* Copper rises on expected China demand
* Banks recover after heavy sell-off
* BHP Billiton (L:BLT) seen as bargain at multi-year lows
SYDNEY/WELLINGTON, Nov 27 (Reuters) - Australian shares edged higher on Friday as a base metals rally pushed up resources stocks, while investors bought bank stocks made cheap by months of selling as a result of regulatory changes.
Overnight, copper led base metals prices higher amid expectations that China may announce more infrastructure projects, providing a boost to Australian mining stocks.
Investors meanwhile bought bank stocks, which have been hammered in 2015 following capital rules requiring them to undertake some A$20 billion ($14 billion) in capital raisings and to sell nonessential business units. That has improved the stocks' dividend yields.
By 0131 GMT, the S&P/ASX 200 index .AXJO was up 12.4 points or 0.2 percent at 5,223.1. The benchmark has risen in seven of the last 10 sessions.
"The key thing for the index is investor perception of the banks," said Angus Nicholson, an analyst at IG Markets.
"It doesn't look like the dark days are over for them yet, but there does look like a bit more buying."
National Australia Bank NAB.AX was up 0.6 percent, while Westpac Banking Corp WBC.AX rose 0.4 percent, Commonwealth Bank of Australia CBA.AX added 0.3 percent and Australia and New Zealand Banking Group ANZ.AX was flat.
Mining giant BHP Billiton BHP.AX was 1.4 percent higher. The stock is trading at multi-year lows as it manages the fall-out from a dam bursting at a Brazilian mine it part-owns, a low iron ore price and speculation it may stop growing dividends.
Its rival Rio Tinto (L:RIO) RIO.AX rose 0.5 percent and BHP spin-off South32 S32.AX jumped nearly 3 percent.
Energy stocks rose, even as the oil price slipped. Woodside Petroleum WPL.AX gained 2.6 percent while Santos STO.AX firmed 1.5 percent.
Law firm Slater and Gordon slumped 25 percent, the biggest decliner on the benchmark index, following an even bigger drop the previous day, as proposed changes to U.K. law will make it harder to mount compensation claims.
New Zealand's benchmark NZX 50 index .NZ50 rose 0.1 percent or 4 points to 6,091.77. Trading was light given tepid offshore trading due to the U.S. Thanksgiving holiday.
The biggest gainers were Tower TWR.NZ , which added 2.1 percent and Genesis Energy GNE.NZ , also up 2.1 percent. Fisher & Paykel Healthcare FPH.NZ shed 0.5 percent after it reported a record half year net profit, up 27 percent and reiterated its full year guidance.
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($1 = 1.3847 Australian dollars)