* HSI +0.5 pct, H-shares +0.7 pct, CSI300 flat
* HK-listed Chinese insurers outperform after Morgan Stanley upgrade
* Kingsoft tumbles due to weaker-than-expected earnings
* Pharmaceutical sector strong on China healthcare reforms (Updates to midday)
By Grace Li
HONG KONG, May 29 (Reuters) - Hong Kong shares rose on Thursday, lifted by Chinese insurers which posted strong gains after Morgan Stanley upgraded the sector.
China shares were flat at midday despite strength in the pharmaceutical sector, buoyed by newly announced reform policies allowing more access to the healthcare system by private hospitals.
The Hang Seng Index was up 0.5 percent at 23,186.78 points, edging closer to its April highs. The China Enterprises Index of the top Chinese listings in Hong Kong jumped 0.7 percent.
The CSI300 of the leading Shanghai and Shenzhen A-share listings and the Shanghai Composite Index both ended the morning session flat. The Shanghai benchmark index stood at 2,050.54 points.
"We are doing the HSI futures settlement today, so maybe we will see more volatility breaking out in the afternoon session," said Steven Leung, sales director at brokerage UOB Kay Hian, about the Hong Kong market.
Chinese insurers were the standout index performers in Hong Kong. China Life Insurance added another 2.4 percent after Wednesday's 3 percent jump, while PICC Property and Casualty gained 2.0 percent, after Morgan Stanley upgraded the two insurers from "equalweight" to "overweight".
In the Chinese onshore market, health-related stocks flourished. Among top CSI300 percentage gainers, Jiangsu Hengrui Medicine was up 2.9 percent and Shanghai Fosun Pharmaceutical Group climbed 2.4 percent.
China will allow more private capital into the healthcare system, the government said on Wednesday, as it deepens a sweeping overhaul of its healthcare system aimed at cutting costs and sprucing up overloaded public services.
China software company Kingsoft tumbled 10 percent in Hong Kong after its first quarter results on Wednesday failed to meet market expectations.
Shares of home appliances retailer Huiyin Household Appliances (Holdings) Co Ltd surged as much as 50 percent to their highest in 16 months after the smaller rival of Suning and GOME said it would expand into the lottery sales business in China, leveraging on its retail sales channel in the country.
Shares of Suning fell 0.9 percent in Shenzhen while GOME was down 2.9 percent in Hong Kong on concerns over price competition amid weak consumer sentiment in the mainland.
Additional reporting by Donny Kwok in Hong Kong and Chen Yixin in Shanghai; Editing by Jacqueline Wong