(Updates to market close)

SHANGHAI, May 7 (Reuters) - China and Hong Kong stocks

closed higher on Thursday, led by AI and tech shares, as risk

sentiment improved on hopes of a U.S.-Iran peace deal.

** China's blue-chip CSI300 Index and the Shanghai

Composite Index gained 0.5% each. Hong Kong's benchmark

Hang Seng was up 1.6%.

** Market mood brightened after Iran said on Wednesday it

was reviewing a U.S. peace proposal that sources said would

formally end the war but leave unresolved key U.S. demands that

Iran suspend its nuclear program and reopen the Strait of

Hormuz.

** "Despite the lack of a definitive resolution, defensive

positioning has lowered the threshold for positive surprises to

influence price action," UBS strategist Rohit Arora said.

** Onshore energy shares fell 4.3%, the Coal Index

dropped 4.8%.

** The 5G Communication Index led gains

onshore, up 4.1%.

** Hong Kong-listed tech majors were up 3.1%,

following an overnight rally in their counterparts listed in New

York. Alibaba ( BABA ) shares jumped 5%.

** China's tourism sector saw a rise in trips during the May

Day holiday, though official data released the day after the

five-day break did not include spending figures that usually

provide a fuller picture of consumption over the period.

** Chinese liquor shares edged up 0.5%, while

food and beverage stocks were roughly flat.

** Markets are watching closely for U.S.-China developments

as U.S. President Donald Trump is set to meet Chinese President

Xi Jinping this month on his first visit to China in eight

years.

(Reporting by Shanghai Newsroom; Editing by Rashmi Aich and

Subhranshu Sahu)