HK shares up 1.1 pct with Chinese banks leading

HONG KONG, July 4 (Reuters) - Hong Kong shares were up 1.1 percent by midsession on Friday, led by strong gains in Chinese banks after industry leader Industrial & Commercial Bank of China (1398.HK: Quote, Profile, Research) issued a positive earnings estimate.

The world's largest lender by market capitalisation said on Thursday its first half profit grew at least 50 percent, based on Chinese accounting standards. [ID:nHKG337025]

ICBC, the most heavily traded stock in the morning, rose 2.6 percent. Smaller rival China Construction Bank (0939.HK: Quote, Profile, Research) was 1.5 percent higher and Bank of Communications (3328.HK: Quote, Profile, Research) gained 2.2 percent. Merchants Bank (3968.HK: Quote, Profile, Research), the nation's sixth largest lender, rose 3.6 percent.

The Hang Seng Index ended the morning up 234.55 points at 21,477.33 after losing nearly 4 percent in the past two days.

"The bears have already made a lot of money and are taking a short break now, ahead of the holiday in the U.S. today," said Y.K. Chan, a strategist with Phillip Capital Management.

U.S. markets are closed for Independence Day on Friday.

Mainboard turnover fell to a thin HK$28 billion ($3.6 billion) from HK$39.78 billion at mid-day Thursday.

HSBC Holdings (0005.HK: Quote, Profile, Research), Europe's largest bank and the most heavily weighted stock on the Hang Seng, gained 1 percent after the European Central Bank dimmed prospects for further rate moves, after Thursday's rate hike. [ID:nL0323441]

The China Enterprises Index .HSCE of top locally listed Chinese firms rose 1.6 percent.