* CSI300 +2.3 pct; SSEC +1.4 pct; HSI +0.3 pct
* Blue chips rise as investors bet on the next Vanke
* Fresh wave of IPOs could put pressure on liquidity
SHANGHAI, Dec 21 (Reuters) - China stocks rose sharply on Monday, led by broad rallies in real estate, banking and consumer plays as investors scooped up modestly-priced blue chips, pulling Hong Kong shares higher.
Chinese investors have been inspired to buy blue chips following a recent wave of share acquisitions by yield-seeking insurance firms.
Strength on the mainland bolstered the Hong Kong market, helping investors there shrug off the gloom in U.S. and European stocks in the wake of last week’s post-Federal Reserve rate hike rally.
The CSI300 index jumped 2.3 percent, to 3,852.96 points by the lunch break, while the Shanghai Composite Index gained 1.4 percent, to 3,629.20 points.
Shenzhen’s start-up board ChiNext weakened, but relatively cheap big-caps advanced, amid evidence that cash-rich insurers have been stepping up purchases into blue chips such as property developer China Vanke Co .
“Investors are looking for the next Vanke,” said Chang Chengwei, analyst at brokerage Hengtai Futures, referring to China’s biggest homebuilder at the centre of a high-profile bidding war.
“They’re looking for companies with low valuations, high dividends, and healthy cash flows, hoping they would become insurers’ next target.”
Vanke has suspended trading in its shares, pending an announcement about a “major restructuring”, after Chairman Wang Shi said he did not welcome Shenzhen Jushenghua Co, the property and insurance group which recently became its largest shareholder.
Stocks partially owned by insurers, including Gemdale Corp and Xinjiang Goldwind Science & Technology Co surged.
Investors also bought into blue chips such as Gree Electric Appliances and Inner Mongolia Yili Industrial Group , betting they could also become targets of a bidding war due to their fragmented shareholding structure.
However, some investors questioned the sustainability of the blue-chip rally, citing liquidity constraints and economic weakness.
Hedge fund house Wellspring Capital said that a fresh batch of initial public offerings this week, expected to freeze 1.7 trillion yuan ($262.34 billion) of capital, could have a short-term impact on market liquidity.
In Hong Kong, the Hang Seng index added 0.3 percent, to 21,814.42 points, while the Hong Kong China Enterprises Index gained 1.3 percent, to 9,761.28.
The energy sector rose 1.3 percent, while resource shares also rebounded.
($1 = 6.4801 Chinese yuan)
Reporting by Samuel Shen and Kazunori Takada; Editing by Jacqueline Wong