* China B shares hit 18-month high on speculation
* ICBC rises 2 percent on bullish outlook
* Taifook advances to 21-month high on CCB interest
* BEA down 4 percent after bank says not in M&A talks (Updates to close)
By Sui-Lee Wee and Claire Zhang
HONG KONG/SHANGHAI, Nov 13 (Reuters) - Hong Kong stocks rose on Friday, buoyed by a bullish outlook from Industrial and Commercial Bank of China and a spurt of corporate takeover talk in the financial sector, while foreign-currency-denominated B shares jumped to an 18-month high in China on speculative trade.
ICBC (1398.HK) rose 2 percent to HK$6.80 after its chairman said he expected the non-performing loan situation in China's banking sector to improve next year as Chinese companies climbed out of the global economic crisis. [ID:nSP544236].
Taifook Securities (0665.HK) gained 6.59 percent to HK$4.85 after rising as much as 9.9 percent to its highest since January 2008. Reuters reported on Thursday that China Construction Bank (0939.HK) was in talks to buy control of the brokerage to give it a solid footing in Hong Kong's lucrative retail securities market. [ID:nHKG329606]
Bank of East Asia (0023.HK), Hong Kong's No.5 bank, was the top loser among index heavyweights after the lender said it was not in talks on a potential acquisition. [ID:nHKG328800] The stock fell 3.67 percent to HK$32.80.
Rumours that Malaysian conglomerate Guoco Group (0053.HK) could be interested in BEA had sent the bank's shares up 26 percent in the last two days.
Brokers said the flurry of takeover talk was fueling optimism about share values.
"Every couple of years, we have takeover stories on Hong Kong banks," said Howard Gorges, director at South China Brokerage. "People are punting and chasing stories in second-line companies."
"There's certainly some catch-up value (in these stocks) compared with the big ones. It's a reflection of the amount of cash around and underlying confidence in the market," he said.
The benchmark Hang Seng Index .HSI rose 0.7 percent or 156.06 points to 22,553.63, up 3.3 percent on the week.
Turnover was almost unchanged at HK$70 billion, from Thursday's HK$70.95 billion.
The China Enterprises Index of top locally listed mainland Chinese stocks .HSCE rose 1.03 percent to 13,461.79.
Simsen International (0993.HK) jumped as much as 52 percent to HK$0.47 intraday, its highest since November 2007, after the brokerage said its controlling shareholders were in preliminary talks with a potential acquirer. The stock closed at HK$0.40, up 29.03 percent.
Shui On Construction and Materials Ltd (0983.HK) rose 7.93 percent to HK$12.52 after Reuters reported that the company and Lafarge LAFP.PA, the world's largest cement maker, were set to spin off their cement joint venture, hoping to raise $500 million-$600 million from a Hong Kong initial public offering in 2010. [ID:nHKG88574]
SHANGHAI RISES, BUOYED BY ROSY OUTLOOK
China's key stock index edged up 0.46 percent, boosted by the upbeat outlook for the economy and company earnings.
The Shanghai Composite Index .SSEC ended at 3,187,647 points, reversing losses early in the session and securing a 0.7 percent gain for the week.
Gaining Shanghai A shares outnumbered losers by 601 to 270 while turnover rose to 163 billion yuan ($23.88 billion) from WednesSay's 144 billion yuan.
Shanghai's index of U.S. dollar-denominated B shares .SSEB ended up 9.42 percent at 251.192 points, close to its 10 percent daily limit, while volume nearly tripled from the previous day to $326.5 million on the thinly traded market.
Market sources said long-running speculation resurfaced about a possible merger with the far larger yuan-denominated A-share market or a requirement for companies to buy back B shares.
Both moves would likely favour B shares, which are undervalued compared to their A-share counterparts.
Analysts also cited rising expectations of yuan appreciation as favourable for B shares, which are denominated in U.S. dollars in Shanghai and U.S. dollar-linked Hong Kong dollars in Shenzhen, while the companies hold yuan-denominated assets.
"Investors could wait to see if any actual policy comes out over the weekend regarding B shares. Otherwise, B shares may be hit by profit-taking next week," said Zhang Xiang, chief strategist at Guodu Securities in Beijing.
Official media on Friday quoted Fan Jianping, chief economist with the State Information Centre, as saying that China's economic recovery was exceeding expectations and that full-year growth would be about 8.3 percent. [ID:nSHA79146]
The stock index is likely to rise slightly next week, Zhang said, but added that significant gains were unlikely in the near term, after a sustained rally early this month, and that it would resistance at 3,200 points.
Shares of companies that produce snow-clearing products rose after heavy snow hit many regions of China. [ID:nPEK344476]
Changlin Co (600710.SS) advanced 3.29 percent to 6.60 yuan while Qingdao Soda Ash Industrial (600229.SS) climbed 5.47 percent to 7.13 yuan. (Editing by Chris Lewis)