Australia shares up for 3rd day, financials rise; China a risk factor

* Banks, healthcare lead gains

* Headed for first monthly gains in four months (Adds analysis, quotes, stocks on the move)

By Charlotte Greenfield and Gyles Beckford

SYDNEY/WELLINGTON, July 31 (Reuters) - Australian shares rose for the third straight day on Friday, as investors bought into higher yielding financial sector stocks and kept a wary eye over volatile markets in China.

The S&P/ASX 200 index gained 21.277 points, or 0.4 percent, by 0245 GMT. The benchmark rose 0.8 percent on Thursday and was on track for its first monthly rise since February.

"I think there is some optimism returning to the market as people breath a sigh of relief. Everything that could go wrong, went wrong," said Mathan Somasundaram, quantitative strategist at Baillieu Holst, referring to the fading risk of a Greek exit from the euro zone.

He said that investors were also increasingly turning their attention to the earnings season that kicks off next week.

China remains a risk factor, analysts said.

"Given the strength of the market this morning and add that we have the official Chinese Manufacturing PMI data over the weekend I think we will see some risk off from investors with the local market to finish flat," Tristan Knell, analyst at Quay equities, said in a research note.

The financial and healthcare sectors led gains.

Asset manager Henderson Group Plc (LSE: HGG.L - news) rose as much as 5.2 percent after reporting strong results for the first half of the year.

Most major banks were up slightly with ANZ up 0.3 percent, but AMP lost 0.6 percent.

Biotechnology company CSL (Other OTC: CMXHF - news) rose 2.1 percent after the company said it had secured approvals to proceed with the acquisition of the influenza vaccine business of Novartis (Xetra: 904278 - news) .

Pharmaceutical company ResMed Inc (NYSE: RMD - news) gained as much as 8.4 percent after reporting higher-than-expected revenue in the fourth quarter.

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New Zealand's benchmark NZX50 share index was 0.5 percent higher at 5,920.95, just shy of a record high set last week.

The market was being lifted by demand for major stocks including Fletcher Building (NZSE: FBU.NZ - news) , Spark, Fisher and Paykel Healthcare, which pushed the leading companies index 0.8 percent higher.

The big exception was Contact Energy (NZSE: CEN.NZ - news) which fell 2.4 percent to a one year low, despite a research report saying it looked attractive for its yield.

Smaller-cap companies were notching respectable gains including campervan and tourism operator Tourism Holdings up 2.7 percent to a five month high as a lower New (KOSDAQ: 160550.KQ - news) Zealand dollar improves its pricing for offshore visitors.

Australian-owned gold miner Oceana Gold was down 15.6 percent as it resumed trading after it reported lower gold production in the second quarter and a plan to acquire U.S. gold producer Remarco.

(Editing by Shri Navaratnam)