* SSEC +0.6 pct, CSI300 +0.5 pct, HSI +0.7 pct
* China July factory growth cools slightly - official PMI
* Material sector surges after mid-year earnings forecasts
SHANGHAI, July 31 (Reuters) - 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 percent, to 3,740.85 points at the end of the morning session. The Shanghai Composite Index gained 0.6 percent, 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 percent 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.
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 percent 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 percent, 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 percent, to 10,822.94.
An index of major material firms jumped 3.7 percent, 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 percent, after the country’s largest coal producer expected a big rise in first-half profits.
Index heavyweight Tencent rose 2 percent to a record high, which helped lift sentiment.
Reporting by Luoyan Liu and John Ruwitch; Editing by Lisa Twaronite and Richard Borsuk