China stocks were mixed on Wednesday morning, with bank shares powering the “Nifty 50" blue-chips to a 23-month high, as investors sought firms with solid fundamentals amid a continued correction in small-caps.

The CSI300 index rose 0.1 per cent to 3,674.84 points at the end of the morning session, while the Shanghai Composite Index lost 0.2 per cent to 3,196.56 points.

An index tracking the 50 most representative blue-chips in Shanghai, dubbed the “Nifty 50", gained 1 per cent to its highest since August 2015, with heavyweight banking shares far outperforming the broader market.

“The bull run in bank stocks is mainly due to improved profitability in those lenders amid a weak recovery in the economy,” said Sun Lijin, an analyst with Pacific Securities.

The lenders were also chased for their valuations and solid fundamentals, Sun said, adding he expected them to continue to outperform.

Small-caps extended losses into a third session, with the tech-heavy start-up board ChiNext losing 0.8 per cent to a one-month low.

Analysts said the sluggishness was due in part to concerns about mid-year earnings and expectations of more equities coming onto Chinese markets.

Sector performance was mixed. Banking and real estate shares led the gains while healthcare plays fell.

China Merchants Bank , a leading retail bank, rose 3.6 per cent to a more than nine-year high. The stock has gained nearly 42 percent this year.

Hong Kong stocks extended gains into the third day, helped by strong advances in banking shares.

The Hang Seng index added 0.8 per cent to 26,089.42 points, its highest in two years. The Hong Kong China Enterprises Index climbed 1.5 per cent to 10,575.66 points.

Shares of Industrial and Commercial Bank of China (ICBC) rose 3.4 per cent. Sunac China's shares touched a record high, on news of the developer's plan for a $9.3 billion deal to buy Dalian Wanda's tourism projects, but then ended the morning flat.

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