Hk share rally set to continue amid lower oil

HONG KONG, July 24 (Reuters) - Hong Kong shares are expected to rise on Thursday, with financial stocks leading the way, tracking their U.S. counterprarts and with a sharp pullback in oil prices likely to boost refiners, airlines and retailers.

U.S. stocks rose on Wednesday as financial shares climbed after President George W. Bush dropped a threat to veto a housing rescue bill.

After the closing bell, the U.S. House of Representatives approved the housing market rescue legislation. The bill will now go to the Senate.

"The financial markets have suffered a lot of pain in recent times and something like the housing market rescue bill should bring hope to investors," said Ben Kwong, COO with KGI Securities.

"But nothing has really changed fundamentally, the only real change is that greedy funds that think they have milked the commodities rally dry are now switching to stocks."

Oil prices fell more than $4 after government data showed a big increase in U.S. inventories of gasoline, boosting companies sensitive to higher fuel costs, such as retailers and airlines.

Hong Kong shares climbed 2.7 percent to a five-week high on Wednesday, as lower oil prices eased concern over the impact of high energy costs on businesses and consumers, while China Eastern Airlines (0670.HK) surged the most in nine months amid talk of a possible merger.

STOCKS TO WATCH: * China Eastern Airlines (600115.SS) (0670.HK) and its smaller rival Shanghai Airlines (600591.SS) said on Thursday they had not discussed a possible merger, playing down a media report on a possible tie-up that had sent their shares surging. [ID:nSHA8505]

On Wednesday, shares in China Eastern soared 11.8 percent after a report in a mjor mainland business magazine triggered speculation of a potential consolidation in the industry.