HONG KONG: China stocks closed near 3-1/2-year high on Monday, led by rare earth and construction sectors, while Hong Kong stocks rose as internet heavyweights rallied following a government rebuke on price wars.
The Shanghai Composite index added 0.7% to 3,559.79, its highest closing since January 2022. China’s blue-chip CSI300 index also gained 0.7%. Leading the gains onshore, the CSI Construction & Engineering Index rallied 4.3% to a seven-month high after China began construction of a $170 billion hydropower dam in Tibet.
The project is macro relevant and could provide some demand support, likely easing concerns on growth and the labor market marginally, Citi analysts said in a note.
Also lifting markets, the rare earth sector advanced 3.2% following a Reuters report that Beijing has quietly issued its first 2025 rare earth mining and smelting quotas.
In Hong Kong, the benchmark Hang Seng Index grew 0.7% after briefly topping the 25,000 level for the first time since February 2022.
Platform companies Meituan, JD.com and Alibaba rose between 1.8% and 2.7% after Beijing summoned the three and asked them to cool a bruising price war, a move dubbed by investors as an “anti-involution” campaign.
Positive catalysts from anti-involution policies and strength in the tech sector have lifted sentiment, which together with a solid economic foundation have fuelled the market rally that’s surprising in its timing yet reasonable, Huatai Securities said.
Looking ahead, Chinese policymakers are expected to hold the July Politburo meeting in the coming days to discuss economic policies for the second half of this year.
Goldman Sachs analysts said they don’t expect broad-based, significant stimulus in the near term, but anticipate continued policy pledges to regulate disorderly price competition and contain the “involution”.
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