* Shanghai shares up 1.1 pct, Hang Seng Index up 0.8 pct
* Investors switching from bonds to stocks find bargains
* Chalco extends gains on profit forecast, materials rally
* China 2010 GDP up 10.3 pct, Dec CPI up 4.6 pct - media (Updates to midday)
By Vikram S.Subhedar and Lu Jianxin
HONG KONG/SHANGHAI, Jan 19 (Reuters) - Shares in China and Hong Kong rose on Wednesday in relatively healthy turnover as investors scooped up companies most likely to benefit from a recovery in the global economy.
Cyclical sectors such as materials and resources led the benchmark indexes higher as North Asia continued to outperform other regional markets this year and investors chase last year's laggards.
China's key Shanghai Composite Index was up 1.1 percent by the midday trading break on Wednesday as cash from a lacklustre bond market flowed into stocks, particularly rail and banking issues.
Hong Kong's benchmark Hang Seng Index was up 0.82 percent at 24,351.86. The China Enterprises Index of top locally listed mainland companies rose 1.04 percent.
Broadly positive results from major U.S. corporations and signs of sustained strength in China's economy encouraged investors to take bets on large cap commodity-related stocks including oil majors, metals and shippers.
"It looks like people are putting aside their worries for the moment and getting more optimistic on some of the big names in Hong Kong," said Ben Kwong, chief operating officer at KGI Asia.
Heavy buying was seen in PetroChina Co Ltd, up 1.3 percent on 1.3 times its average daily 30-day volume, and China Petroleum & Chemical Corp (Sinopec), up 3.9 percent.
A drop in the dollar to a two-month low lifted oil above $91 per barrel.
China Mobile Ltd, a laggard among major stocks in Hong Kong, rose 2.8 percent and was the second-biggest boost to the Hang Seng Index on the day.
SHANGHAI RECOVERS, RAILWAYS UP
The benchmark Shanghai Composite Index rose to 2,737.7 points and appeared to have found support at the crucial 2,700-point level after digesting news of the latest official increase in bank reserve ratios.
Local media in Hong Kong reported that China's consumer price index rose 4.6 percent in December, slowing from November's 5.1 percent, a 28-month high, while GDP for 2010 grew 10.3 percent.
China is scheduled to publish the numbers at 0200 GMT on Thursday.
"Here we see a sort of shift in interest from bonds to stocks, particularly ahead of the announcement of the (December) data," said a trader at a major Chinese brokerage in Shanghai. "While many stocks appear to be good bargains now, the bond market has little upside potential amid a rate rise cycle."
The PBOC has conducted a slew of tightening moves, including two unexpected official interest rate rises, since mid-October to fight consumer inflation that jumped to a 28-month high of 5.1 percent in November. December data will be announced on Thursday.
Government bond yields have jumped about 100 basis points on average since October, while a research report this week by Citic Securities saw further upside for bond yields in the near term.
Most banks rose on Wednesday morning underpinned by low valuations. China Everbright Bank Co Ltd added 0.5 percent and Agricultural Bank of China Ltd edged up 0.4 percent.
Railway plays strengthened as the sector is among several the government is promoting. State media have reported that in 2011 alone, the country will invest 700 billion yuan ($106 billion) in building railways.
China South Locomotive and Rolling Stock Corp Ltd and China North Locomotive Corp Ltd both jumped by their 10 percent daily limit as the morning's most actively traded stocks, biggest index movers and ranked among top gainers.
China will also open a $33 billion high-speed railway between Beijing and Shanghai in June, cutting the journey between the country's two most important cities in half to less than five hours. Its high-speed rail network has developed rapidly over the past decade, reaching 8,358 km (5,193 miles), the world's longest.
There is persistent market talk that the government plans to merge the top two locomotive markers to lead a high-speed rail export drive, although one of them has denied the talk as a rumour. (Editing by Chris Lewis)