* Hang Seng Index up 1.2 percent, off two-month low
* Shanghai Composite up 0.9 percent, large caps recover
* Coal plays rise, Shenhua up 5 percent in HK on assets buy
* Baidu top traded depositary receipts in 2010 - BNY Mellon
* HK midday turnover weak, buying restricted to energy (Updates to midday)
By Vikram S.Subhedar and Lu Jianxin
HONG KONG/SHANGHAI, Dec 21 (Reuters) - Stocks in Hong Kong and China rebounded on Tuesday, with coal counters partly lifted by expectations of strong winter demand and as some investors hunted for bargains.
Hong Kong's Hang Seng Index was up 1.18 percent by the midday trading break, rising from a two-month low on Monday after almost a month of profit-taking drove the benchmark below a key support level.
Shanghai's key Composite Index was up 0.9 percent by midday, back above the closely watched 250-day moving average.
Coal issues led the rebound in both markets, with the world's top producer by market value China Shenhua Energy Co Ltd up 4.8 percent in Hong Kong after saying it would spend $1.3 billion to acquire assets.
In Shanghai, Shenhua rose 5.5 percent.
"There's some bargain-hunting, with the Hang Seng Index seeming to find support at the 100-day moving average at 22,500, but the low turnover suggests investors are still cautious," said Phillip Securities research head Louis Wong in Hong Kong.
The Hang Seng index is up 4.5 percent this year compared with a 16.7 percent gain for the MSCI index of Asian markets outside Japan as Chinese companies underperformed.
The China Enterprises Index of top locally listed Chinese companies is down 1.7 percent on the year, while the Shanghai Composite, Asia's worst performing major market, is down 12.2 percent.
While most strategists remain optimistic that Chinese shares will recover strongly in 2011, inflation in China, which hit a 28-month high in November, and fears of capital controls to stem inflows of hot money, remain key concerns for investors.
Appetite for Chinese shares, particularly technology-related, listed abroad remains strong with a record number of Chinese listings in the United States this year, and several soaring on their trading debuts.
According to BNY Mellon, U.S.-listed internet company Baidu.com was the top traded Asian depositary receipt in the year to date with just over $1 billion in average daily turnover on the Nasdaq. Baidu shares are up more than 140 percent this year.
Turnover on the Hong Kong stock exchange fell to the lowest in 3-½ months as investors remained wary of taking big bets as a choppy 2010 winds to a close.
Some buying by mutual funds was seen in Shanghai as they sought to improve book values after a tough year, traders said, but a cash shortfall in the market was likely to limit gains.
"Don't expect too much by way of stock market performance amid an overall liquidity crunch situation," said Shenyin and Wanguo Securities senior analyst Qian Qimin, adding that the psychologically important 2,900-point level may prove a near-term ceiling.
Underscoring an overall shortage of funds, turnover of Shanghai A shares fell to 60 billion yuan ($9 billion) from Monday morning's 81 billion yuan.
In the money market, China's benchmark short-term rate spiked 55 basis points to a more than two-year high early on Tuesday, as traders reported an acute shortage of funds after a slew of official tightening steps.
Minmetals Development Co Ltd, a unit of state-owned mining giant China Minmetals Corp, jumped 6.8 percent in Shanghai after Hong Kong-listed sister Minmetals Resources Ltd said the parent was carrying out internal restructuring. ($1=6.66 Yuan) (Editing by Chris Lewis)