* HSI +0.3 pct, H-shares +0.1 pct, CSI300 +0.1 pct
* CSI300 in eighth consecutive winning session
* Shanghai FTZ-related stocks jump ahead of a new law
* China South City drops after reports on bulk sale of its shares (Updates to midday)
By Grace Li
HONG KONG, July 29 (Reuters) - China shares hovered near the year's highs on Tuesday while Hong Kong's key index edged up from its best close in more than 3-1/2 years on spillover from improving views of the Chinese economy.
By midday, the Hang Seng Index rose 0.3 percent to 24,493.41 points. The China Enterprises Index of the top Chinese listings in Hong Kong inched up 0.1 percent.
The CSI300 of the leading Shanghai and Shenzhen A-share listings and the Shanghai Composite Index each added 0.1 percent. The Shanghai benchmark stood at 2,180.52 points. Both swung between negative and positive territory in morning trade.
The CSI300 is now in its eighth consecutive winning session, having climbed almost 8 percent in the past seven sessions.
Volumes stayed robust in Shanghai, with midday turnover some 74 percent above its average in the last 20 days, though it dipped a bit from Monday's spectacular amount.
"The recent rally in the Hong Kong and China stock markets is pretty much liquidity-driven due to favourable fund flows. And fund flows are maybe because the two markets remain relatively lagging behind in terms of valuation and performance," said Ben Kwong, director at KGI Asia in Hong Kong.
On Tuesday, stocks related to Shanghai's Free Trade Zone (FTZ) outperformed, ahead of a new law to provide a legal basis for reform measures in the pilot zone which is to take effect on August 1.
Shanghai International Port Group and Shanghai Lujiazui Finance & Trade Zone Development were among top index boosts in Shanghai, climbing 1.8 and 6.2 percent, respectively.
China South City Holdings sank 5.0 percent after closing at a 4-1/2-month high the previous session.
Investment fund Pacific Alliance Asia Opportunity Fund plans to sell 250 million of its shares, or 3.3 percent of the issued share capital, the Hong Kong Economic Journal reported on Tuesday.
Bank of Communications spiked another 2.6 percent following a 9.9 percent jump the previous day. The country's fifth-largest lender said late on Monday it is studying feasibility plans for the implementation of hybrid ownership reforms to help improve its competitiveness. (Editing by Jacqueline Wong)