SHANGHAI: China and Hong Kong stocks closed higher on Wednesday, as investors snapped up rare earth and metal shares amid simmering geopolitical tensions.
China’s blue-chip CSI300 Index ended 0.6 percent higher while the Shanghai Composite Index gained 0.7 percent. Hong Kong’s benchmark Hang Seng Index was up 0.7 percent. The CSI Rare Earth Index jumped 6.1 percent, leading gains onshore.
The rally came after China prohibited the export of dual-use items to 20 Japanese entities that it says supply Japan’s military. The rules effectively cut companies off from the seven rare earths and associated materials currently on China’s dual-use control list.
Meanwhile, Reuters reported that the Trump administration plans to use a Pentagon-created artificial intelligence programme to help set reference prices for critical minerals. Non-ferrous metal shares climbed 3.8 percent, while materials shares outperformed offshore, up 2.7 percent.
Tech majors fell in Hong Kong, down 0.2 percent.
“Despite the year-to-date weakness in internet stocks causing significant losses, investors believe concerns over the AI-fear trade are exaggerated for the China market,” UBS analysts said in a note to clients.
“Consequently, investors are reallocating funds to less crowded sectors like oil services, coal, lithium, and insurance names.”
Hong Kong-listed Alibaba and Tencent fell 10 percent and 12 percent, respectively, over the past month, while onshore artificial intelligence shares lost nearly 4 percent.
Onshore consumer staple and real estate shares rose 0.6 percent and 2.2 percent, respectively.
Goldman Sachs analysts said data from the Lunar New Year period pointed to a solid demand backdrop, with consumers still willing to spend during the festival, broadly matching slightly higher market expectations.
They, however, cautioned that a typical post-holiday slowdown and a longer break that might have flattered the figures made the subsequent trend crucial to monitor.