HK shares gain 3.2 pct, led by banks and resources

* HK shares pare gains amid flat China market

* Commodity stocks surge as oil, gold rally for second day

* ICBC up after Goldman Sachs adds it to conviction buy list

* Hutch Telecom drops as investors exit after dividend payout

(Updates to midday)

By Parvathy Ullatil

HONG KONG (Reuters) - Hong Kong shares rose 3.2 percent on Tuesday after Wall Street gave a resounding thumbs up to the government's decision to rescue Citigroup, while resurgent oil prices helped energy stocks to notch up big gains.

China's top lender, ICBC (1398.HK), surged 6.6 percent after Goldman Sachs added it to its conviction buy list, citing its lower risk profile and less net interest margin pressure than its peers.

The benchmark Hang Seng Index .HSI ended the morning session 403.71 points higher at 12,861.65, led by a 2.1 percent gain in global lender HSBC Holdings (0005.HK).

Other regional markets also rose, but a flat performance on mainland bourses limited gains in the local market.

"We were waiting for an indication from Wall Street on how the Citi bailout should be received, as the local interpretation of the rescue is quite different from what U.S. investors think," said Y.K. Chan, strategist with Phillip Capital Management.

Hong Kong shares fell on Monday as the anticipated Citigroup bailout plan failed to ignite buying, but U.S. stocks surged as the plan eased investor concerns over the financial sector.

Chan added, however, that overall weakness in the economy had limited gains and the market could still fall below its October low in the absence of new stimulus steps from the U.S. and China.

CNOOC (0883.HK) surged 8.5 percent after oil prices leapt 9 percent overnight and stayed close to $54 per barrel in Asian trade on Tuesday, buoyed by expectations of an output cut by producer cartel OPEC.

Asia's largest oil and gas producer, PetroChina (0857.HK), gained 4.9 percent, while top coal miner China Shenhua Energy (1088.HK) added 5.7 percent.

The China Enterprises Index of top locally listed mainland Chinese firms .HSCE rose 4.3 percent to 6,651.52.

Bank of China (3988.HK), the nation's second-largest lender, jumped 2.4 percent, while No.3 bank China Construction Bank (0939.HK) bulked up 5.1 percent after Goldman Sachs said it preferred large Chinese lenders to smaller ones amid the economic slowdown.

"We view China H-share banks' fundamentals as relatively stronger than regional banks and many developed and developing markets, given China's stronger macroeconomic condition, aggressive policy response and fewer risks we see for big banks in liquidity, capital and dividend payout," said Ning Ma, analyst with the U.S. investment bank.

Hutchison Telecommunications (2332.HK) slid 16.7 percent from its ex-dividend share price of HK$2.28, as investors exited shares in the company amid the absence of any major expansion plans in the short term following its exit from India.

The stock finished Monday at HK$9.28 and was adjusted for the special dividend payout resulting for the sale of its stake in Indian mobile firm Hutchison Essar last year, bringing its share price to HK$2.28. It had dropped 6.1 percent to HK$2.14 by midday.

Beijing Capital Land (2868.HK) jumped 6 percent after its controlling shareholder, Capital Group, raised its stake in the property firm to 47.21 percent from 46.34 percent.

(Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)