(Updates to midday)
* HSI jumps 1.6 pct, CSI300 climbs 1 pct
* Turnover spikes in both markets, 200-day MA in view for HSI
* China banks lead jump in riskier sectors
* Power Assets up 0.9 pct ahead of interim earnings
By Clement Tan
HONG KONG, July 19 (Reuters) - Hong Kong shares rose 1.6 percent at midday on Thursday, outperforming an Asian rally after better-than-expected U.S. housing data and corporate profits led to strong gains for riskier sectors such as Chinese banks.
Data showing groundbreaking on new U.S. homes rose in June to its fastest pace in over three years also supported the market, after a series of recent reports had pointed to worrying signs that the economy was cooling.
Mainland Chinese markets also climbed, with traders saying index futures settlement ahead of the expiry of July contracts on Friday helped push the move upwards. Shanghai bourse volume at midday was at the highest since May 29.
The CSI300 Index of the top listings in Shanghai and Shenzhen and on which the major Chinese stock index derivative products are based, gained 1 percent at midday. The Shanghai Composite Index rose 1.1 percent.
Hong Kong turnover also picked up, hitting the highest at midday since July 3 as the China Enterprises Index of the top Chinese listings in Hong Kong jumped 2.5 percent. The Hang Seng Index went into the midday break at 19,547.3, just shy of its 200-day moving average at 19,588.8.
If the Hang Seng benchmark closes above this level, stiff chart resistance is next seen at around 19,869.1, the high recorded on July 5, traders said. However, underwhelming corporate earnings expected over the next few weeks will be a strong deterrent for buyers, they added.
"I think people are a little fed up of the market moving sideways for so long and not being able to do anything with their money," said a Hong Kong-based senior trader at a European fund management firm.
"There's a fair amount of fresh buying today because of the gap between valuation and price of risk assets. Funds are beginning to flow back into Hong Kong from overseas, so that is helping too," the same trader added.
Chinese banks, which have underperformed the broader offshore market in the year to date, were strong. China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC) each jumped 2.7 percent.
Both banks are still down 10 percent in Hong Kong in 2012, compared to the 6 percent gain on the Hang Seng Index and the 4 percent loss on the China Enterprises Index over the same time period.
Despite trading near historically low valuations, investors have shunned the Chinese banking sector due to bad debt fears. Beijing's two recent rate cuts also involved adjustments to lending and deposit rates that are expected to squeeze banks' interest rate margins and hurt their profitability.
The state-run Shanghai Securities News said on Thursday that China's big four state banks doubled their pace of lending in the first half of July from a month ealier, although Chinese banks' total new lending in the month is expected to fall by about a third to 650 billion yuan ($102 billion).
Hong Kong utilities provider Power Assets rose 0.9 percent ahead of its interim earnings at the midday trading break. It posted first half profit that grew by 6.8 percent and proposed an interim dividend of HK$0.62 per share.
Power Assets is up 4.2 percent this year and was trading before Thursday, at 13.3 times forward 12-month earnings, a 11 percent premium to its historical median, according to Thomson Reuters StarMine.
(Editing by Simon Cameron-Moore)
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