* China properties lifted on interest rate cut talk
* Mainland insurers rally on likely policy changes
* China Cosco pares losses on Baltic Index rebound (Updates to close)
By Parvathy Ullatil
HONG KONG, Dec 16 (Reuters) - Hong Kong shares ended Tuesday's skittish session 0.6 percent higher as Chinese insurers soared on talk that Beijing is set to introduce new policy measures that will widen their scope of investment.
Non-life insurer PICC P&C (2328.HK: Quote, Profile, Research, Stock Buzz), tipped to be the highest leveraged company in the sector, surged 17.5 percent.
But anaemic turnover, HK$40.3 billion ($5.2 billion), suggested many investors were staying on the sidelines awaiting the interest rate decision from the Federal Reserve.
"It's been a pretty dull day with people just waiting around to see what the Fed decides and the fate of the U.S. carmakers," said Andrew To, sales trader with Tai Fook Securities.
Property counters also rallied on increased speculation over interest rate reductions and tax cuts on property transactions on the mainland. China Overseas Land Investment (0688.HK: Quote, Profile, Research, Stock Buzz) gained 4.5 percent.
Guangzhou R&F Properties (2777.HK: Quote, Profile, Research, Stock Buzz), which operates in southern China, one of the worst affected regions in this year's property price free fall, soared 8 percent. The stock has fallen more than 75 percent this year, far underperforming the 46 percent drop on the main index.
The benchmark Hang Seng Index .HSI ended 83.26 points higher at 15,130.21 but HSBC Holdings (0005.HK: Quote, Profile, Research, Stock Buzz) underperformed the broader market after announcing a potential $1 billion exposure to Wall Street trader Bernard Madoff.
The stock ended unchanged after dropping more than 1 percent at one point as talk swirled about possible capital raising at the bank.
"We are just seeing a lot of window dressing in badly battered sectors. Investors are ready to ignore the bad news and buy up on any excuse like possible support measures from China," said Ben Kwong, chief operating officer with KGI Asia.
"The index will stay around the 15,000-point level as we enter the year-end rally. And the game of musical chairs will continue up until then."
China has aggressively cut interest rates and rolled out an ambitious stimulus plan to bolster its economy as exports slow.
The China Enterprises Index of top locally listed mainland Chinese firms .HSCE rose 0.7 percent to 8,063.75 led by a 3.4 percent gain in top insurer China Life (2628.HK: Quote, Profile, Research, Stock Buzz).
COSCO CUTS LOSSES
China's biggest shipping group, China Cosco (1919.HK: Quote, Profile, Research, Stock Buzz), cut losses to 0.7 percent after opening down nearly 12 percent as the rally in the broad market and another day of gains on the global freight index helped limit the sell-off in the stock after the company announced nearly 4 billion yuan ($584.1 million) in hedging losses.
"If you look at the fundamentals of this company, Baltic Dry Index is still on a downtrend, freight rates are at their lowest in many years and the global economy is still hurting," said Linus Yip, strategist with First Shanghai Securities.
"All signs are pointing to weaker international trade but investors are using the short-term rally in the freight index as an excuse to buy shipping stocks."
The Baltic Dry Index .BADI, which measures changes in the cost of shipping commodities, rose 5 percent overnight, adding to last week's 15 percent rally. [ID:nLF192251]
Chinese carmaker Dongfeng Motor Group (0489.HK: Quote, Profile, Research, Stock Buzz) rose 6 percent on hopes that China will move to protect growth in its auto industry. The government announced it would aid the industry after Chinese passenger car sales in November fell 10 percent from a year earlier, this year's third monthly drop.
China may cut its vehicle purchase tax for passenger cars to aid its slumping auto sector, focusing the cut on stimulating purchases of small cars, the official Shanghai Securities News reported on Tuesday.
(Reporting by Parvathy Ullatil; Editing by Jacqueline Wong)
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