SHANGHAI, Oct 31 (Reuters) - Stocks in China were trading flat on Monday, while those in Hong Kong rose, as gains in technology shares offset a slump in property players at the end of a volatile month.

** With foreign investors dumping China assets amid concerns over Beijing's policy directions, there are signs mainland investors are bargain hunting, pointing to increasingly divergent outlooks.

** China's blue-chip CSI300 Index edged 0.2% lower by the lunch break, to 3535.93 points, while the Shanghai Composite Index was almost flat at 2914.95 points.

** Hong Kong's Hang Seng Index rose 0.9% to 14,995.01 points, and is on track to lose roughly 13% for the month.

** China's factory activity unexpectedly fell in October, weighed by softening global demand and strict domestic COVID-19 curbs, which hit production, travel and shipping in the world's second-largest economy, data showed on Monday.

** Gloomy economic outlook hit China's energy, financials and property stocks, but a jump in tech and defence stocks helped steady the benchmark index.

** Shanghai's STAR Market gained 2.4% as market making was launched on the Nasdaq-style, tech-focused board on Monday.

** China's defence stocks rose more than 2%, flirting with two-month highs as investors bet on a sector poised to benefit from Bejing's focus on national security amid rising geopolitical tensions.

** In Hong Kong, listed Chinese developers tumbled as much as 11% to a new low, as a slump in struggling developer Longfor Group further dented fragile confidence in the sector.

** But the Hang Seng Tech Index rebounded 3.5%.

** Reflecting the diverging views among investors, China's A-shares witnessed roughly $1.7 billion in outflows last week under the cross-border Connect scheme, but Hong Kong saw strong inflows worth $3.6 billion from mainland investors.

** The biggest Hong Kong-focused ETF also witnessed massive inflows in recent weeks.

** "While the Hang Seng can see further downside, this is a time when excessive pessimism doesn't help anyone and starts to disagree with our contrarian-self," wrote Hao Hong, chief economist at Grow Investment Group. (Reporting by Shanghai Newsroom)