* HSI +0.9 pct, H-shares +1.8 pct, CSI300 +1.5 pct
* BYD down 8 pct in Hong Kong on profit-taking
* Investors lukewarm on China Merchants Bank's issuance
* Stocks seen benefiting from Shanghai FTZ draw funds
By Pete Sweeney
SHANGHAI, Aug 23 (Reuters) - China shares were buoyant Monday morning, with all major indexes in Hong Kong and the mainland rising about percent or more as investors bet on banks, infrastructure and the planned Shanghai Free Trade Zone.
"Markets are pretty optimistic today," said a trader at a Shanghai brokerage, saying that mainland companies expected to benefit from construction of the recently-approved free trade zone were seeing inflows from investment funds, as were banks.
In the morning, the state statistics bureau said China's economy is showing clear signs of stabilisation, helped by policy support and some improvement in global demand, and is on track to meet the government's 2013 growth target of 7.5 percent.
China stocks outperformed other Asian markets on Monday as they extended gains after disappointing U.S. new home sales figures eased fears that the Fed might cut qualitative easing prematurely.
At midday, the Hang Seng Index was up 0.9 percent at 22,069.29 points. The China Enterprises Index of the top Chinese listings in Hong Kong rose 1.8 percent.
The CSI300, which tracks the largest listed companies in China, was up 1.5 percent, while the Shanghai Composite Index was up 1.4 percent at 2,086.5 points.
Earnings had a positive impact on some index heavyweights, including shares in China Construction Bank Corp, the country's No. 2 lender, which rose 0.9 percent after second-quarter net profit slightly beat expectations.
Asia's largest refiner Sinopec Corp moved up 1.6 percent after the company posted a 22 percent rise in second-quarter net profit, helped by better refining margins after China introduced measures to let domestic fuel prices track the international market more closely.
Sinopharm Group Co Ltd, China's largest pharmaceutical products distributor, rose 4 percent after the company said its first half net profit rose to 1.15 billion yuan ($187.9 million) from 958.9 million yuan a year ago.
The Shanghai trader noted that two companies expected to benefit from the development of the Shanghai FTZ were outperforming on Monday. Shanghai International Port Group Co. Ltd. and Shanghai International Airport Co. Ltd. both rose more than 9 percent, close to the intraday limit.
HONG KONG-SHANGHAI DISCONNECT
There were a few notable losses. Shares in Warren Buffett-backed BYD Co Ltd plunged more 8 percent in Hong Kong and 3 percent in Shenzhen even though the company said first half net profit rose 26 fold to 427 million yuan.
Some analysts said BYD shares ad become quite expensive and attributed the decline to profit-taking given uncertain prospects.
Shares in China Merchants Bank , China's sixth-largest lender, were mixed as the company launched its online road show sell a maximum 35 billion yuan ($5.7 billion) rights issue on Monday after a two-year delay caused by the weak domestic stock market.
The bulk of the proceeds will supplement the bank's capital. The bank will issue 1.74-for-10 yuan-denominated A-shares listed in Shanghai, with the rest via Hong Kong-listed H-shares, the company has announced.
Shares in China Merchants Bank were down 0.6 percent in Shanghai but up 1 percent in Hong Kong.
Many retail investors in the mainland remain resistant to of new listings or share reissuances given the lacklustre historical performance of Chinese equities relative to other asset classes and China's economic growth. Initial public offerings have been frozen since late 2012 and regulators have yet to clarify when they will formally resume.