China and Hong Kong stocks rose again on Friday, with the Shanghai market on track for its biggest weekly gain in two months after data showing new Chinese loans surged in September.

Both the CSI300 index and the Shanghai Composite Index finished morning trade up 0.3 per cent, reaching 3,498.67 points and 3,348.58 points, respectively.

Although the indexes gave up some early-morning gains, the Shanghai benchmark was still up more than 5 per cent for the week. The CSI300 was up 4.7 per cent for the week.

Gerry Alfonso, Shanghai-based director at Shenwan Hongyuan Securities, said that given recent volatility "it is not surprising there is some profit-taking but it does not necessarily mean that there is a deterioration in investors' sentiment''.

Lending by Chinese banks surged by far more than expected in September, with 1.05 trillion yuan ($165.47 billion) in new yuan loans extended following moves to stop the economy slowing by cutting interest rates and prioritising infrastructure projects.

Hopes for more government stimulus have fuelled the market's recent rebound, and some analysts look for more steps even after the robust lending data.

"Despite a rebound in new loans, we think the weak growth and PPI deflation still point to the need for an interest rate cut," Barclays said in a report on Friday.

Underscoring improving risk appetite, China's outstanding margin loans expanded over the past six sessions, their longest rising streak in two months.

But some investors think the market rebound isn't sustainable.

"Economic fundamentals don't support a rising stock market," said Yu Weixin, a retail investor. "The indexes will come back down soon."

China's economic growth is expected to slow to 6.5 per cent in 2016 from an expected 6.8 per cent in 2015, a Reuters poll showed.

On Friday, shares in most sectors advanced, with transportation stocks leading the charge.

But small-caps, which have led the recent market rebound, corrected. Start-up board ChiNext, the SME board and the CSI500 index tracking small firms all fell on Friday morning.

In Hong Kong, the Hang Seng index added 0.6 per cent to 23,019.38 points, while the Hong Kong China Enterprises Index gained 0.7 per cent to 10,631.03.

Chinese airline operators listed in Shanghai and Hong Kong, including Air China , China Eastern and China Southern Airlines rose, after they expected sharp rises in nine-month profit, thanks to lower fuel costs and increasing domestic travel.

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