* Shares up 0.2 pct on Tuesday
* Industrials, materials sectors lead gains
* Financials and energy sectors lead losses
* 118 shares up, 71 down 11 unchanged (Adds analysis, quotes, stocks on the move)
By Swati Pandey and Gyles Beckford
SYDNEY/WELLINGTON, Aug 18 (Reuters) - Australian shares rose on Tuesday as sentiment was underpinned by news the country's biggest rail and freight operator Asciano AIO.AX had agreed a $6.5 billion takeover by Canada's Brookfield Infrastructure.
Asciano shares jumped 7.5 percent on the Brookfield deal, the fifth-largest buyout of an Australian firm by an overseas entity and the biggest by a Canadian firm, underscoring the huge international appetite for Australian infrastructure.
Broad market gains were capped, however, as investors were underwhelmed by corporate earnings, analysts said.
"The reporting season hasn't been all that great so far. There hasn't been a lot of earnings upgrade and there's been quite a few companies that have missed market expectations," said Danial Moradi, equity strategist at Lonsec.
The S&P/ASX 200 index .AXJO rose 0.2 percent, or 13.5 points to 5,381.2 by 0215 GMT, largely led by gains in industrials and materials sectors.
The index is on track for its worst monthly performance in nearly a year, largely hurt by the shock devaluation of yuan, capital raisings by the country's major banks and on continued weakness in metals and oil prices which is hurting the resource-driven economy.
Electronics retailer Dick Smith DSH.AX slumped over 15 percent after its weaker-than-expected full-year earnings report.
Shares in Australia's biggest insurer by premium income QBE QBE.AX rose more than 3 percent after it posted a 24 percent rise in first-half net profit and lifted interim dividend.
Investment manager Challenger CGF.AX hit a 4-month high after better-than-expected full year earnings.
Among major banks, Westpac WBC.AX and National Australia bank NAB.AX were up 1.3 percent and 0.6 percent respectively.
New Zealand stocks edged higher as buyers looked for some bargains after the market's recent sell-off, pushing the benchmark NZX50 share index up 0.1 percent to 5,734.61.
Contact Energy gained 0.6 percent to a two month-high as investors looked through its weak annual result and instead chased its attractive yield.
Among the larger moves were a 3.5 percent fall for tightly-held retailer Briscoe Group whose takeover offer for outdoor goods retailer Kathmandu is struggling.
Metro Performance Glass was up 8.3 percent after it told market regulators it had no news that would explain a fall of nearly 17 percent since the start of the month.
The market's top stock Fletcher Building was 0.6 percent higher ahead of Wednesday's annual result, which is expected to show a lift of about 5 percent in normalised profit. (Editing by Shri Navaratnam)