HONG KONG: China stocks extended their five-week rally on Monday, with the rare earth sector climbing to a three-year high ahead of crucial trade talks with the United States, while insurers gained following an industry policy change that boosted sentiment.
The Shanghai Composite index reversed earlier losses to close up 0.1% at 3,597.94, hovering near the highest level in 3-1/2 years. The blue-chip CSI300 index added 0.2%.
The rare earth sector climbed 1.5% to a fresh three-year high, lifting onshore markets higher, as top US and Chinese economic officials prepare to resume talks in Stockholm later in the day.
The discussions will likely extend their trade truce by three months, preventing the implementation of higher tariffs, according to analysts.
The insurance sector added nearly 3% to rank among the best performers onshore, after the industry body cut the reference rate for life insurance products.
“Investor concerns on US-China trade frictions appear to have eased,” Kinger Lau, chief China equity strategist at Goldman Sachs, said in a note. “A potential US-China trade deal could be a market-clearing event for Chinese stocks.”
The bank raised its 12-month MSCI China index target to 90 from 85, representing an 11% potential rise, due to improved US-China relations, reduced regulatory risks, stronger yuan and supportive liquidity conditions.
Weighing on the markets on Monday, commodity-related companies pared last week’s rally which was spurred by Beijing’s campaign to tackle overcapacity. Indexes tracking steel and coal sectors lost 1.4% and 2.9%, respectively. Hong Kong’s benchmark Hang Seng Index rose 0.7% to 25,562.13 and continued to hover near the highest since November 2021.
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