HK shares finish flat on U.S. concern; BEA recovers

* Bank of East Asia shares rebound 3.4 percent

* Small local lender falls on high interbank rate

* Turnover drops amid doubts over U.S. bank bailout plan (Updates to close)

By Parvathy Ullatil & Joseph Chaney

HONG KONG, Sept 25 (Reuters) - Hong Kong shares gave up early gains to finish flat on Thursday amid doubts over U.S. congressional approval for a $700 billion bank bailout plan, but Bank of East Asia (0023.HK: Quote, Profile, Research, Stock Buzz) rebounded a day after plummeting on denied rumours of financial distress.

The benchmark Hang Seng Index .HSI finished down 27.56 points at 18,934.43 after rallying to 19,248.72 earlier in the day.

"There is a lot of concern over whether the rescue package will be approved and even if it is, there are doubts over whether this will succeed in securing the financial system," said Ben Kwong, COO with KGI Asia.

Mainboard turnover fell to HK$52.2 billion ($6.7 billion) from HK$59 billion on Wednesday.

The China Enterprises Index .HSCE of top locally listed mainland Chinese firms gained 0.3 percent to 9,764.52, propped up by China Life (2628.HK: Quote, Profile, Research, Stock Buzz) as investors hoped for progress on Chinese stock market reforms and more government support.

Bank of East Asia jumped as much as 5.6 percent in morning trade after it denied rumours about its financial stability that had prompted thousands of customers to withdraw cash at its branches Wednesday night. The stock finished on Thursday up 3.4 percent at HK$26 after tumbling 6.9 percent on Wednesday.

The Hong Kong Monetary Authority said the rumours were unfounded and that it would provide liquidity to the bank if necessary. [ID:nHKG187731].

But small and mid-cap lenders in Hong Kong closed lower as the Hong Kong interbank offered rate (HIBOR), the rate at which banks lend to each other, stayed high threatening margins at local banks.

Shares in Wing Lung Bank (0096.HK: Quote, Profile, Research, Stock Buzz) fell 1.4 percent while Wing Hang Bank (0302.HK: Quote, Profile, Research, Stock Buzz) dropped 2.5 percent.

Shares in China's largest life insurer, China Life, jumped 2.5 percent, trailing a 7.9 percent jump in its Shanghai-listed A-shares. Smaller rival Ping An (2318.HK: Quote, Profile, Research, Stock Buzz) gained 1.2 percent.

China's benchmark stock index .SSEC rose 3.6 percent to its highest in three weeks, buoyed by share buybacks by state-owned firms and by signs of progress in market reforms [ID:nBJB000494]

China Railway Group (0390.HK: Quote, Profile, Research, Stock Buzz) (601390.SS: Quote, Profile, Research, Stock Buzz), the country's largest railway and highway builder, climbed 3.2 percent after it said four of its subsidiaries had won four contracts worth a total of 2.28 billion yuan ($334 million).

The value of the contracts is equivalent to 1.27 percent of the company's 2007 sales under domestic accounting standards, the company said in a filing carried by the official Shanghai Securities News. [ID:nSHA183754]

China's top aluminum producer Chalco (2600.HK: Quote, Profile, Research, Stock Buzz) fell 1.8 percent. Officials from Chinese aluminium smelters, alumina refineries and trading firms said at a conference in Chongqing this week that prices would stay at levels well below marginal costs, unless smelters significantly cut back output. [ID:nHKG169082].

(US$1=HK$7.8)

(Reporting by Parvathy Ullatil; Editing by Ken Wills)