China stocks rose to a fresh 10-month high on Monday, led by blue-chips, but gains were limited as some investors remained sceptical that the uptrend could extend further.
The blue-chip CSI300 index rose 0.7 percent, to 3,441.11, while the Shanghai Composite Index gained 0.8 percent to 3,218.15.
The strength in the main indexes, both of which hit their highest levels since early January, contrasts with the lacklustre performance recently in China’s growth board ChiNext , which was roughly flat.
The divergence mirrors the recent trend on Wall Street, where banking and infrastructure stocks have outperformed high-tech plays since Republican Donald Trump’s election win, but investors say China has its own domestic dynamics at play.
Modestly-priced cyclical shares have increasingly drawn liquidity flowing out of China’s property and bond markets.
“There’s a lot of money seeking investment opportunities as property purchases have been restricted, while the bond market looks creaky,” said Wu Kan, Shanghai-based head of equity trading at investment firm Shanshan Finance.
“Valuation in cyclical stocks is relatively low compared with growth shares, and the sector could be bottoming out, making them attractive targets for investors.”
That view is supported by recent bullishness in commodity prices, and data showing China’s economy is stabilising, Wu said, adding that growth “could be on the path to recovery.”
While there is some trepidation around the recent weakness in the yuan, some are looking at the bright side of a weaker currency aiding Chinese exports.
Most sectors advanced, led by infrastructure and financials, while defensive consumer stocks lost ground.