China A shares finished the morning session sharply higher as banks got a boost from strong earnings forecasts by China CITIC Bank and China Merchants Bank, dealers said.

The benchmark Shanghai Composite Index ended the morning session up 106.39 points or 3.98 percent at 2,776.28.

"The market was supported by gains in heavyweight banks and property developers," said Gu Jindong, an analyst with Tebon Securities. "The sound profit growth eased some worries over the banks' earnings and property stocks rebounded on bargain-hunting, although the entire industry's prospects remains uncertain."

"With the Olympic Games a month away, Olympics-related stocks drew attention again, particularly hotels and tourism plays," he said.

Analysts noted that sentiment was also bolstered by a rumor that the government will set up a 17-billion-yuan ($2.48 billion) stabilization fund for the stock market.

"It is possible that the expected fund will enter the stock market soon as the market is quite weak," Gu said.

China CITIC Bank rose 5.16 percent to 5.50 yuan after projecting a more than 160 percent year-on-year rise in first half net profit.

China Merchants Bank was up 6.15 percent at 22.60 yuan. The bank estimated that net profit in the first half will climb more than 100 percent year-on-year.

Airlines, tourism and consumer stocks also gained ground coming up to the one-month mark to the Olympics, analysts said.

Coal producers recovered as rumors about new resource tax scheme were not confirmed at the weekend with the government not announcing any measures.