HK shares rise on high liquidity; China stocks dip

* HK stocks up on abundant liquidity; finance leads

* Lijun soars on new antiviral drug

* China stock down; steel, power shares stay strong

(Updates to midday)

By Donny Kwok, Claire Zhang and Edmund Klamann

HONG KONG/SHANGHAI, Nov 9 (Reuters) - Hong Kong shares rose
on Monday, tracking firmer overseas markets with Chinese finance
plays leading the rise, while Shanghai stocks dipped on
profit-taking after last week's rally to a three-month high.

"Abundant liquidity drove up local stocks, but too much
upside is unlikely especially when the index hovers above 22,000
mark," said Ben Kwong, chief operating officer of KGI Asia. The
recent rally was unjustified by economic fundamentals, he added.

The benchmark Hang Seng Index .HSI rose to a two-week high
of 22,139.71 before steadying at 22,063.16 at midday, up 1.07
percent or 233.44 points and extending the previous session's
1.63 percent gain.

Hong Kong assets look attractive given the territory's peg to
a weak U.S. dollar.

Hong Kong's central bank, the Hong Kong Monetary Authority,
injected a total HK$9.3 billion (US$1.2 billion) into the money
market in Hong Kong and New York last Friday as the Hong Kong
dollar HKD= repeatedly hit the top of its trading band at
7.7500 as funds poured into the stock market. [ID:nHKG237502]

Optimism over economy growth in the mainland aided demand for
Chinese finance plays with China Life (2628.HK: 株価, 企業情報, レポート), the world's top
life insurer by market value, rose 1.7 percent to HK$38.10.

ICBC (1398.HK: 株価, 企業情報, レポート) gained 2.01 percent to HK$6.59 and Bank of
Communications (3328.HK: 株価, 企業情報, レポート) rose 1.5 percent to HK$9.75.

Banks in China are expected to lend 8 trillion-9 trillion
yuan ($1.2 billion-$1.3 billion) in 2010, down from this year's
forecast new-loan total of 10 trillion yuan, Bank of
Communications (601328.SS: 株価, 企業情報, レポート) said on Saturday. It said system-wide
non-performing loans (NPLs) would remain steady; the NPL ratio
might even fall because of growth in outstanding loans.
[ID:nPEK214189]

Turnover was at HK$33.96 billion ($4.38 billion), down from
midday Friday's HK$37.01 billion.

The China Enterprise Index .HSCE of top locally listed
mainland Chinese stocks rose 1.34 percent to 13,191.11.

Dongfeng Motor Group Co (0489.HK: 株価, 企業情報, レポート) gained 1.1 percent to HK$11
after China's third-largest carmaker said its sales in October
rose 76.98 percent from a year earlier. [ID:nSHA225953]

Lijun (2005.HK: 株価, 企業情報, レポート) surged to an all time high of HK$1.86 before
steadying at HK$1.47, still up 11.4 percent. The Chinese
drugmaker said it saw a promising market for its new antiviral
drug, Enerxin, which has been proven by the State Key Laboratory
of Virology as effective in restraining growth and blocking the
invasion of cells by the influenza A virus (H1N1) in its early
stages, similar to the function of Tamiflu.

SHANGHAI DIPS; POWER, STEEL SHARES STRONG

China's key stock index dipped 0.2 percent on Monday, weighed
down by profit-taking after last week's rally to a three-month
high, but power and steel shares were strong as the market drew
continued support from expectations of strong economic data for
October.

The Shanghai Composite Index .SSEC ended the morning at
3,157.552 points, after posting its best weekly rise in more than
three months last week.

Losing Shanghai A shares outnumbered gainers by 443 to 421,
while turnover remained active at 85 billion yuan ($12 billion),
although down from Friday morning's 94 billion yuan.

"This is a mild and rational consolidation after last week's
strong gains," said Wen Lijun, analyst at Nanjing Securities, who
added that investors were expecting upbeat economic data for
October, which is due for release on Wednesday.

China's money supply and lending growth are expected to have
maintained a rapid pace last month as Beijing held to its loose
monetary policy stance, according to a Reuters poll.
[ID:nSP458045]

Central bank adviser Fan Gang told Reuters late on Friday
that China's economy had stabilised and was on track to achieve
growth of 8 percent next year but Beijing would stick to its
loose fiscal and monetary policies for now. [ID:nSGN002268]

PetroChina (601857.SS: 株価, 企業情報, レポート), the most heavily weighted share in
the index, slipped 0.87 percent to 13.64 yuan, after U.S. crude
futures fell nearly 3 percent on Friday.

Electric power sector shares were strong, with Datang
International Power Generation (601991.SS: 株価, 企業情報, レポート) jumping 4.88 percent
to 9.67 yuan while Huadian Power (600027.SS: 株価, 企業情報, レポート) rose 2.22 percent to
5.53 yuan and Huaneng Power International (600011.SS: 株価, 企業情報, レポート) advanced
2.33 percent to 8.33 yuan.

The official Shanghai Securities News reported on Friday that
China may raise power prices charged on consumers by up to nearly
5 percent this month, intensifying speculation that Beijing could
make the first price move in 15 months very soon. [ID:nPEK232338]

Steel shares outperformed after news of a possible merger in
the sector, with Baoshan Iron and Steel (600019.SS: 株価, 企業情報, レポート) gaining 2.07
percent to 7.41 yuan.

Laiwu Steel Corp (600102.SS: 株価, 企業情報, レポート) and Jinan Iron and Steel Co
(600022.SS: 株価, 企業情報, レポート), whose shares have been suspended from trading, said
they may merge into a single company, part of consolidation
efforts by their parent, Shandong Iron and Steel Group.

Metal shares were firmer, with Shandong Gold (600547.SS: 株価, 企業情報, レポート)
jumping 6.53 percent to 75 yuan, as gold prices edged up and held
near a record high on Monday.
(Editing by Jonathan Hopfner)