* HSI +0.4 pct, H-shares +0.7 pct, CSI300 -0.5 pct
* China banks lead HK rise, resurgent China markets chased
* Railway plays strong on reported $289 bln investment in China over 3 yrs
* China Rongsheng hammered after warning of loss
By Clement Tan
HONG KONG, Dec 27 (Reuters) - Hong Kong shares tested fresh 17-month intra-day highs in holiday-thinned Thursday trade, led by growth-sensitive Chinese counters as investors caught up on strong gains in mainland markets during the 2-1/2 day break taken for Christmas.
But onshore Chinese shares snapped a three-day winning streak, slipping from their highest levels since July as investors took profits on the banking sector, which has outperformed in December.
The Hang Seng Index closed up 0.4 percent at 22,619.8, finishing near the day's lows after opening at its highest intra-day level since Aug. 1, 2011. Chart resistance is next seen at around 22,800, peaks seen in July and August 2011.
The China Enterprises Index of the top Chinese listings in Hong Kong rose 0.7 percent. But the gains came in turnover that was more than 30 percent below its average in the last month and the lowest since Sept. 26.
In the mainland, the CSI300 of the top Shanghai and Shenzhen listings closed down 0.5 percent at 2,444.6. The Shanghai Composite Index shed 0.6 percent in relatively healthy bourse volumes.
Both onshore indexes have now reversed losses on the year after languishing for almost six months. They stayed above their 200-day moving average, a chart level both have struggled to stay above for more than two weeks since May 2011.
"There's an element of catching up in today's trading in Hong Kong," said Larry Jiang, chief investment strategist at Guotai Junan International Securities.
"The strong A-share performance over the last few days is definitely a factor and will continue to support gains in Hong Kong as more details of reform and signs of earnings and economic recovery emerge," Jiang added.
Official data on Thursday showed that annual growth of China's industrial profits quickened to 22.8 percent in November from October's 20.5 percent, reinforcing signs of a steady economic recovery.
Chinese railway counters added to strong 2012 gains after the official China Securities Journal reported that the amount of domestic railway investment could hit 1.8 trillion yuan ($289 billion) in the next three years, according to the country's top economic planning agency.
China Railway Construction jumped 2.3 percent in Hong Kong and is now up 109 percent in 2012, compared to the 14.2 percent rise on the China Enterprises Index and the Hang Seng Index's 22.7 percent jump.
Despite an outperformance that has set it up for its first annual gain since it listed in 2008, China Railway Construction is still trading at a 20 percent discount to its historical median 12-month forward earnings multiple, according to Thomson Reuters StarMine.
This suggests further gains could be in store in 2013 with Beijing seen still relying on infrastructure investment to prop up growth in the world's second-largest economy.
Reflecting the improved sentiment towards Chinese equities, the Chinese financial sector has seen strong gains for the sector in December.
China Merchant Bank is up 26 percent on the month in Shanghai and set for its best monthly showing since June 2009 despite shedding 1.4 percent on Thursday, as investors took profit on the sector for a second successive session.
But Chinese banking shares rose in Hong Kong. Bank of China (BOC) gained 0.6 percent, while China Merchant Bank jumped 2.7 percent.
New China Life Insurance rose 1.8 percent to HK$28.65 in heavy volumes after more than 17 million shares were sold at HK$28.39 each by an unidentified shareholder, according to a Hong Kong-based trader at a major European brokerage.
Still, bad debt fears linger over the Chinese banking sector and some of the more growth-sensitive sectors.
China is considering a mechanism to cap local government debt, a researcher affiliated with the Ministry of Finance was cited as saying, as policymakers debate deficit levels for a year in which a wave of debt will come due.
China Rongsheng Heavy Industries Group warned of an annual net loss for 2012 on sharp declines in orders and prices of new vessels due to the shipping industry's downward turn.
The warning contrasted with a consensus estimate for a 584 million yuan ($93.76 million) net profit for the year ending December 2012, according to 11 analysts polled by Thomson Reuters I/B/E/S.
Shares of China's largest private shipbuilder tumbled 7.4 percent on Thursday to their lowest close since Dec. 6. It is still down 41.6 percent on the year.