Hong Kong shares rose on Wednesday as investors snapped up beaten down stocks of Chinese oil and financial companies and on some short-covering, although sustained low volumes suggest that investor confidence remains poor.

Stocks such as CNOOC and Li & Fung , which witnessed the most short selling in recent sessions, were among the biggest gainers in Hong Kong.

The Hang Seng Index closed up 1.7 percent at 20,048.00 points, but is still down about 11 percent from its late July highs. It bounced up from an Aug. 9 low, but shed more than half those gains in the past few sessions.

The volatility makes for good day trading, but it also makes it very difficult to make a trend reversal call, Hong Hao, a global strategist with CICC in Beijing, told Reuters.

People need to be patient and let the market slowly bottom out, he said, adding that investors are buying into defensive sectors and cutting their exposures to cyclical names.

China Construction Bank's 2.5 percent gain and Petrochina Co Ltd's 3.1 percent jump helped the Hang Seng index end higher.

CNOOC shares have fallen almost 11 percent from the one-month high reached on Thursday, after the company said production would be hit by a government-ordered suspension of operations at the nation's largest offshore oil field. It rose 2.3 percent on Wednesday.

Short selling in the stock on Wednesday totalled 1.6 percent of its total volume, a marked decrease from the prior three sessions, where short selling averaged over 10 percent of its total volume.

Li & Fung, for which short-selling interest averaged about 40 percent of its total volume in the first two sessions on the week, jumped over 5 percent on Wednesday after having lost over 7 percent in the three sessions before.

ENERGY, MATERIALS LIFT SHANGHAI

The Shanghai Composite Index finished up 1.8 percent at 2,516.1 points, snapping a four-session losing streak and lifting the benchmark off oversold levels on the charts though A-share turnover stayed persistently low.

Jitters over credit supply and renewed concerns on growth in the world's second-largest economy have combined to push the Shanghai benchmark to fresh 14-month lows on Tuesday, with energy and material names taking the brunt of the losses.

On Wednesday though, investors bought into oil and coal names, which were among the top boosts to the Shanghai benchmark, after local media reported that data would likely show inflation in August have slowed.

Petrochina Co Ltd gained 0.82 percent, continuing its bounce after it hit an all-time low on Monday. China Shenhua Energy Co Ltd gained 2.4 percent.

Anhui Conch Cement gained 2.3 percent in Shanghai and 1.5 percent in Hong Kong after hitting its lowest levels since January and March this year respectively.

But more downside looks possible for cement names. Credit Suisse analysts said in a report on Tuesday that the supply-demand outlook of the Chinese cement sector has incrementally deteriorated, which they expect to hit their margins in the coming months. (Editing by Ramya Venugopal)