FUND VIEW-Hang Seng Bank sees China, HK stocks beating Wall St

* Sees about 17 percent upside in HK shares

* Favours banks, insurance firms; cautious on real estate

* Sees slim chance for U.S. Fed to raise rates in 2010

TAIPEI, Nov 3 - China and Hong Kong stocks may outperform Wall Street in 2010, as China leads Asian economies out of the global downturn, while the U.S. economy struggles with rising unemployment, an executive at Hang Seng Bank's fund arm said on Tuesday.

Hong Kong's Hang Seng Index and China Enterprises Index of Chinese companies listed in Hong Kong could rise to 25,000 points and 15,000 points, respectively, next year, said Clement Ho, chief investment officer of Hang Seng Investment Management Ltd. That would represent gains of around 17 to 20 percent from current levels.

"The main growth in global economies will come from Asia in the future, which will be dominated by China," Ho, whose company manages about $10.6 billion in assets, told reporters.

Chinese banks and insurers will benefit the most from the country's solid economic growth and the rally in Chinese stocks, said Ho, adding that he would avoid property stocks on concerns of possible tightening in bank lending.

Industrial Commercial Bank of China, China Life Insurance and Ping An Insurance were among Hang Seng's favourite picks, said the chief investment officer.

The Shanghai Composite index rose 2.7 percent on Monday, its biggest one-day gain in more than three weeks, boosted by solid earnings and data that showed sustained industrial expansion.

Hong Kong stocks, meanwhile, have staged a 60 percent rally in the year to date, making the it among world's the best performing markets.

Although the U.S. economy is improving from its worst recession in decades, investors are concerned the recovery may not be sustainable.

"Many U.S. companies just posted market-beating quarterly results, but what worries investors most is that the results were because of cost cutting, rather than increased demand," said Andrew Fung, head of treasury and investment at Hang Seng Bank.

"The chances for the Fed to raise interest rates next year are slim, since the U.S. jobless rate is widely expected to extend its rise to above 9.5-10 percent in 2010," Fung added.