* Hang Seng Index up 1 percent; gap resistance in sight
* Shanghai up 0.4 percent, pares some gains to profit-taking
* Turnover rises sharply in HK to HK$78 billion by midday
* China banks rally on loan growth, valuations
* Energy plays rise on oil price, broker upgrades (Updates to midday)
By Vikram S.Subhedar
HONG KONG/SHANGHAI, Oct 14 (Reuters) - Hong Kong- and Shanghai-listed shares rose on Thursday morning, helped by bank and resources issues, with the HSI at a 28-month high as emerging markets continue to attract strong inflows on the back of a weak dollar.
Hong Kong's benchmark Hang Seng Index was up 1.05 percent at 23,704.7 on particularly heavy volume by the midday trading break. Turnover rose to HK$78 billion, 30 percent higher than the average full-day volume seen in 2009.
Chinese banks provided the biggest boost to the market, with renewed interest in the sector as investors chase laggards and relatively low valuations tempt those seeking value in a market that has sharp made upmoves in the past six weeks.
Citigroup raised its 2011-end target for the Hang Seng Index to 26,500 to reflect improved earnings expectations and the dollar remaining weak with few apparent signs of an interest rate rise in the U.S.
Industrial & Commercial Bank of China Ltd rose 3 percent and was the biggest boost to the benchmark index. ICBC currently trades at 9.8 times forward 12-month earnings, a 24 percent discount to their 10-year median multiple.
China Construction Bank Corp rose 1.7 percent.
Energy shares also gained sharply as oil prices neared a five-month high and on expectations crude will catch up with the strong gains seen in other commodities.
PetroChina Co Ltd rose 2.2 percent. China Petroleum & Chemical Corp (Sinopec) rose 1.2 percent after analysts at Bank of America Merrill Lynch added the stock to its Asia Pacific Focus 1 portfolio, a list of its highest conviction buy-rated stocks.
Thomas Wong, an analyst at BofA Merrill Lynch, said in a note that the company's margins would see a rise in 2011 because of better pricing in its petrochemical business as capacity addition in the industry slows down sharply.
Investor conviction appeared especially strong with trading activity sharply higher on the day with turnover rising HK$78 billion with a whole session left to go.
Money has flowed into emerging markets, including Asia, over the past few weeks as a persistently weak dollar lifts appetites for assets such as commodities, precious metals and stocks.
Societe Generale estimated, based on EPFR data as of October 6, that $6.1 billion dollars were funneled into emerging market stock funds compared with a $6.5 billion outflow from U.S. stocks.
SHANGHAI RISES, PARES GAINS
China's key stock index pared some of its earlier gains to end the morning session up 0.4 percent, pulling back after breaching a key technical level.
The Shanghai Composite Index was at 2,873.8, extending a five-day rally, after closing up 0.7 percent on Wednesday. The index has gained 8 percent since opening after the week-long national holiday last Friday.
"There has been a change in investor attitudes after the holidays. The falling dollar and expectations of more liquidity in the markets is the reason for the continuous gains," said Zhang Qi, analyst at Haitong Securities in Shanghai. "Additionally, increasing inflows have encouraged investors to invest new money in the market."
Volume rose to 156 billion yuan ($23.41 billion) from 128 billion yuan on Wednesday.
Analysts said the index could come under pressure from short-term profit-taking after jumping above the annual 250-day moving average now at 2,888 points.
Banks were among the biggest gainers. Huaxia Bank Co Ltd forecast its net profit for the first three quarters jumped more than 50 percent.
China's central bank released data on Wednesday showing strong lending by Chinese banks in September, and foreign trade figures that showed China's resilient import growth.
Analysts expect the 16 banks listed on the Shanghai and Shenzhen stock exchanges to post an average 30 percent jump in earnings for the first nine months.
China Everbright Bank Co Ltd jumped by its 10 percent limit. China Minsheng Banking Corp Ltd rose 1.7 percent. Industrial and Commercial Bank of China Ltd, the world's most valuable lender, gained 2.1 percent. ($1=6.690 Yuan) (Editing by Chris Lewis