* HSI +0.6 pct, H-shares +1.9 pct, CSI300 +3.5 pct
* China banks lead cyclical gains on preferred shares report
* Shanghai bourse volumes biggest in nearly 3 years
* Positive China inflation, export data adds to A-shares cheer
* Report on Shanghai trade zone perks lift shippers
Shanghai shares produced their biggest daily gain in nine months on Monday, lifting Hong Kong markets, due to a combination of encouraging August economic data and hopes that regulators soon will allow banks to issue preferred shares.
Gains on the larger of two mainland bourses came in the strongest volume since Nov. 12, 2010. The shipping sector again had solid gains after the official Shanghai Securities News reported on Monday that companies operating in the city's new free-trade zone may enjoy special tax exemptions.
The Shanghai Composite Index ended up 3.4 percent at 2,212.5 points, its biggest daily gain since Dec. 14, 2012, when it surged 4.3 percent. The CSI300 of the leading Shanghai and Shenzhen A-share listings jumped 3.5 percent.
The Hang Seng Index rose for a third straight day, by 0.6 percent, while the China Enterprises Index of the top Chinese listings in Hong Kong climbed 1.9 percent.
Turnover in Hong Kong totalled $8.7 billion, 13 percent above its 20-day moving average. Short selling accounted for 8 percent of total turnover in Hong Kong, consistent with the historical average.
"A-share gains today came in very strong volumes today, which augurs well for the broader market," said Cao Xuefeng, Chengdu-based head of research for Huaxi Securities. "From what I understand, preferred shares are not typically publicly traded and minimize impact of stake dilution."
Traders cited a report on the website of mainland-based Money Week for buoyancy about banks. It said that Shanghai Pudong Development Bank and Agricultural Bank of China (AgBank) had met with the China Securities Regulatory Commision and were likely to be the first two banks to be allowed to issue preferred shares.
A media relations representative at Shanghai Pudong Bank told Reuters it was not aware of any approval for such a plan. That did not stop the media report from spurring a 7.2 percent surge for the Shanghai financial sub-index.
Both Pudong's and AgBank's A-share listings surged by the maximum 10 percent limit in Shanghai, as did Bank of Communications (BoCom) . AgBank and BoCom shares in Hong Kong each jumped 4.6 percent.
Ping An Bank also soared 10 percent to 12.13 yuan in Shenzhen after its parent, Ping An Insurance Group , said it will acquire up to 1.32 billion new shares in the bank at 11.17 yuan per share, raising its stake to 59 percent.
Financials were also boosted by official data that showed China's annual consumer inflation at 2.6 percent in August, in line with market expectation. Producer prices fell 1.6 percent last month from a year earlier, slightly less than an expected decline of 1.8 percent.
This follows data on Sunday that showed China's exports rose 7.2 percent in August from a year earlier and imports increased 7 percent, producing a monthly trade surplus of $28.6 billion.
Beijing is due to release monthly data for industrial output, retail sales and urban investment on Tuesday. Money supply and loan growth data is also expected this week.
Chinese shipping shares were also stronger on the day, supported by resurgent freight rates, with the Dry Baltic Index again hitting its highest since January 2012.
China Shipping Container Lines (CSCL) surged by the 10 percent limit in Shanghai and 3.2 percent in Hong Kong. CSCL Shanghai shares have rebounded 40 percent from a trough on Aug. 23, one day after China's cabinet approved establishment of a free trade zone in Shanghai.
Shares of Chinese oil giant PetroChina , whose ex-chairman has been implicated in a corruption investigation, rose 1.3 percent in Hong Kong and 2 percent in Shanghai.
PetroChina suspended morning trade following local media reports that alleged more probes of its executives were under way. The company said the reports were inaccurate, and trading resumed in the afternoon.