December 21, 2016 / 5:09 AM / a year ago

China stocks rebound as liquidity concerns ease; HK firms

* China Eastern Airlines surges to daily 10 percent limit

* Mixed ownership reform hopes boost some SOE shares

SHANGHAI, Dec 21 (Reuters) - China stocks rebounded on Wednesday morning, as fears of a liquidity squeeze in the banking system subsided after risks from a high-profile bond scandal appeared contained.

Hong Kong stocks also rose, tracking Wall Street where the Dow and Nasdaq Composite climbed to record highs on Tuesday, extending a rally fuelled by hopes of stronger economic growth under Donald Trump’s presidency.

The CSI300 index rose 0.8 percent, to 3,335.65 points at the end of the morning session, while the Shanghai Composite Index gained 1.0 percent, to 3,132.35 points. Both indexes are set for their best gains in a month.

The markets found solace after Sealand Securities Co Ltd , the brokerage embroiled in a bond scandal, said on Wednesday it would take responsibility for forged bond agreements.

Sealand’s commitment, which could prevent a breakdown of trust among financial institutions, greatly eased concerns of a liquidity squeeze, triggering a sharp rebound in bond prices on Wednesday.

“Sealand’s announcement was not only good news to the bond market, but also positive to the stock market,” said Zhang Qi, analyst at Haitong Securities in Shanghai.

Zhang noted that the market was also aided by Beijing’s resolution to propel mixed-ownership reforms during a recent economic meeting, which helped boost shares of some state-owned enterprises (SOE) on restructuring hopes.

The transport sector was the best performer in the market’s board-based rise. An index tracking transport shares advanced more than 3 percent after receiving a boost from index heavyweight China Eastern Airlines Corp Ltd which soared 10 percent, the maximum allowed.

Energy major PetroChina Co Ltd gained more than 5 percent by midday on news that the company approved mixed-ownership reform guidelines.

In Hong Kong, the Hang Seng index added 0.6 percent, to 21,868.37 points, while the Hong Kong China Enterprises Index gained 0.7 percent, to 9,350.29.

All main sectors gained at the lunch break, with services stocks leading the gains, up around 1 percent.

Reporting by Jackie Cai and John Ruwitch; Editing by Jacqueline Wong

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