* HSI -0.1 pct, HSCE +0.5 pct, CSI300 +0.5 pct, SSEC +0.7 pct
* Mainland shares up for seventh day, consolidation expected
* Energy shares extend losses on lower oil price
SHANGHAI, Nov 28 (Reuters) - China stocks rallied for the seventh straight session on Friday and looked headed for their biggest monthly gain in nearly two years as a surprise interest rate cut and hopes of further policy easing re-ignited demand for mainland shares.
Investors had snapped up shares in the lead-up to the launch of the Shanghai-Hong Kong stock connect scheme earlier this month but they moved to book profits following the debut amid a weaker-than-expected response for northbound investment.
The rate cut by the central bank late last week to support the cooling economy and expectations of further monetary easing has added fresh optimism into the market, lifting key indexes to multi-year highs.
However, technical indicators point to the main indexes as being overbought, which could leave them vulnerable to profit-taking in the near-term.
“The index has reached a very high level in a short period of time,” said Liu Jingde, analyst at Cinda Securities in Beijing.
The CSI300 index rose 0.5 percent to 2,768.68 points at the end of the morning session, while the Shanghai Composite Index gained 0.7 percent, to 2,649.57 points. The indices were at their highest level since February 2013 and August 2011, respectively.
For the month, the CS1300 was up 10.4 percent while the SSEC gained 9.5 percent, the biggest monthly gain since January 2013.
In Hong Kong, the Hang Seng index dropped 0.1 percent to 23,978.58 points. The Hong Kong China Enterprises Index gained 0.5 percent, to 11,070.90.
For the month, the indexes were flat and down 2.9 percent, respectively.
Trading in Shanghai was heavy, with turnover already reaching more than half of previous day’s total which was a record high.
The transportation sector rallied across the board as oil prices continued to skid, with shares of Air China Ltd rising by the 10 percent daily limit.
Bank shares also gained after reports that the central bank had could soon announce the draft rules for the introduction of an insurance system for bank deposits.
Energy shares retreated in Hong Kong and China markets as crude prices plumbed four-year lows after the Organization of the Petroleum Exporting Countries (OPEC) said it would not cut crude production despite global oversupply.
The index measuring price differences between dual-listed companies in Shanghai and Hong Kong was at 104.94, the highest level since June 2013.
A value above 100 indicates Shanghai shares are pricing at a premium to shares in the same company trading in Hong Kong, and vice versa. (Reporting by Shanghai newsroom and Kazunori Takada; Editing by Kim Coghill)