China shares up as investors eye recovery, unfazed by bond defaults

* SSEC 0.1%, CSI300 flat, HSI 0.5%

* HK->Shanghai Connect daily quota used 1%, Shanghai->HK daily quota used 3.6%

* FTSE China A50 -0.4%

BEIJING/SHANGHAI, Nov.20 (Reuters) - Chinese stocks edged up on Friday, as investors turned to materials and machinery companies, looking past recent bond market defaults on brightening hopes for recovery in the world's largest economy.

** At the midday break, the Shanghai Composite index was up 0.1% at 3,366.53 points.

** China's blue-chip CSI300 index was up 0.02%, with its material sector sub-index jumping 1.25% and the industrial sector sub-index gaining 1.02%. ** COSCO Shipping Holdings Co was the biggest contributor to the industrial sub-index, rising 10% to its daily limit, while Zijin Mining Group Co was up 4.4%, one of the biggest movers among material shares.

** The smaller Shenzhen index was up 0.26%, the start-up board ChiNext Composite index was higher by 0.57% and Shanghai's tech-focused STAR50 index was down 0.37%.

** So far this week, Shanghai Composite Index is up 1.7% and the bluechip benchmark CSI300 is up 1.49%.

** "Earnings recovery and sentiment upside remain intact despite the defaults and geopolitical uncertainty," analysts at Morgan Stanley said in a report. They expect A-shares to continue to outperform the offshore space in 2021 on attractive valuations.

** China's interbank bond market regulator said on Thursday it would launch probes into three banks for their role in underwriting bonds issued by Yongcheng Coal & Electricity Holding Group, which defaulted last week.

** The move comes after some Chinese state-firm debt defaults triggered market selloffs, including parent of BMW's Chinese venture partner Huachen, and Tsinghua Unigroup, a major government-backed player in China's technology race.

** Auto shares also rose on the mainland ahead of the Guangzhou International Motor Show commencing Friday.

** China left its benchmark lending rate for corporate and household loans unchanged for a seventh straight month at its November fixing on Friday, matching market expectations.

** Chinese H-shares listed in Hong Kong rose 0.02% to 10,557.86, while the Hang Seng Index was up 0.35% at 26,449.07.

** Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.52% while Japan's Nikkei index was down 0.70%. (Reporting by Cheng Leng in Beijing and Andrew Galbraith in Shanghai; editing by Uttaresh.V)