* HK benchmark index sets high for year above 21,700 pts
* Cathay Pacific leads gains after HAECO stake sale
* Metals, energy counters key drivers for China market (Updates to midday)
By Nerilyn Tenorio and Claire Zhang
HONG KONG, Sept 17 (Reuters) - Hong Kong and mainland Chinese shares extended early gains and tracked firmer markets overseas, fuelled by ample liquidity and optimism for more positive economic data.
Sentiment in Shanghai also stayed positive ahead of the week-long National Day holiday from Oct 1. Hong Kong's benchmark index set a new high for the year above the 21,700-point level after rising 1.82 percent, while Shanghai's key index was expected to continue to flirt with its key resistance of 3,000 points over the next couple of days.
"Today, the Hong Kong market set a new high for the year after yesterday's breakthrough," said Linus Yip, strategist at First Shanghai Securities in Hong Kong. "There are two major reasons for this: liquidity is still high and expectations for positive economic indicators are up. Don't ask me if this is sustainable, no one knows."
Earnings revisions by companies in Asia as summer ends and autumn begins would be worth watching as an investment tool over the next two quarters, Nomura Securities analysts said.
"Alongside low interest bearing costs, expanding margins and rising order backlogs, the best jump in earnings revisions tends to be over the first two quarters as the global economic cycle turns," the brokerage said in a note on Thursday.
The benchmark Hang Seng Index rose 389.70 points to end the morning session at 21,792.62.
The China Enterprises Index, which represents top locally listed mainland Chinese stocks, was up 1.6 percent at 12,728.97.
Cash-strapped Cathay Pacific Airways rallied 5.8 percent to HK$13.08 after Hong Kong's flagship carrier said it was selling shares in aircraft maintenance unit HAECO and six Boeing aircraft currently on order to boost its capital.
"It's all about protecting our balance sheet so that we can get through this difficult time," Cathay Pacific Chief Executive Tony Tyler told a news conference late Wednesday. The stock extended its advance after a brief mid-session fall when the market considered the deal's implications.
"We are positive on the move but it also proves that the airline needs cash to fight the recession," said Mirae Asset analyst Jay Ryu.
The airline, Asia's No.4 carrier, is expected to post a one-time gain of HK$1.27 billion from the deal to help finance its capital spending requirements for new aircraft, which are estimated at HK$4 billion this year and HK$7 billion in 2010.
Steel-to-property conglomerate CITIC Pacific Ltd gained almost 3 percent on reports it aimed to list in China, joining other top Hong Kong-listed Chinese companies that are looking to list in their home market.
Sun Hung Kai Properties advanced 4.3 percent to HK$117.80 as analysts focused on the developer's 2010 prospects, assuming underlying residential, retail and office rental growth.
The stock continued to gain despite Macquarie Securities' warning it would be challenging for the company "to maintain and grow one of the largest underlying profit levels, at over HK$12 billion for the full year to June 2009, of any property company in the world."
SHANGHAI
China's key stock index rose 1.48 percent on Thursday, with metal and energy shares strong, in step with firmer global markets and underpinned by news of more brokerages lining up to launch initial public offerings (IPO).
The Shanghai Composite Index ended the morning at 3,044.17 points, after fluctuating around its key psychological level of 3,000 points and falling 1.1 percent on Wednesday.
Gaining Shanghai A shares outnumbered losers by 768 to 107, while turnover edged down to 90 billion yuan ($13 billion) from a modest 91 billion yuan on Wednesday morning.
Analysts said the index may continue to flirt with its key resistance of 3,000 points in the next couple of days, while sentiment would largely stay positive as investors expect the authorities to keep policy stable ahead of the country's week-long National Day holiday starting on Oct. 1.
"The index is expected to fluctuate at around 3,000 points in the next couple of days. Policy will be kept stable before the October holidays so the index could advance mildly," said Qian Xiangjing, chief analyst from CITIC-Kington Securities in Hanzhou.
Qian added corporate fund-raisings may drain money from the stock market and weigh on sentiment after the celebrations to mark the 60th anniversary of the founding of the People's Republic of China.
The official Shanghai Securities News reported that Industrial Securities would apply for an IPO at the end of this month, among several other brokerages waiting to launch IPOs.
In addition, there are signs to suggest some investors are turning cautious. A survey showed on Wednesday that investors cut allocations to equities and added cash and bonds in September, while they turned underweight on China for the first time in 13 months.
Metal stocks were firm, with Jiangxi Copper gaining 0.83 percent to 41.35 yuan. Industry sources said that China may boost tax rebates on outflows of semi-finished and finished goods, including those made from nonferrous metals, during the next few months.
Aluminum Corp of China (Chalco) gained 1.48 percent to 15.04 yuan after its parent Chinalco said late on Wednesday it would start construction of a $2.2 billion Peruvian copper mine Toromocho in early 2010 and begin production in the last quarter of 2012.
Oil refiners were firmer with Sinopec climbing 1.83 percent to 12.24 yuan as U.S. crude futures steadied above $72 per barrel on Thursday.
Coal shares were strong with China Shenhua Energy advancing 2.83 percent to 34.56 yuan after saying it produced 17.9 million tonnes of coal in August, up 13.3 percent from a year earlier, with sales up 8.3 percent to 20.9 million tonnes. (1$ = HK$7.75, 6.83 yuan) (Editing by Chris Lewis)