* Hong Kong market up 0.5 pct, Shanghai advances 0.8 pct
* Financials lead after China's 4th rate rise since Oct
* Investors take profit on overbought majors in HK (Updates to midday)
By Yixin Chen and Clement Tan
SHANGHAI/HONG KONG, April 6 (Reuters) - Financial majors led stock gains in Hong Kong and China on Wednesday morning, with investors largely shrugging off Beijing's fourth interest rate increase since October on Tuesday.[ID:nSGE735004]
Some analysts said the rate rise would be a net positive for banks as it could help to slightly widen the spread between lending and deposit rates that banks rely on for much of their revenue.
"The index was boosted by bank shares," said Nanjing Securities analyst Wen Lijun. "But we think blue chips may also face correction pressure in the near term as they have risen for a quite long time."
In Hong Kong, the benchmark Hang Seng Index was up 0.53 percent at 24,279.15 by the midday trading break, extending a four-session winning streak as it climbed to levels last seen in January.
The Shanghai Composite Index was up 0.81 percent at 2,991,46, extending a 1.3 percent rise on Friday. Chinese markets were closed on Monday and Tuesday for a public holiday.
Analysts widely expect the index to move between 2,800 and 3,000 points in coming weeks.
All 16 banks listed on the Shanghai and Shenzhen markets rose, led by Bank of Communications Co Ltd , up 3.8 percent and among the most active issues in Shanghai. Hua Xia Bank Co Ltd rose 3.6 percent.
Some traders pointed to abundant liquidity in the financial market as the root cause behind the index's recent strong performance, meaning more tightening could be on the cards.
But investors were still concerned over high inflation, expected to hit 6 percent and preventing any relaxation of monetary tightening. [ID:nL3E7F6023]
"The March inflation figure must be very high for the central bank to increase interest rates." said Xu Biao, economist with China Merchants Bank in Shenzhen. "More importantly, it is not the end of China's monetary policy tightening."
PROFIT-TAKING ON OVERBOUGHT HK MAJORS
Chinese property and energy counters underperformed the broader market in Hong Kong as investors took profit on overbought stocks, but analysts said the broader uptrend for the sectors remained intact.
CNOOC Ltd , technically overbought with a relative strength index (RSI) value of 71.9, lost 2.4 percent. China Overseas Land & Investment Ltd , overbought with an RSI value of 71.2, recovered from a 3.5 percent decline to end the morning down 2.2 percent.
HSBC Holdings Plc , Bank of China Ltd and Chinese insurers, China Life Insurance Co Ltd and Ping An Insurance (Group) Co of China Ltd were among leading gainers in Hong Kong.
Analysts said trading would likely be rangebound for the rest of the week, citing 24,800, the index's January peak, as the next resistance point, with support seen at 23,400.
"This rate rise didn't come as a surprise. Market sentiment remains quite bullish," said Wing Fong Financial Group analyst Mark To. "People are not going to dump their stocks now, they are waiting for further upside." (Editing by Chris Lewis)