China, HK shares rally on tech rebound; activity data in focus

China and Hong Kong stocks experienced a surge on Monday, with technology shares driving the rally after strong earnings from chipmakers. The Shanghai Composite index rose 0.8% to 3,960.19 points by midday, while China’s blue-chip CSI 300 index also increased by 0.8%. The ChiNext Composite index, which focuses on the tech sector, climbed by 1.3%, and Shanghai’s tech-focused STAR 50 index rose by 3%.

The CSI Semiconductor Index gained 4%, and the AI Index added 1.5%. Notably, memory chip maker CXMT surged 9%, and Shenzhen China Micro Semiconductor reached a one-month high after reporting a nearly 100% increase in profit for the first half of the year.

However, the CSI Liquor Index declined by 3.3% as Kweichow Moutai, a key player in the sector, dropped 4.2% following a profit decline. The consumer staples sector weakened by 2.8%. Further data releases later in the day are expected to shed light on the health of China’s second-largest economy, following a record contraction in bank loans last week, indicating faltering credit demand.

China’s industrial output was projected to grow 4.8% in July from the previous year, slowing from 5.3%, while retail sales were forecast to expand by 1.5%, better than the previously anticipated 1.0%.

Analysts at Nanhua Futures noted that the market's focus may shift to actual earnings performance, potentially leading to range-bound consolidation and sectoral rotation. In Hong Kong, the benchmark Hang Seng Index rose 1.6% to 25,521.99, and the Hang Seng Tech Index gained 2%. Meanwhile, shares in the region remained relatively stagnant as investors remained cautious about oil prices, which edged higher on Monday due to stalled US-Iran peace talks.

Iran had called for a US defeat on Saturday, while President Donald Trump labeled Tehran as "very evil" and warned Americans to prepare for ongoing high fuel prices resulting from the ongoing conflict.