SHANGHAI: China stocks rose on Monday, following a tumble in the week prior, as signs of state support lifted sentiment in the so-called traditional sectors, while richly valued tech shares and small-caps continued to slide.
The large-cap CSI300 Index gained 1.5 percent, while the Shanghai Composite Index advanced 0.9 percent.
Both indexes slumped more than 5 percent last week, part of a global selloff that saw renewed conflict in the Middle East hit sentiment and chip shares plunge.
Meanwhile, Chinese investors rushed to unwind leveraged bets, slashing outstanding margin loans by more than 160 billion yuan (USD23.65 billion) last week.
In Hong Kong, the Hang Seng Index climbed 2.4 percent.
China’s top securities regulator Wu Qing chaired a meeting with investors in Beijing on Monday, vowing to make “all efforts” to maintain market stability.
In another signal of Beijing’s intention to stem the recent market rout, two state-owned firms said over the weekend they had spent roughly 60 billion yuan (USD8.86 billion) recently buying stocks.
In addition, a slew of listed state firms, including Aluminum Corp of China, CRRC Corp and SDIC Power said their state parents plan to increase share holdings to help bolster investor confidence.
Sectors such as consumer, property and utility that have lagged far behind tech shares this year supported the rebound.
Investors took advantage of an early rebound to cut positions in tech shares amid growing concerns over their stretched valuations.
The tech-focused STAR Composite Index fell 2.3 percent to a near three-month low by the close. Smaller STAR-listed companies slumped more than 6 percent.
An index tracking chip-making material and equipment companies plunged 7 percent, recording a seven-day losing streak.
“Any extremely overcrowded sectors face huge volatility risks,” said Wang Zhuo, partner at Shanghai Zhuozhu Investment, referring to China’s AI and chip stocks.
When their uptrend loses steam, “money will definitely hunt for assets able to offer earnings certainty and stable cash flows.”
Institutional demand for chipmaker CXMT Corp’s USD8.6 billion IPO was less feverish than in China’s previous initial public offerings this year.
In Hong Kong, biotech, energy and consumer stocks led the gains.
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