* China shares finish at 14-month high, led by steel stocks
* HK shares end at close to 11-month peak; laggards catch up
* Analysts see markets cooling after mega IPO list this week
* Steel stocks rally on Goldman Sachs upgrade (Updates to close)
By Parvathy Ullatil and Samuel Shen
HONG KONG/SHANGHAI, July 28 (Reuters) - Hong Kong and China shares rose on Tuesday as the liquidity-driven rally in the region pushed forward with scant regard for a regulatory warning on improper bank lending.
Hong Kong shares advanced 1.8 percent to finish at a near 11-month closing high in a fourth session of gains on Tuesday, as laggard stocks continued to play catch up, while local property stocks were snapped up on record new mortgage lending data.
Chinese stocks edged up to a fresh 14-month closing high, reversing early losses with a boost from surging steel shares.
"There is only one explanation, money, money and more money, said Andrew To, sales director with Taifook Securities.
"Hopefully the rally will die down after the hot money locked in the big IPOs are refunded. If you are short on the market, its okay but if you are long, this is not the time to buy," he said.
China State Construction Engineering Corp (CSCEC), which last week raised 50.2 billion yuan ($7.3 billion) in the world's largest initial public offering in a year, will list its shares on the Shanghai Stock Exchange on Wednesday. In Hong Kong, cement maker BBMG Corp will make its debut on Wednesday after its $768 million share sale was heavily oversubscribed.
LAGGARDS IN FOCUS IN HONG KONG
The benchmark Hang Seng Index advanced 372.92 points to 20,624.54, its highest closing level since early September 2008. The index vacillated between a near 11-month high of 20,664.48 and a low of 20,109.55.
Turnover rose to HK$84.8 billion from Monday's HK$80.9 billion.
Property stocks extended gains, with New World Development up 4.4 percent and Hang Lung Properties gaining 3.9 percent. New residential lending in the territory soared to its highest on record in June, according to the Hong Kong Monetary Authority, amid low interest rates and new launches.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, was 1.93 percent higher at 12,424.58 led by a 3.8 percent gain in top lender Industrial & Commercial Bank of China (ICBC).
China Mobile built on Monday's sharp gains to rise another 4 percent, while China Unicom climbed 1.6 percent.
The stock had risen close to 3 percent earlier in the day on a report that China's No.2 wireless service provider had reached an agreement with Apple Inc. to be the sole supplier of the iPhone in China for three years. A Unicom spokesperson said a formal deal had not been reached.
Garment retailer Bossini International Holdings soared 39.4 percent after the company said its controlling shareholder Law Ka Sing was in talks to sell his 68.58 percent stake to a potential investor.
REGULATOR'S WARNING FAILS TO HALT SHANGHAI RALLY
The Shanghai Composite Index closed up 0.09 percent or 7.65 points at 3,438.371, after falling as much as 1.2 percent to 3,392.428 intraday. The index moved into positive territory in the final minutes of trade.
Rising Shanghai A shares outnumbered losers by 579 to 299. Turnover in Shanghai A shares rose to a 26-month high of 243 billion yuan ($35.6 billion) from Monday's 240 billion yuan.
"The market will continue to trend upward as long as investors see fresh signs of a solid economic recovery," said Gao Lingzhi, strategist at Great Wall Securities Co. "The only concern is that the government may start to tighten monetary policy, which could affect market liquidity, but such a move is unlikely soon."
Premier Wen Jiaobao reaffirmed that China would maintain its current macroeconomic policies to safeguard stable and fairly fast economic growth, the People's Daily reported on Tuesday, easing investor concerns that the government might tighten its stance.
The market shrugged off warnings by the China Banking Regulatory Commission that Chinese banks must ensure that loans they issue for investment projects are actually put to use in the real economy, rather than flowing into the property and stock markets for speculation.
Steelmakers surged on signs the industry is recovering on the back of an economic rebound, with steel prices climbing over the past few weeks.
"Steel makers are benefiting from the government's 4 trillion yuan stimulus package and a rebounding property market," said Tao Zhifeng, strategist at Debon Securities Co. "Rising demand will push steel prices higher."
Goldman Sachs raised its view on the sector to "attractive" as it sees increased demand for the metal in the third quarter when new infrastructure projects kick off.
Baoshan Steel, China's biggest listed steel company, jumped 8.7 percent to 9.40 yuan, while Angang Steel gained 8.6 percent to HK$16.96 in Hong Kong.
Goldman raised its ratings on the two stocks to "buy" from "neutral".
Chinese toll road operator Sichuan Expressway fell by its 10 percent daily limit to 9.81 yuan, however, as investors rushed to take profit a day after an explosive speculative rally in its mainland debut that pushed the shares to more than three times their IPO price. (Editing by Edmund Klamann and Chris Lewis)