By Jiaxing Li

HONG KONG, Feb 26(Reuters) - China and Hong Kong stocks rebounded on Wednesday, as the tech rally resumed on the country's renewed AI push and financials jumped after analysts flagged banks' reduced credit risk cycles.

** The Hang Seng Tech Index snapped a two-day decline to soar 3.7% to hit a fresh three-year high. Hong Kong's Hang Seng Index added 2.54% to 23,619.24.

** Leading the gains, Alibaba rallied 4.8%, recouping the losses from Tuesday, after announcing plans to make AI model for Syair HK Hari ini video and image generation publicly available.

** This followed a similar action from startup DeepSeek, which is now rushing to release next-generation R2 model, Reuters reported.

** "China's tech re-rating narrative is still there on the back of AI optimism and the momentum should have a bit more room to go following a consolidation," said Kenny Ng, strategist at Everbright Securities International in Hong Kong.

** On the mainland markets, the Shanghai Composite index gained 0.5% to 3,362.63 points at the midday break and the blue-chip CSI300 index rose 0.13%.

** The financial sub-index climbed 0.39% to lead gains onshore, after Morgan Stanley raised price targets for key Chinese banks.

** The major credit risk cycles have bottomed, including property, industrial and local government financing vehicle, which should reduce long-term risk concerns, analysts at Morgan Stanley said.

** A more balanced and sustainable growth model should support China banks re-rating, they added.

** Around the region, MSCI's Asia ex-Japan stock index firmed 0.79%, while Japan's Nikkei index eased 0.97%. (Reporting by Jiaxing Li in Hong Kong; Editing by Sumana Nandy)