* HK, Shanghai rise in thin volume as banks, property rebound
* China Rare Earth jumps 16 pct as China cuts export quotas
* Auto stocks recover despite end to tax incentives (Updates to close)
By Donny Kwok and Samuel Shen
HONG KONG/SHANGHAI, Dec 29 (Reuters) - Stocks in Hong Kong and Shanghai rebounded in thin trade on Wednesday as investors snapped up financial and property plays after the recent sell off, while China automakers ended up despite an end to tax incentives for small cars.
Ending three consecutive day of falls, the Hang Seng Index ended up 1.54 percent at 22,969.30, its biggest single-day percentage gain in more than a week.
Property group Wharf (Holdings) Ltd rose 3.8 percent in its biggest percentage gain in three weeks. Cheung Kong (Holdings) Ltd climbed 2.8 percent, and Hang Lung Properties Ltd advanced 2.7 percent.
China Construction Bank Corp rose 2.4 percent in its biggest percentage gain in four weeks. Industrial and Commercial Bank of China Ltd gained 1.4 percent.
The China Enterprises Index of top locally listed mainland Chinese companies rose 1.62 percent to 12,508.52. Turnover was a thin HK$40.6 billion ($5.2 billion), the lowest in nearly six months.
"It was a rebound in thin volume as there was no change in fundamentals, while sentiment was still mixed," said Linus Yip, chief strategist at First Shanghai Securities. "Auto stocks were a good example as they experienced a recovery after the recent selloff."
Hong Kong-listed auto stocks, which were bruised last week by Beijing's policy to limit new car registrations in the capital, trimmed early losses and advanced in late trade despite Chinese government confirmation of an end to tax incentives for small cars next year..
Geely Automobile Holdings Ltd, which fell 2.1 percent in the morning, ended 3.6 percent higher. Brilliance China Automotive Holdings Ltd rose 4.8 percent and Dongfeng Motor Group Co Ltd surged 3.4 percent.
Higher commodities prices sent China Petroleum & Chemical Corp (Sinopec) and CNOOC Ltd up more than 2 percent.
China Rare Earth Holdings Ltd rose more than 16 percent to its highest in five weeks after China effectively cut export quotas by 35 percent for the first half of 2011 compared with a year earlier.
SHANGHAI RISES, CONSUMER STOCKS CLIMB
China's stock market ended up 0.68 percent in thin trading, following a near 4 percent drop over the past two days, as investors started buying property and financial counters after tightening fears triggered by Saturday's interest rate rise pushed down valuations.
Consumer stocks rose on expectations they would benefit from government policies, but car makers were hit by news that the government would end tax incentives for small cars next year.
With valuations of blue chips attractively low and policy concerns largely priced in, the index may be near its bottom, although a strong rally was unlikely in the short term because of seasonal liquidity tightness toward year-end, analysts said.
"Banking and property shares are already cheap, so if they don't fall a lot, the index will not either," said Li Feng, Shenzhen-based trader at Fortune Securities. "What the market is waiting for is some kind of stimulus, such as signs of economic recovery in the United States for example."
The benchmark Shanghai Composite Index rose to 2,751.53 points after closing on Tuesday at the lowest level in nearly three months.
Trading turnover shrank to 76 billion yuan ($11 billion), the lowest level in three months, reflecting lingering liquidity tightness in the financial system.
Most consumer stocks rose, as investors bet that retailers and dairies would benefit from government support for consumption next year and would be little affected by tightening.
Inner Mongolia Yili Industrial Group Co Ltd, one of China's biggest diary producers, rose 2.5 percent, while supermarket chain Beijing Hualian Hypermarket Co Ltd gained 3.2 percent.
Property stocks rebounded after two consecutive days of losses, shrugging off official reaffirmation of real estate curbs.
Beijing's determination to curb the real estate market was "unshakable", and the government would continue to crack down on home speculation using a combination of fiscal, financial and regulatory measures, the official Xinhua News Agency reported on Wednesday, citing Vice Premier Li Keqiang.
Gemdale Corp, a developer based in China's southern city of Shenzhen, jumped 3.9 percent, while rival China Merchants Property Development Co Ltd gained 0.3 percent.
Banks, which had been the main drag on the market in the past two days, also rebounded on Wednesday, despite hints from the industry's top regulator that China's biggest lenders might be subject to higher capital requirements.
Banks that are considered "systematically important" may be subject to higher capital adequacy rules as regulators aim to build up counter-cyclical capital buffers in the financial system, state media cited Liu Mingkang, chairman of the China Banking Regulatory Commission, as saying.
Industrial and Commercial Bank of China Ltd, China's biggest lender, gained 0.7 percent. Bank of China Ltd, the biggest foreign exchange lender, rose 0.3 percent. (Editing by Chris Lewis)