Britain's FTSE rises as housebuilders rally ahead of UK EU vote

(ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)

* FTSE 100 up 0.1 pct

* Housebuilders, insurers rally ahead of UK's EU vote

* AB Foods falls on downgrade

* Debenhams (Other OTC: DBHSF - news) drops after results

By Kit Rees

LONDON, June 22 (Reuters) - UK shares edged higher on Wednesday as housebuilders and insurers rallied before Britain's vote on its membership of the European Union on June 23.

The blue-chip FTSE 100 index was up 0.1 percent at 6,232.63 points by 0836 GMT, extending its three-day rally.

Betting odds from Betfair suggest that the implied probability of Britain voting to remain in the European Union was at 75 percent, although a Survation telephone poll released on Tuesday suggested that the "In" camp's lead over "Out" had shrunk.

Among the top gainers, housebuilders Taylor Wimpey (LSE: TW.L - news) , Persimmon (Other OTC: PSMMF - news) , Berkeley Group and Barratt Developments rose between 0.9 to 1.5 percent.

"(The housebuilders) are acting as a massive proxy for this referendum, so the moves you're seeing this morning, the slight uptick in housebuilders, is really investors and traders airing their views on which way the referendum's going to be," Jonathan Roy, advisory investment manager at Charles Hanover Investments, said.

Roy added that, as a company, they had been buying into some of the blue-chip housebuilders with clients over the last couple of days.

"The Housebuilders probably are ... the sector that has the most to gain or lose from the referendum. There's very little options for them if we do leave," Charles Hanover Investments' Roy said.

Insurers also rallied, with Direct Line (Other OTC: DIISD - news) and RSA Insurance up 1.5 percent and 1.4 percent respectively.

While the losses were broad-based, AB Foods was the top faller on the blue chip index, down 3 percent as Morgan Stanley (Xetra: 885836 - news) cut its rating to "equal weight", taking a more cautious view on valuation as it examined why Primark's like-for-like growth was slowing.

Among mid caps, department store group Debenhams fell 5.7 percent after posting a fall in third quarter sales growth, after trading conditions became more uncertain, especially in clothing.

Likewise chemicals company Elementis (LSE: ELM.L - news) dropped 8.6 percent after issuing a profit warning. (Reporting by Kit Rees; Editing by Andrew Heavens)