* Hang Seng index up 0.6 percent; Cheung Kong, refiners up
* Shanghai flat, property shares firm after Tuesday jump
* Cheung Kong planning HK's 1st yuan IPO through REIT
* Refiners rally in HK as China hikes fuel prices (updates to midday)
By Vikram S.Subhedar and Lu Jianxin
HONG KONG/SHANGHAI, Dec 22 (Reuters) - Hong Kong stocks rose for the second straight day on Wednesday, extending their recovery after two weeks of declines, as refiners rallied on China's fuel price hike.
The Hang Seng index rose 0.6 percent to 23,127.2, finding support at the 23.6 percent retracement level of its slide since November 9. Turnover, which has declined all week, thinned to the lowest in over 3-1/2 months.
It had fallen 2.6 percent over the past two weeks.
Refiners rose in Hong Kong after China announced a 4 percent hike for retail gasoline and diesel prices, the third increase this year, as crude hovered near two-year highs. [ID:nL3E6NM06I]
Sinopec Corp rose 3.1 percent.
Property shares in Hong Kong also rose following an over 5 percent jump in developers in Shanghai on Tuesday.
Gains were led by Li-ka Shing-controlled Cheung Kong Holdings , which is planning Hong Kong's first yuan-denominated listing. [ID:nTOE6BL01N]
The Hong Kong Economic Times reported the company was planning to spin off its rental property in China through a real estate investment trust to raise $1.5 billion in the first half of 2011. [ID:nTOE6BL01N]
Cheung Kong shares rose 3.6 percent, providing the biggest boost to the Hang Seng.
Analysts at Bank of America Merrill Lynch in Hong Kong said in a note that a listing would improve transparency of Cheung Kong's investment property holdings in China.
This, in turn, could help narrow Cheung Kong's NAV discount -- the discount of the current shares to the net asset value per share of the company - which currently is about 27 percent versus a historical average of 15 percent, they said.
The gains in Cheung Kong shares and other property developers such Sung Hung Kai Properties , up 1.4 percent, helped the benchmark index recover about two-thirds of its losses since last Monday.
On weekly charts the index is still showing signs that a "head and shoulders" pattern could develop, indicating more weakness.
SHANGHAI FLAT, PROPERTY STOCKS STABILIZE
China's key stock index was flat by the midday trading break as reduced cash flows from a liquidity crunch in the money market capped the market's rally after a 1.8 percent rise a day earlier.
The benchmark Shanghai Composite Index was at 2,903.3 points at midday. Shanghai's property index edged up 0.4 percent to 3,556.2, slowing from a 5.4 percent jump on Tuesday.
The money market is in an acute squeeze after a slew of official monetary tightening steps since mid-October, with the benchmark short-term rate rising another 9 basis points to a more-than-two-year high on Wednesday.
Most institutions, such as brokerages and insurers, have also met their 2010 annual financial targets, and are not willing to conduct major transactions in the final few trading days of the year, said traders.
"Except for some special interest in selected sectors such as property, the market will continue its lukewarm performance for the rest of this year," said senior analyst Zhang Qi at Haitong Securities in Shanghai.
Top property issue China Vanke , one of the morning's most actively traded stocks, dropped 0.11 percent after jumping its 10 percent daily limit on Tuesday.
Traders said sectoral interest in areas which have a strong influence on the index such as property, financial and oil, may cause volatility in the Shanghai Composite.
Oil issues in Shanghai staged a lacklustre performance after China raised retail gasoline and diesel prices. The rise was expected and had been largely factored into their share prices, said traders.
PetroChina was flat at midday while Sinopec Corp edged up 0.61 percent. ($1=6.66 Yuan)
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