* Shanghai market climbs to five-month high, turnover jumps
* HK shares at 28-month high, volume up for second day
* CNOOC ends at three-year high after acquisition (Updates to close)
By Donny Kwok and Farah Master
HONG KONG/SHANGHAI, Oct 11 (Reuters) - Hong Kong and China stocks surged on Monday as investors injected more funds with U.S. dollar weakness expected to continue.
China's key stock index on Monday closed up 2.49 percent in its biggest two-day surge in more than 12 months, buoyed by commodity issues such as Baoshan Iron & Steel Co Ltd (Baosteel) on strong corporate earnings and expectations of another flood of liquidity in global markets.
The Shanghai Composite Index closed at 2,806.94 after closing up 3.1 percent on Friday. Volume leapt to a 10-month high of 252 billion yuan ($38 billion) from 166 billion yuan.
Traders said investors ploughed cash back into the market after waiting on the sidelines for the past two months. But China's stock market is still down 14 percent on the year after government steps to clamp down on bank lending and a series of property controls spooked investors.
The index has broken through the half-year 125-day moving average, a level that local investors consider demarcates a bearish or bullish market. Analysts said the index had the potential for further gains to test the yearly 250-day moving average now at 2,888 points.
Baosteel, the country's biggest listed steel mill, gained 4.7 percent after it said net profit for the first nine months of the year was likely to outstrip previous forecasts.
Xining Special Steel Co Ltd and coal miner Shan Xi Guo Yang New Energy Co Ltd rose by their 10 percent trading limits.
"Expectations for higher inflation, increasing liquidity and a weaker dollar are buoying commodities and agricultural issues. These in turn are lifting the broader index," said Chen Shaodan, analyst at China Development Bank Securities.
A marked weakness in the U.S. currency has helped boost commodities such as gold and oil, which are priced in dollars.
"There has been a turnaround in market expectations. Previously the biggest drag was concern over the severity of property controls, but investors are more positive on the sector," said Cheng Yi, analyst at Xiangcai Securities in Shanghai.
Heavyweight banks and financials helped bolster gains for the index on Monday, reversing their lacklustre performance for most of the past two months.
Citic Securities Co Ltd and Everbright Securities Co Ltd jumped their 10 percent limit. Industrial and Commercial Bank of China Ltd (ICBC) gained 2.2 percent.
Beijing had raised reserve requirements by 50 basic points for six large commercial banks, aiming to drain liquidity, fours sources told Reuters on Monday.
CNOOC AT THREE-YEAR HIGH
Tracking the strength of Shanghai market, the benchmark Hang Seng Index climbed 263.13 points or 1.15 percent to close at 23,207.31, its highest close since June 18, 2008. The China Enterprises Index of top locally listed mainland stocks was up 1.52 percent at 12,951.90.
Turnover increased for a second straight session to HK$95.21 billion ($12.3 billion), from Friday's HK$86.6 billion.
"The overall market continued to trend up as investors did not want to hold cash because of the weak (U.S.) dollar," said Alex Wong, a director at Ample Finance Group. "Instead of sitting on cash, investors preferred to make a bet in the market, and that helped demand for resources and oil shares after the recent strength of precious metals," Wong said.
CNOOC Ltd ended at HK$16.80, up 4.48 percent, its highest close since Oct 30, 2007, after the company agreed to buy a third of Chesapeake Energy Corp's acreage in the Eagle Ford shale in South Texas for $1.08 billion.
Property stocks remained firm in anticipation that a land auction in Hong Kong on Tuesday could draw strong interest from developers, sending the Hang Seng property sub-index up 1.02 percent. Henderson Land Development Co Ltd and Sun Hung Kai Properties Ltd each gained 0.8 percent.
Despite the strong market, Chinese coking coal logistics debutant Winsway Coking Coal Holdings Ltd, which raised $473 million in an IPO, weakened on debut to HK$3.38 from the issue price of HK$3.70. ($1=6.671 Yuan) (Editing by Chris Lewis)