China and Hong Kong Stocks Rally on Tech and Rare Earth Boost

China and Hong Kong stocks surged to multi-month highs, driven by gains in the rare earth and tech sectors, ahead of U.S.-China talks at the ASEAN Summit. The Shanghai Composite and Hang Seng indices both saw significant jumps. Anticipated policy support fueled optimism, though volatility is expected.

On Friday, China and Hong Kong stocks soared to multi-month highs, influenced by sharp gains in the rare earth and tech sectors, just ahead of pivotal discussions between U.S. and China planned at the ASEAN Summit. At midday, China's Shanghai Composite Index ascended by 1.1% to 3,546.50 points, marking its highest level since October of the previous year. Similarly, the blue-chip CSI300 index mirrored this increase of 1.1%.

The rare earth sector spearheaded the rally with an almost 6% hike to its highest point since early 2023. Brokers' shares also experienced a nearly 4% surge. In Hong Kong, the prominent Hang Seng Index rose by 1.9% to 24,485.49, reaching a four-month peak, while the Hang Seng China Enterprises Index, encompassing Chinese H-shares listed in Hong Kong, expanded by 1.8%.

Notably, tech shares sharply elevated in Hong Kong as well, with the Hang Seng Tech Index growing by over 2%; meanwhile, Alibaba and Meituan each increased by more than 3%. U.S. Secretary of State Marco Rubio and Chinese Foreign Minister Wang Yi are poised for an in-person meeting in Kuala Lumpur, as announced by the State Department, signifying the first such encounter between them.

(With inputs from agencies.)