Hong Kong shares gain, infrastructure hauls China off 6-mth low

(Update to close)

* HSI up 0.1 pct, CSI300 climbs 0.8 pct

* HK property developers boosted by JPM upgrade

* Infrastructure stocks strong after Wen's remark on growth

* China news report reignites bad loan fears for banks

By Clement Tan

HONG KONG, July 11 (Reuters) - Hong Kong shares ended in positive territory for the first time four days on Wednesday, as strength in local property developers helped counter weakness in Chinese banks after a mainland news report fanned worries over banks' exposure to bad loans.

Onshore Chinese markets were hauled off six-month lows by infrastructure-related stocks after Premier Wen Jiabao said China must maintain reasonable investment growth, although lackluster turnover in both markets pointed to lingering caution ahead of China GDP data due on Friday.

Second quarter GDP is expected to show the weakest growth in at least three years.

"People are piling into cement and railways stocks after the Chinese Premier's comments, but it's mainly short term players chasing the rally," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

"We are still awaiting more details on how Beijing plans to push infrastructure investment which will give greater clarity on profitability for that sector, but otherwise sentiment remains quite weak," he added.

The Hang Seng Index reversed midday losses to close up 0.1 percent at 19,419.9. The China Enterprises Index of the top Chinese listings in Hong Kong shed 0.1 percent.

Onshore Chinese markets bounced from their lowest levels since January this year. The large-cap focused CSI300 Index climbed 0.8 percent, while the Shanghai Composite Index rose 0.5 percent.

Chinese infrastructure-related stocks shrugged off U.S. engine maker Cummins Inc reducing its profit forecast, partly due to demand in China improving less than expected.

Among infrastructure stocks, China Railway Construction jumped 5.2 percent in Hong Kong and 3.4 percent in Shanghai while Anhui Conch Cement rose 2.8 percent each in Hong Kong and Shanghai.

Shares of Hong Kong property developers jumped after JP Morgan analysts upgraded the sector, suggesting it could reverse its underperformance in the second half of the year as fears ebb on the new government flooding the physical market with a huge land supply to drive down housing prices.

Sun Hung Kai Properties jumped 3.6 percent after JPM upgraded its shares by two notches from underweight to overweight, and upped its target price by nearly 10 percent.

Wednesday's gains cut Sun Hung Kai's losses this year to 1.2 percent. The share had been down by as much as 13 percent at the end of March after the arrests of its two co-chairmen on allegations of corruption.

FRESH BAD DEBT FEARS HIT CHINA BANKS

Chinese banks lost ground after Caixin magazine said China Construction Bank (CCB) would be owed 3 billion yuan if a troubled Hangzhou-based conglomerate client defaults on outstanding debt estimated at 8 billion yuan.

CCB, the mainland's second-largest lender lost 3 percent while larger rival, Industrial and Commercial Bank of China (ICBC) fell 1.9 percent and Bank of China shed 1.4 percent.

Although Chinese banks are trading near historically low valuations, investors have shunned the stocks.

On top of balance sheet concerns, Beijing's recent interest rate cuts also involved cuts to its lending and deposit rates that are expected to squeeze banks' interest rate margins and hurt their profitability. (Additional reporting by Vikram Subhedar; Editing by Simon Cameron-Moore)