Shanghai, Hong Kong stocks close at two-month highs as COVID impact fades

Shanghai and Hong Kong stocks closed at near two-month highs on Monday, as Beijing and Shanghai steadily return to normal life from China's biggest COVID-19 outbreak in two years, with sentiment boosted by measures to revive the country's economy.

The blue-chip CSI300 index .CSI300 rose 1.9 percent to 4,166.09, the highest level in seven weeks, while the Shanghai Composite Index .SSEC gained 1.3 percent to 3,236.37, the highest since April 8.

The Hang Seng index .HSI rose 2.7 percent to 21,653.90, the highest since April 8, while the China Enterprises Index .HSCE gained 3.2 percent, to 7,499.97 points.

Beijing will further relax COVID-19 curbs by allowing indoor dining, while Shanghai has lifted most of the restrictions in recent days.

"Reopening in Shanghai was a positive catalyst in itself, but the immediate impact is more on sentiment than on fundamentals," said Morgan Stanley analysts in a note. "We continue to advise patience."

China's central bank will strengthen the implementation of its prudent monetary policy and bring forward steps to support the economy, vice governor Pan Gongsheng said.

US Commerce Secretary said on Sunday that President Joe Biden has asked his team to look at the option of lifting some tariffs on China to combat the current high inflation.

The Caixin services purchasing managers' index (PMI) rose to 41.4 in May from 36.2 in April, but is still below the 50-point mark that separates growth from contraction.

"We expect faster growth in the services sector in June as lockdowns have gradually eased," said Iris Pang, Chief Economist, China at ING in a note. "However, we remain concerned that there may be further lockdowns ahead."

The tech-focused STAR Market .STAR50 added 3.9 percent, extending gains from a 4.7 percent jump in the previous session, amid speculations that the market will lower its investor threshold.

New energy shares .CSI399808 soared 5.2 percent, with new energy vehicles .CSI399976 surging 5.6 percent and photovoltaic firms .CSI931151 up 4.6 percent.

Biden will declare a 24-month tariff exemption on Monday for solar panels from four Southeast Asian nations after an investigation froze imports and stalled projects in the United States, sources told Reuters.

However, the CSI 300 Real Estate Index .CSI000952 lost more than 2 percent.

Tech giants trading in Hong Kong .HSTECH rose 4.6 percent, with food-delivery giant Meituan 3690.HK up nearly 10 percent as its quarterly revenue surpassed analysts' estimates.

Sentiment was further lifted as the Wall Street Journal reported Chinese regulators are concluding yearlong probes into Didi Global DIDI.N, Full Truck Alliance YMM.N, and Kanzhun Ltd 8JNy.D, and preparing as early as this week to lift a ban on their adding new users.

Chinese electric vehicle (EV) makers Li Auto 2015.HK, Xpeng Inc 9868.HK and Nio Inc 9866.HK climbed between 5.8 percent and 12.4 percent.

China's EV startups reported stronger sales for May and forecast continued gains for June as supply chains and output begin to recover from the COVID-19 disruptions.