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

rose on Thursday, as risk sentiment improved on hopes of a

Middle East de-escalation.

** China's blue-chip CSI300 Index edged up 0.2% by

the lunch break, while the Shanghai Composite Index

gained 0.3%. Hong Kong benchmark Hang Seng was up

1.6%.

** The 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 3.9%, the Coal Index

dropped nearly 4.5%.

** The 5G Communication Index led gains

onshore, up 3.5%.

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

following an overnight rally in their counterparts listed in New

York. Alibaba ( BABA ) shares jumped 4.3%.

** 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 were up 1.1%, while

food and beverage stocks edged up 0.4%.

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

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

Jinping in May on his first visit to China in eight years.