(Reuters) - China shares produced their biggest daily gain in three months on Monday, with the Shanghai Composite Index surging 2.9 percent on better-than-expected December loan growth and money supply data as well as comments by Chinese Premier Wen Jiabao.

Gains in Shanghai spurred some short covering in Chinese shares listed in Hong Kong, reversing early losses. The China Enterprises Index jumped 2.4 percent, helping the broader Hang Seng Index finish up 1.5 percent on a day the Hong Kong and China markets outperformed Asia.

The December data, released on the weekend, boosted Chinese banking stocks on reinforced perceptions that the central bank is gently easing policy to cushion the impact of the slowdown in the Chinese economy.

Wen said during the weekend that Beijing would improve market regulation and protect investors rights.

The Shanghai Composite has dropped almost 33 percent over the last two years, ranking it among the worst performers in Asia as Beijing progressively tightened monetary policy to fight inflation.

In the mainland, people are desperately betting on a rebound, it doesn't need much of a reason for that to happen. Whether or not it can be sustained is another matter, said a fund manager at a Qualified Foreign Institutional Investor (QFII).

Hong Hao, China International Capital Corporation's Beijing-based global strategist, said in an early Monday note to clients that gains in an oversold market are merely a fleeting technical rebound.

The Shanghai Composite Index closed at 2,225.9 points on Monday, at the top of the trading range. A-share turnover in Shanghai soared to its highest since Dec. 1, the day after Beijing cut the reserve requirement ratio for commercial lenders for the first time in three years.

Comments by Wen and others at the weekend's National Financial Work Conference were short on details. Still, HSBC economists said the outcome could be taken to imply more monetary policy easing for 2012. They reiterated their view China would make cuts of at least 150 basis points in reserve requirements in the first half, with the next cut likely in coming weeks.

The conference, held every five years since 1997, spurred investors to pour into growth-sensitive sectors, such as coal.

A Xinhua News Agency report on Monday suggested the reforms to allow markets to set oil prices in China could be expanded to include other energy sectors, including coal, potentially resolving shortages to a certain extent.

China Shenhua Energy Co Ltd was its top boost, up 7.2 percent in volume more than three times its 30-day average. Smaller rival Yangquan Coal Industry Group Co Ltd jumped the maximum 10 percent.

CHINA COAL, BANKING STOCKS LEAD HK REVERSAL

Chinese coal stocks in Hong Kong were also strong. Shenhua Energy was the top percentage boost among Hang Seng Index components, rising 4.7 percent. China Coal Energy Co Ltd jumped 3.9 percent.

Turnover in Hong Kong remained weak, in contrast to Shanghai, with investors focused on Europe after data last week pointed to a recession in the euro zone despite stronger-than-expected economic data from the United States and China.

Chinese banks were strong in Hong Kong mainly on a bout of short covering, with the country's largest lender, Industrial and Commercial Bank of China (ICBC), up 2.8 percent.

Among fellow Big Four banks, Bank of China rose 3.2 percent, China Construction Bank (CCB) firmed 2 percent and Agricultural Bank of China (AgBank) gained 2.1 percent.

In a note on Monday, Barclays analysts reiterated their positive view on the sector, believing more accommodative fiscal and monetary policies could be catalysts for gains.

Despite trading near historic low valuations, investors have avoided Chinese banks, uncertain about their exposure to local government debt.

Despite the Chinese central bank governor saying these risks were controllable in a state media interview published on Sunday, traders said fresh buying interest in the sector will likely stay low.