* Hang Seng adds 0.6%, H-shares up 1.4%
* Chinese stocks rally runs for seventh day
* Morgan Stanley raises indexes’ targets
HONG KONG, July 8 (Reuters) - Hong Kong stocks edged higher on Wednesday, ending near a four-month high hit in the previous session, as market sentiment was lifted on hopes of recovery in the Chinese economy after a seventh straight session of gains in mainland shares.
** At the close of trade, the Hang Seng index was up 0.6% at 26,129.18, near a four-month high hit on Tuesday. The ‘H-share’ Hang Seng China Enterprises index rose 1.4%. ** The sub-index of the Hang Seng tracking energy shares rose 0.2%, while the IT sector rallied 5.4%, the financial sector was flat and the property sector edged 0.2% lower. ** China’s stock market rose for a seventh day on regulatory and retail support. The Shanghai Composite index and the blue-chip CSI300 index both achieved fresh highs in closing levels. ** Morgan Stanley raised targets for several China equity indexes, including the Hang Seng and H-share indexes, on improving liquidity, certainty in Chinese companies’ earnings, and continuous regulatory reform.
** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.5%, while Japan’s Nikkei index closed down 0.8%. ** The offshore yuan was 0.12% stronger at 7.0183 at 0832 GMT. The Hong Kong dollar stayed close to the strong side of its 7.75-7.85 per U.S. dollar trading band. ** Trading activity cooled slightly after the rally earlier in the week. About 2.58 billion Hang Seng index shares were traded. The volume traded in the previous trading session was 3.91 billion. ** At close, China’s A-shares were trading at a premium of 34.78% over Hong Kong-listed H-shares. (Reporting by Noah Sin; Editing by Rashmi Aich)