* HSI +0.9 pct, H-shares +1.5 pct, CSI300 +1.7 pct
* Tencent recovery pulls up HK indexes
* Hundsun Technologies up 10 pct after Alibaba purchase
By Natalie Thomas
SHANGHAI, April 8 (Reuters) - China stocks rose sharply on Tuesday as banking shares rebounded on stimulus hopes, driving the CSI300 banking subindex to a seven-week high.
Hong Kong stocks stabilised on Tuesday led by a rally in index heavyweight Tencent Holdings Ltd, whose recent volatility has heavily influenced the overall performance of the Hang Seng.
By midday, the CSI300 index of the largest Shanghai and Shenzhen A-share listings was up 1.7 percent, while the Shanghai Composite Index was 1.3 percent higher at 2,086.39 points.
The Hang Seng Index was up 0.9 percent at 22,574.3 points. The China Enterprises Index of the top Chinese listings in Hong Kong gained 1.5 percent.
China's banking subindex climbed 2.2 percent to its highest intraday level since Feb. 20 on market expectations that the government will introduce economic stabilisation policies, analysts said.
"What's more, this sector has been undervalued so there's a clearer chance for profits," said Du Changchun, an analyst at Northeast Securities in Shanghai, also noting that recent earnings for the sector had on the whole beaten expectations.
Industrial Bank Co Ltd rose 4.3 percent, China Minsheng Banking Corp Ltd gained 2.8 percent and Ping An bank Co Ltd added 2.7 percent.
Tencent gained 2.7 percent, regaining some ground after dropping 4.5 percent to a 10-week low on Monday.
The stock has proved highly volatile over the past 10 weeks, registering 11 daily losses or gains of more than 4 percent since Jan. 24, amid investor concerns that the sector as a whole is overvalued.
"Tencent is the key right now in Hong Kong," said Alex Wong, director of asset management at Ample Finance Group.
"Yesterday we saw a turnover of around 50 billion Hong Kong dollars, out of which I think one-tenth was Tencent."
Elsewhere, Great Wall Motor Co Ltd soared 6.2 percent after Malaysian media reported that the company would be awarded a license to set up a vehicle manufacturing plant in that country.
On the mainland, Hundsun Technologies surged 10 percent on its first day of trading since Alibaba Group Holding Ltd IPO-ALIB.N agreed to take a 3.3 billion yuan ($531 million) stake in the financial software firm.
Auto manufacturer Lifan Industry (Group) Co Ltd jumped 7.2 percent after the company announced after trade on Friday that it had signed a framework agreement to invest about 2.2 billion yuan ($354 million)in a new energy car project.
The Shanghai and Shenzhen exchanges were closed on Monday for the Qingming festival. ($1 = 6.2123 Chinese Yuan) (Additional reporting by Chen Yixin; Editing by Chris Gallagher)