(Correcting to omit Deutsche Bank from banks named in paragraph 13)
* HSI +1.1 pct on the day, +1.5 pct on the week
* CSI300 +1.7 pct on Friday, +4.5 pct this week
* China data slightly tops consensus, beta plays lead gains
* China railway slips in HK after disappointing 2013 budget
By Clement Tan
HONG KONG, Jan 18 (Reuters) - Hong Kong shares hit a 19-1/2-month high on Friday, while China posted a first gain in three days after better-than-expected data showed the world's second-largest economy snapped seven-straight quarters of declining economic growth.
Gains picked up in the afternoon, but volumes were well short of the year's highs, suggesting investors were looking beyond data that showed the China's economy growing 7.9 percent in the fourth quarter and 7.8 percent in 2012 from a year earlier.
"I think today's numbers were broadly in line with what people expected... and a trigger for strength in cyclical sectors," said Wang Aochao, UOB-Kay Hian's Shanghai-based head of China research.
The Hang Seng Index was up 1.1 percent at 23,601.8, its highest since June 1, 2011. Gains on Friday covered the gap on the chart that opened between June 1 and 2, 2011, something the benchmark has struggled to do since the start of the year.
The China Enterprises Index of the top Chinese listings rose 2.1 percent. The CSI300 of the top Shanghai and Shenzhen listings climbed 1.7 percent, while the Shanghai Composite Index gained 1.4 percent.
All four indexes saw weekly gains after posting losses last week. Onshore outperformed offshore markets for the first time in three weeks. The Hang Seng Index gained 1.5 percent, the China Enterprises 2.2 percent, while the CSI300 jumped 4.5 percent and the Shanghai Composite 3.3 percent.
"We have had a pretty dramatic rally over the last few weeks and most are now waiting to see how this economic recovery will translate into earnings recovery," Wang added.
With the next set of economic data not due until March, investors are likely to turn their attention to corporate earnings. Some Chinese companies have begun posting fourth quarter earnings, but the pace of reporting will only pick up after the Chinese New Year next month.
On Friday, growth-sensitive sectors such as Chinese banks were among the top boosts to benchmark indices. Industrial and Commercial Bank of China (ICBC) rose 1.7 percent in Hong Kong and 0.7 percent in Shanghai.
Still, short selling accounted for 9 percent of ICBC's turnover on Friday, compared to the 7.3 percent for the broader Hong Kong market, pointing to lingering concerns balance sheet risks China's largest lender might be holding.
ICBC shares in Hong Kong have now surged 49 percent from a July 12 low and are now hovering at levels not seen since August 2011. This compares to the 24 percent jump for the Hang Seng Index from the same July day.
Chinese railway stocks counters eased, bucking the broader market after local media reported the railway ministry is earmarking 650 billion yuan for railway development in 2013, up 3 percent on 2012.
Analysts at Bank of America-Merrill Lynch and Citi said the budget increase was disappointing. In Hong Kong, China Railway Construction slid 2.2 percent, while China Railway Group shed 2.1 percent. Both outperformed in 2012, surging 106 and 86 percent respectively.
CONSUMER DISCRETIONARY NAMES HAVE FIELD DAY
On top of quarterly and annual GDP figures, data ranging from monthly industrial output to fixed asset investment and retail sales were released on Friday and came in stronger than expected.
China-focused consumer stocks were mostly firmer after the country's statistics bureau said consumption was the largest overall contributor to economic growth last year. The agency also said price levels were largely stable.
Garry Evans, HSBC's global head of equity strategy, told reporters at a press conference that some Chinese consumer and infrastructure names represented good value plays, and he expected them to do well this year, compared to quality or growth plays which had done well in the past year.
In Hong Kong, shares of China's largest footwear retailer Belle International spiked 3.3 percent, while Li Ning surged 8.7 percent after Citi raised its price target for shares of the embattled sports brand by 35 percent.
Shares of Gree Electric Appliances Inc had its best day in 2-1/2 months, jumping 6.4 percent in Shenzhen after China's largest appliance maker by sales said its net profit rose around 41 percent in 2012 on the back of higher sales.
Chinese automakers were among the top performers on the day with traders citing a local media report that Zhengzhou, a city in central China, will prioritise locally produced vehicles when making new purchases in a move to support the industry.
Baoxin Auto surged 8.2 percent after Goldman Sachs added the China auto maker to its conviction list, citing its high luxury car sales volume mix. (Editing by Simon Cameron-Moore)