Australia shares rise on robust building approvals, China data

(Adds analysis, quotes, stocks on the move)

SYDNEY, Sept 2 (Reuters) - Australian shares rose 0.7 percent on Monday as better-than-expected manufacturing data from China, Australia's largest export market, and a rise in local building approvals boosted investor sentiment.

Financial heavyweights underpinned the market with top lender National Australia Bank adding 1.3 percent and Westpac Banking Corporation (NZSE: WBC.NZ - news) jumping 1.5 percent, continuing their bull-run on the back of attractive dividend yields and record earnings.

Growth in China's manufacturing sector picked up further in August, official purchasing managers' index (PMI) data showed on Sunday, providing further evidence of a stabilisation in the economy after a recent slowdown.

Elsewhere, Australian approvals to build new homes in July rose 10.8 percent, according to data released by the Australian Bureau of Statistics.

"Generally with the Chinese PMI on the weekend and the building approvals numbers locally here has improved sentiment and that's contributed to the market starting the week on a positive footing," said Tim Waterer, senior dealer at CMC Markets.

The S&P/ASX 200 index rose 37.2 points to 5,172.2 by 0205 GMT. The benchmark rose 1.6 percent in August and finished 0.8 percent higher on Friday.

Australia's benchmark index has rebounded from its year-to-date lows in June and moved sideways for most of August, hovering near the 5,100-point level amid a mixed earnings season and concerns about the U.S. Federal Reserve trimming its stimulus.

A handful of defensives gained on Monday, with telecommunications provider Telstra Corporation Ltd rising 0.9 percent and blood products maker CSL Ltd (Other OTC: CMXHF - news) climbing 1.5 percent.

The market was also helped by reduced concern over possible U.S.-led military action against Syria after the matter was deferred to a vote in Congress due next week.

However, gains were capped ahead of a Reserve Bank of Australia policy meeting on Tuesday and a federal election on Saturday.

"A break above the highs set back in May of 5,250 points would be a positive reflection of improving sentiment around the Chinese economy along with greater political certainty domestically, if the Coalition wins a majority government," Tim Radford, a global analyst at Rivkin Securities, said in a note.

Billabong International Ltd soared 15.3 percent to A$0.49 after a New York-based hedge fund with a $10 million stake called for the removal of directors from the company.

AMP Ltd lost 1.5 percent after the Australian insurance and wealth manager said it plans to set up a funds management company in China, but is still waiting for the nod from the China Securities Regulatory Commission.

Discovery Metals Ltd (Other OTC: DVYLF - news) jumped 3.2 percent after the copper and silver production company said it has received a re-financing proposal, which it is currently evaluating.

New Zealand's benchmark NZX 50 index rose 0.7 percent or 34 points to 4,575. (Reporting by Thuy Ong; Editing by Chris Gallagher)