policies lifted China stocks.

Li & Fung, which in January signed a sourcing agreement with U.S. retailer Wal-Mart (WMT.N), ended up 2.21 percent at its highest close in more than two years, but off an all-time high of HK$40. Brokers said the stock was boosted by hopes it would benefit from a recovery in the U.S. economy after better-than-expected retail sales data. [ID:nN04185357]

"We buy the U.S. retail (recovery) story," said William Lo, analyst at Ample Finance Group, adding that sales figures from some U.S. retailers suggested signs of improvement.

Brokers said they expected limited upside for Li & Fung because of its high share valuation after the rally, with buying interest likely to switch to other retail-related stocks.

"It would be a better idea to wait for more solid proof of a (U.S.) recovery," said Daniel Chan, strategist from DBS Bank. "Hong Kong and China stocks were off their peak after traders digested Premier Wen's comments."

Premier Wen Jiabao said on Friday that China would stick to an "appropriately easy monetary stance" and a "proactive fiscal policy" as it sought to counter the lingering impact of the international credit crunch. [ID:nTOE62308M]

Chinese banks recovered from a sell-off in the previous session. No.2 lender China Construction Bank (0939.HK) was up 2.35 percent at HK$6.10.

Top lender ICBC (1398.HK) trimmed early gains and advanced 0.87 percent to HK$5.80. ICBC (601398.SS) said on Friday that it was not facing pressure to raise new capital, even as many of its peers announced fundraising plans to bolster their balance sheets. [ID:nBJB003710]

The benchmark Hang Seng Index .HSI ended up 1.03 percent or 212.19 points at 20,787.97, finishing the week up 0.87 percent. The China Enterprises Index .HSCE of top locally listed mainland Chinese stocks closed up 1.29 percent at 11,927.37, ending the week 3.3 percent higher.

Turnover increased to HK$69.2 billion ($8.9 billion) from Thursday's HK$62.16 billion.

PetroChina (0857.HK) touched a four-week high of HK$9.03 before ending at HK$8.93, up 1.82 percent. Chairman Jiang Jiemin said the company expected profit to improve this year. [ID:nTOE624034]

Investors locked in gains on Hang Seng Index newcomers [ID:nTOE61409N] set to join the benchmark index on March 8. China Minsheng Banking Corp (1988.HK) was down 3.73 percent. Metallurgical Corp of China (1618.HK) fell 5.04 percent, while Sinopharm (1099.HK) lost 2.96 percent and electronics manufacturer ZTE (0763.HK) was down 3.5 percent.

SHANGHAI UP ON EASY MONETARY POLICY

China's key stock index closed up 0.25 percent on Friday, with brokerage shares buoyed by news of the imminent launch of index futures trade, while Premier Wen Jiabao reaffirmed China's loose monetary and fiscal policy.

The Shanghai Composite Index .SSEC ended at 3,031.065 points, after falling 2.4 percent on Thursday in its biggest one-day decline in five weeks.

"One of the main reasons for today's rise was just a bounce from the big drop yesterday, but the news that index futures will begin trading in April was also a positive factor," said Zheng Weigang, analyst at Shanghai Securities.

China's stock index futures trade was expected to begin in mid-April, preceded by a pilot programme for margin trading and short-selling of shares, the chief securities regulator said. [ID:nTOE6230AE]

Brokerages were the most actively traded stocks, with CITIC Securities (600030.SS) up 1.84 percent at 27.12 yuan and Huatai Securities (601688.SS) up 6.87 percent at 22.25 yuan.

Gaining Shanghai stocks outnumbered losers by 547 to 324, while turnover fell to one-week low of 105 billion yuan ($15.38 billion) from Thursday's 144 billion yuan.

Premier Wen Jiabao assurance that China would stick to an appropriately easy monetary stance and proactive fiscal policy lent support.

"The tone of Wen's speech was generally in line with expectations," said Chen Huiqin, senior analyst at Huatai Securities in Nanjing. "Investors should not be optimistic about a strong rebound given lingering worries over more share supplies and liquidity."

The index lost 0.7 percent for the week, after last week's 1.12 percent gain was not seen supported by improvements in fundamentals such as the balance of share supply and demand, with regulators continuing to approve a steady stream of share offerings to the market, traders said.

The market has also been pressured by policy moves to tighten liquidity, including two increases in bank reserve requirements since the beginning of the year.

Traders added that the market was expected to trade in a narrow range in the short term, but was likely to test key psychological support at 3,000 points.

FAW Car (000800.SZ), a subsidiary of major Chinese automaker FAW Group, jumped 5.21 percent to 23.22 yuan after saying net profit rose 49.8 percent last year to 1.6 billion yuan.

China Vanke (000002.SZ), the country's largest listed property developer, fell 0.32 percent to 9.36 yuan after saying turnover from housing sales in February fell 35.4 percent year on year to 2.51 billion yuan.