China stocks closed at their highest level since 2015 on Monday, extending a months-long rally driven by easing trade tensions and abundant liquidity, while pushing market capitalization to a record peak.
The Shanghai Composite Index climbed 0.85 percent to 3,728, marking the highest closing level since August 2015.
The Shanghai benchmark has now advanced some 22 percent since the low struck in early April, buoyed by the extension of the China-US trade truce, Beijing's crackdown on excessive competition, and a rotation of funds from bonds into equities, which brokers say has flooded the market with liquidity.
The total market capitalization of over 5,400 China-listed companies has risen above 100 trillion yuan (HK$109 trillion) for the first time, reflecting both price appreciation and a surge in listings.
The Shenzhen Stock Exchange Component Index also gained 1.73 percent to 11,835 points, the highest level at the close in more than two years.
The Chinese stock market turnover hit 2.81 trillion yuan on the day, a new high since October and the third highest on record.
Winnie Wu, Bank of America's chief China equity analyst, said optimism over geopolitics and Beijing's policy directions helped drive down the equity risk premium and sustain risk-on sentiment despite the still-weak fundamentals.
"There are renewed hopes on domestic retail flows," she wrote in a note to clients.
Analysts at UBS expect the liquidity-driven bull market rally to continue at least until September, saying: "Most investors see limited downside risk in the stock market for now."
Long-only funds showed renewed interest in Hong Kong and China stocks, while hedge funds also bought Chinese equities on a net basis at the fastest pace in seven weeks, Goldman Sachs said in a note.
Stocks in Hong Kong, however, failed to follow suit. The benchmark Hang Seng Index dropped 93 points, or 0.37 percent, to 25,176 points at the close, reversing a rise by the midday closing.
The Hang Seng Tech Index grew 0.65 percent to 5,579 points. The market turnover was HK$312.8 billion.
Reuters and staff reporter
