China stocks extended gains on Monday morning, bolstered by strength in heavyweight blue-chips in the material sector that forecast robust mid-year earnings.

The CSI300 index rose 0.5 per cent, to 3,740.85 points at the end of the morning session. The Shanghai Composite Index gained 0.6 per cent, to 3,272.24 points, its highest in three-and-half months.

The market had a muted reaction to official figures released on Monday that showed China's July factory growth cooled slightly as export orders eased.

Sector performance was mixed. Consumer firms and materials led the advance, with the materials index surging 2.3 per cent to a nearly three-year high after sector leaders forecast robust mid-year profits. Banking and real estate stocks lagged.

“We continue to recommend consumer, financial and cyclical firms with solid performance and low valuations,” Haitong Securities wrote in a report.

July PMI

The official Purchasing Managers' Index (PMI) stood at 51.4 in July, down from the previous month's 51.7, but still well above the 50-point mark that separates growth from contraction on a monthly basis.

China posted stronger-than-expected economic growth of 6.9 per cent in the first half, fuelled by a year-long construction boom, resurgent exports and robust retail sales.

Hong Kong stocks rose in the morning, also supported by strong gains in resource firms. The Hang Seng index added 0.7 per cent, to 27,180.02 points after rising as high as 27,199.47, its highest since June 2015. The Hong Kong China Enterprises Index gained 0.6 per cent, to 10,822.94.

An index of major material firms jumped 3.7 per cent, tracking their mainland peers, as those firms are expected to benefit from China's continued supply-side reforms and a weaker dollar.

China Shenhua gained 3.7 per cent, after the country's largest coal producer expected a big rise in first-half profits. Index heavyweight Tencent rose 2 per cent to a record high, which helped lift sentiment

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