(Updates to close)
* HSI +0.2 pct, H-shares -0.3 pct, CSI300 +0.6 pct
* Profit taking hits China banks, BOC off 52-wk high in HK
* Investors rotate heavily into HSBC, StanChart
* 4th straight gain buoys Galaxy Entertainment to record high
By Clement Tan
HONG KONG, Dec 20 Hong Kong shares ended at their highest level in nearly 17 months on Thursday trade, as investors rotated into HSBC Holdings and Standard Chartered after taking profits in Chinese banks that outperformed recently.
Onshore Chinese markets reversed midday losses to crawl higher, holding at four-month highs for a fifth-straight session on strength in resource counters after state media reported rare earth quotas will stay steady in 2013.
The Hang Seng Index closed up 0.2 percent at 22,659.8, reversing midday losses to stay at its highest since Aug. 1, 2011, but trading volume was low. Chart resistance is next seen at about 22,800, peaks last seen in July-August 2011.
The China Enterprises Index of the top Chinese listings in Hong Kong slipped 0.3 percent.
In the mainland, the CSI300 of the top Shanghai and Shenzhen listings gained 0.6 percent to 2,384.8. The index is now up 1.7 percent in 2012 having spent most of the year in negative territory. It next faces chart resistance at around 2,412, the peaks seen in August this year.
The Shanghai Composite Index edged up 0.3 percent.
Both onshore Chinese indexes reversed midday losses, staying at their respective highest since August.
Shanghai volume improved slightly from Wednesday, but totalled just more than half of last Friday's when onshore Chinese markets had their best day in more than three years.
Hong Kong turnover was at its second weakest since Dec. 4 and was some 7 percent below its average in the last month as doubts reemerged over progress on averting a fiscal crisis in the United States.
"Trading at this time of the year can be quite tricky," said Jackson Wong, Tanrich Securities' vice-president for equity sales. "Investors are rotating out of outperformers today and into some laggards on some Chinese policy catalysts."
Chinese banking plays that have overperformed were weak in both China and Hong Kong markets. Sentiment toward banks took a knock after the mainland's banking regulator ordered them to tighten checks on sales of third-party financial products.
Having touched 52-week intra-day highs twice earlier this week, Bank of China (BOC) slipped 0.6 percent in Hong Kong, and 0.7 percent in Shanghai.
Growth-sensitive counters were also weak. Anhui Conch Cement slid 2.9 percent in Hong Kong, recording a third-straight daily loss after hitting its highest intra-day levels on Monday since November 2011.
In Shanghai, Anhui's shares shed 1.2 percent.
CHINA POLICY PLAYS STRONG
Inner Mongolia Baotou Steel Rare-Earth Group jumped 6.9 percent after the state-owned China Daily reported industry leaders as saying export quotas for rare earth metals will hold steady next year.
Strength in other rare earth producers helped onshore Chinese indexes reverse midday losses, with the CSI Materials sub-index an outperformers among sectors, rising 1.5 percent.
Chinese alternative energy counters extended gains after mainland news outlets reported on Wednesday that Beijing approved a second group of wind power projects.
The state-run China Securities Journal newspaper reported on Thursday that the State Council has issued new measures to support the solar industry, including subsidies and tax breaks to also benefit the wind power industry.
China Longyuan Power Group climbed 2.5 percent in heavy volume in Hong Kong, but it is still down 12.4 percent on the year, compared to the 22.9 percent gain on the Hang Seng Index.
Galaxy Entertainment Group jumped 4 percent to a record closing high, posting a fourth-straight daily gain after Deutsche Bank analysts upgraded on Monday its target price by 5.4 percent. (Editing by Simon Cameron-Moore)