* China shares recover from weak start, property stocks gain
* China Life, Air China advance after first-half earnings (Updates to midday)
By Parvathy Ullatil & Claire Zhang
HONG KONG/SHANGHAI, Aug 26 (Reuters) - China shares rose 1.5 percent in the morning session on Wednesday, rebounding from early weakness with a boost from property stocks after upbeat earnings from a major property developer.
Positive earnings momentum from top companies including insurer China Life also buoyed Hong Kong's benchmark index which gained 0.4 percent.
An early slip on the Shanghai index had extended the previous day's 2.6 percent decline, as the market struggles to stablise following a two-week, 20-percent slide earlier in the month that ended this year's stunning 90-percent rally.
"The Shanghai market is playing out the classic battle between greed and fear," said Pauline Loong with CIMB-GK Securities in a note on Wednesday.
"The market's real fear is not that possible monetary tightening will derail economic recovery but it will dry up the liquidity that has pumped up market turnover and given rise to the greed that set off a seemingly (until recent weeks) unstoppable rally."
EARNINGS PROVIDE BOOST
China Life Insurance Co advanced 2.4 percent after the country's top life insurer, posted a 15.2 percent rise in first-half profit as a booming stock market boosted its returns on investments.
The stock rose 0.7 percent in Shanghai as analysts cheered the strong growth in the insurer's new business value.
By 0410 GMT, the benchmark Hang Seng Index <.HSI> was up 91.90 points at 20,518.85.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, was up 0.6 percent at 11,729.64.
Poly Real Estate Group rose 2.3 percent to 24.71 yuan after saying net profit in the first half rose 35 percent to 1.4 billion yuan.
The official China Securities Journal cited forecasts from industry analysts for steady growth in listed property developers' earnings as property prices rise.
Air China, the country's national flag carrier, climbed 6.3 percent to 7.65 yuan after saying net profit in the first half jumped 155 percent, helped largely by fuel-hedging gains.
In Hong Kong, the stock was up 2.7 percent.
China's biggest homebuilder, China State Construction Engineering climbed 3.7 percent to 5.28 yuan after saying its net profit was 2.35 billion yuan for the first half of this year.
LIQUIDITY WORRIES HOUND
The Shanghai Composite Index was up 44.226 points at 2,960.029 by midday.
Gaining Shanghai A shares outnumbered losers by 822 to 103 while turnover for Shanghai A shares was at a relatively active 69.7 billion yuan ($10.2 billion).
The index slipped in early trade on investor concern over a possible tightening of lending and liquidity in the markets, analysts said, fuelled in part by the central bank's annual report released late on Tuesday, which emphasised stable credit growth and rational levels of liquidity in the banking system.
"The central bank's statement on rational levels of liquidity in the banking system is making investors wary about coming back into the market, and the index is expected to remain sluggish," said Chen Jinren, senior analyst at Huatai Securities.
Brokerage China International Capital Corp also estimated that proposed rules to limit the inclusion of subordinated bonds in bank capital bases could cut lending by 700 billion yuan ($102.5 billion).
Analysts said the index appeared to have established a reasonably solid floor at its recent low of 2,761 points, although it would struggle with resistance near 3,000 points, suggesting it may consolidate within that range in the near term.
China continues to face significant challenges to its economic recovery, including weak demand for its exports, the head of the main planning agency was cited as saying on Tuesday.
China Construction Bank rose 1.6 percent to 5.62 yuan after falling 4.3 percent on Tuesday. (Editing by Edmund Klamann and Chris Lewis)