Australia shares edge higher after uptick in China PMI survey

* ASX 200 reverses early fall to rise after better-than-expected China PMI

* 107 shares higher, 75 shares lower, 17 shares unchanged

* Stocks with large U.S. exposure higher on weaker Aussie (Adds analysis, quotes, stocks on the move)

By Thuy Ong and Naomi Tajitsu

SYDNEY/WELLINGTON, Sept 23 (Reuters) - Australian shares reversed an early dip to rise 0.3 percent on Tuesday as a better-than-expected manufacturing survey from China showed modest expansion, raising hopes of an economic recovery in Australia's largest export market, though a drop among miners tempered gains.

A preliminary HSBC/Markit Flash China Purchasing Managers' Index rose to 50.5 in September from August's final reading of 50.2. The 50 point level separates growth in activity from contraction.

This helped buoy the market, with Australia's largest telecommunications provider Telstra Corporation Ltd gaining 1.1 percent, while diversified company Wesfarmers Ltd added 0.4 percent.

"The PMI (Other OTC: PMIR - news) data was much stronger than expected, that'll keep the bears (away)- we're seeing a relief rally across most risk assets at the moment," said Ben Le Brun, a market analyst from OptionsXpress.

The S&P/ASX 200 index rose 16.4 points to 5,379.3 by 0204 GMT. The benchmark declined 1.3 percent on Monday, its biggest one-day loss since early August.

Despite the ASX200 losing between 4 percent to 5 percent over the past three weeks, analysts at Morgan Stanley (Xetra: 885836 - news) said market fundamentals remain positive with good prospects for a rebound.

The benchmark hit a six-year intraday high of 5,679.5 points on Aug. 21 but has since slumped, erasing most year-to-date gains as investors have exited Australian equities on the back of rising bond yields and a slump in iron ore prices. The benchmark is 0.5 percent for the year.

Chinese steel and iron ore futures slid 4 percent to their lowest on record, plagued by worries about excess supply.

Among iron ore miners, top tier stocks BHP Billiton Ltd and Rio Tinto Ltd (Xetra: 855018 - news) lost 0.6 percent and 0.2 percent.

An uptick among stocks with high exposure in the U.S. helped buoy the market as the Australian dollar was trading at $0.8873 , hovering near February lows. Pallet maker Brambles Ltd jumped 2 percent, while blood products maker CSL Ltd (Other OTC: CMXHF - news) gained 0.8 percent.

Companies with large U.S. earnings benefit from a low Aussie when funds are repatriated, boosting bottom lines.

Australia's Nufarm Ltd soared 10.7 percent after the company reported a jump of 15 percent in full-year revenue from ordinary activities to A$2.6 billion.

New Zealand's benchmark NZ50 index slipped 16.5 points or 0.3 percent to 5,220.88, staying off a record high of 5,264.43 hit earlier in the month.

Losses were led by a 3 percent slide in New Zealand Refining to NZ$1.60 ($1.29) after the company said it would have to halt production at the country's only oil refinery next month due to a strike by some staff.

Kathmandu Ltd stumbled 2.2 percent to NZ$3.08 after the outdoor apparel maker reported a 4.5 percent fall in annual profit due to fluctuating weather and a high exchange rate.

Power companies also eased as investors booked profits on a relief rally on Monday after a decisive win by country's ruling National party in weekend general elections had removed the prospect of creating a national wholesale electricity buyer proposed by some opposition parties.

Mighty River Power Ltd slipped 0.2 percent to NZ$2.58, backing off a 17-month high of NZ$2.63 hit on Monday. (Editing by Simon Cameron-Moore)