China stocks recouped earlier losses to climb by midday Thursday as consumer and banking firms rose, after a private survey showed the country's factory growth rose to a 6-month high in February.

Growth in China's manufacturing sector unexpectedly picked up to a six-month high in February as factories rushed to replenish inventories to meet rising new orders, a private survey showed on Thursday.

The heavy southbound selling via the stock connect linking the mainland and Hong Kong in the past two days, was “worth monitoring but not a major issue at this stage,” Bank of America Merrill Lynch wrote in a note.

Mainland Chinese sold a net 1.2 billion yuan ($189.30 million) of Hong Kong shares via the Shanghai-Hong Kong Stock Connect, after pulling out a record 2.9 billion yuan on Tuesday.

At 04:03 GMT, the Shanghai Composite index was up 19.67 points or 0.6 per cent at 3,279.08. China’s blue-chip CSI300 index was up 0.9 per cent, with its financial sector sub-index rising 0.88 per cent, the consumer staples sector up 1.96 per cent, the real estate index up 0.1 per cent and healthcare sub-index up 1.09 per cent.

Chinese H-shares listed in Hong Kong rose 0.23 per cent at 12,410.75, while the Hang Seng Index was up 0.23 per cent at 30,917.16. The smaller Shenzhen index was up 0.85 per cent and the start-up board ChiNext Composite index was higher by 1.03 per cent.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.30 per cent, while Japan's Nikkei index was down 1.41 per cent. The yuan was quoted at 6.339 per US dollar, 0.24 per cent weaker than the previous close of 6.324.

The largest percentage gainers in the main Shanghai Composite index were Anhui Tongfeng Electronics Co Ltd up 10.02 per cent, followed by Yonyou Network Technology Co Ltd gaining 10.01 per cent, and Henan Ancai Hi-tech Co L td up 9.99 per cent.

The largest percentage decliners in the Shanghai index were 360 Security Technology Inc down 8.75 per cent, followed by Aluminum Corp of China Ltd losing 7.29 per cent and Qingdao Tianhua Institute of Chemistry Engineering Co Ltd down by 3.98 per cent.

So far this year, the Shanghai stock index is down -0.85 per cent, while China's H-share index is up 3.3 per cent. Shanghai stocks have gained 0.6 per cent this month.

The top gainers among H-shares were Zhuzhou CRRC Times Electric Co Ltd up 1.65 per cent, followed by PICC Property and Casualty Co Ltd gaining 1.42 per cent and Agricultural Bank of China Ltd up by 1.15 per cent.

The three biggest H-shares percentage decliners were Guangzhou Automobile Group Co Ltd which has fallen 1.61 per cent, China Petroleum & Chemical Corp which has lost 1.6 per cent, and PetroChina Co Ltd down by 1.1 per cent.

About 8.45 billion shares have traded so far on the Shanghai exchange, roughly 40.8 percent of the market's 30-day moving average of 20.71 billion shares a day. The volume traded was 15.10 billion as of the last full trading day.

As of 04:03 GMT, China's A-shares were trading at a premium of 27.65 per cent over the Hong Kong-listed H-shares. The Shanghai stock index is below its 50-day and 200-day moving average.

The price-to-earnings ratio of the Shanghai index was 14.89 as of the last full trading day while the dividend yield was 2 per cent. So far this week, the market capitalisation of the Shanghai stock index has risen by 0.09 per cent to 29.19 trillion yuan.

In Hong Kong, the sub-index of the Hang Seng index tracking energy shares dipped 0.9 per cent while the IT sector rose 2 per cent. The top gainer on Hang Seng was Sino Land Co Ltd up 3.18 percent, while the biggest loser was WH Group Ltd which was down 2.47 per cent.

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