HK shares post biggest gain in a mth;Shanghai at 13-mth high

* HK shares post biggest one-day gain in a month

* China shares rise 2 pct to 13-mth high, led by banks

* Dealers say thin volumes make market rally unsustainable (Updates to close)

By Sui-Lee Wee and Claire Zhang

HONG KONG, July 14 (Reuters) - Hong Kong shares surged 3.66 percent on Tuesday to their biggest one-day gain in a month, after an overnight rally on Wall Street spurred short-covering in financials.

Stocks in Shanghai jumped 2.1 percent to a 13-month closing high, with financial shares joining a global rally and Baosteel (600019.SS) climbing after it secured a surprisingly big increase in steel prices.

Hong Kong's benchmark Hang Seng Index rebounded from a seven-week low, as investors flocked to beaten-down banks and financial issues, particularly after influential financial analyst Meredith Whitney's bullish outlook for bank earnings boosted U.S. stocks.

HSBC (0005.HK) contributed the most to the rise of the index, advancing 4.4 percent to HK$64.25. Chinese lender China Construction Bank (0939.HK) rose 3.3 percent to HK$5.61, Bank of China (3988.HK) rose 4.1 percent to HK$3.56, and ICBC (1398.HK) was up 2.6 percent at HK$5.05.

Chinese insurer China Life (2628.HK) climbed 3 percent to HK$30.55.

"We saw a nice bounce today," said Howard Gorges, vice-chairman with South China Brokerage. "It's very much news-driven from what happened on Wall Street. But there's still plenty of uncertainty. The bears keep calling the market down but it doesn't seem to want to go down. That is strange because there hasn't been much good news."

RALLY UNSUSTAINABLE?

The benchmark Hang Seng Index rose 631.10 points to 17,885.73. Turnover dropped to HK$51 billion, from HK$52.5 billion on Monday, indicating that some investors were cautious about the market's outlook.

"The market lacks direction and momentum," said Peter Lai, a director with DBS Vickers. "Investors are adopting a wait-and-see attitude and volumes remain weak. We could experience a correction in the third quarter."

Dealers are looking ahead to data on U.S. retail sales and corporate earnings later this week for indications of corporate health in the world's largest economy.

The China Enterprises Index, which represents top locally listed mainland Chinese stocks, rose 3.62 percent or 372.61 points to 10,651.86.

Tsingtao Brewery (0168.HK) surged 6.7 percent to a 17-month high of HK$26.20 after the brewer said it expected first-half profit to increase 60-70 percent year on year.