HK rises as banks lead; Shanghai up to 3-mth high

* HK shares gain on abundant liquidity; Chinese banks up

* Shanghai up for a 7th session to three-month high
(Updates to close)

By Donny Kwok, Claire Zhang and Edmund Klamann

HONG KONG/SHANGHAI, Nov 9 (Reuters) - Hong Kong stocks ended
1.73 percent higher on Monday with Chinese banks including ICBC
(1398.HK) leading gains, while Shanghai shares rose for a seventh
consecutive session to a three-month closing high.

Abundant liquidity due to a persistent inflow of funds drove
the market up as Hong Kong assets look attractive given the
territory's peg to a weak U.S. dollar.

"The market was building up momentum for a breakthrough on
the upside," said Conita Hung, head of equity of research of
Delta Asia Financial. "Chinese lenders appeared particularly
appealing to longer term investors as their fundamentals are
improving."

ICBC (1398.HK), the world's biggest bank by market value,
rose 3.1 percent to HK$6.66, its highest close since November
2007. China Construction Bank (0939.HK), China's No.2 lender by
value, gained 3.1 percent to HK$6.98.

Banks in China are expected to lend 8 trillion-9 trillion
yuan ($1.2 billion-$1.3 billion) in 2010, down from this year's
forecast new-loan total of 10 trillion yuan, Bank of
Communications (601328.SS) said on Saturday. It said system-wide
non-performing loans (NPLs) would remain steady; the NPL ratio
might even fall because of growth in outstanding loans.
[ID:nPEK214189]

The benchmark Hang Seng Index .HSI closed up 377.83 points
at 22,207.55, its highest close in more than two-week.

Turnover rose to HK$65.09 billion ($8.4 billion), up from
HK$64.43 billion on Friday.

China Life (2628.HK), the world's top life insurer by market
value, rose 2.54 percent to HK$38.40, its highest close since
Jan. 10, 2008. Dongfeng Motor Group Co (0489.HK) gained 1.65
percent to HK$11.06 after China's third-largest carmaker said its
sales in October rose 76.98 percent from a year earlier.
[ID:nSHA225953]

The China Enterprises Index .HSCE of top locally listed
mainland Chinese stocks rose 2.31 percent to 13,318.48.

Demand for laggards also boosted China Shenhua (1088.HK),
which climbed 3.91 percent to HK$38.55, its highest close since
April 24, 2008.

Chinese drugmaker Lijun (2005.HK) rose to an all-time high of
HK$1.86 before closing at HK$1.40, up 6.82 percent. It said it
saw a promising market for its new antiviral drug which has been
proven by the State Key Laboratory of Virology as effective in
blocking the invasion of cells by the influenza A virus (H1N1) in
its early stages, similar to the function of Tamiflu.

SHANGHAI UP FOR 7TH SESSION

China's key stock index edged up 0.36 percent on Monday,
rising for a seventh consecutive session to a three-month closing
high, with power and steel shares strong as the market was
boosted by expectations of strong economic data for October.

The Shanghai Composite Index .SSEC ended at 3,175.585
points, after posting its best weekly rise in more than three
months last week.

Gaining Shanghai A shares outnumbered losers by 553 to 324,
although turnover sank to 158 billion yuan ($23.15 billion) from
Friday's 181 billion yuan.

Investors are widely expecting upbeat economic data for
October, with several of the key numbers due for release on
Wednesday.

China's money supply and bank lending are expected to have
maintained a rapid pace of growth last month as Beijing held to
its loose monetary policy stance, according to a Reuters poll.
[ID:nSP458045]

Central bank adviser Fan Gang told Reuters late on Friday
that China's economy had stabilised and was on track to achieve
growth of 8 percent next year but Beijing would stick to its
loose fiscal and monetary policies for now. [ID:nSGN002268]

Despite the upbeat sentiment in the market, analysts said it
may also be vulnerable to profit-taking pressure after its
extended gains.

"The index has put in a strong performance, but tomorrow it
would be reasonable to see it posting either a modest gain or
loss. Nevertheless, with funds continuing to pour into the stock
market, the index may move higher this week," said Zhou Lin,
analyst at Huatai Securities in Nanjing.

Electric power sector shares were strong, with Datang
International Power Generation (601991.SS) jumping 6.18 percent
to 9.79 yuan, while Huadian Power (600027.SS) rose 2.4 percent to
5.54 yuan and Huaneng Power International (600011.SS) advanced
2.58 percent to 8.35 yuan.

The official Shanghai Securities News reported on Friday that
China may raise power prices charged to consumers by up to nearly
5 percent this month, intensifying speculation that Beijing could
make the first price move in 15 months very soon. [ID:nPEK232338]

Steel shares outperformed after news of a possible merger in
the sector, with Baoshan Iron and Steel (600019.SS) gaining 1.65
percent to 7.38 yuan.

Laiwu Steel Corp (600102.SS) and Jinan Iron and Steel Co
(600022.SS), whose shares have been suspended from trading, said
they may merge into a single company, part of consolidation
efforts by their parent, Shandong Iron and Steel Group.

Metals shares were firmer, with Shandong Gold (600547.SS)
jumping 7.66 percent to 75.79 yuan, as gold prices edged up and
held near a record high on Monday.
(Editing by Chris Lewis)