The Chinese stock market climbed on Monday, rebounding from its three-month lows, as investors expected greater policy support to offset impact from US tariffs and cooling domestic demand.
At the close, the Shanghai Composite index was up 1.4% at 2,892.38, while the blue-chip CSI300 index gained 1.2%. Both indexes bounced from their lowest since January 22, hit earlier in the session.
CSI300's sub-indexes for the financial sector, the consumer staples sector, and healthcare shares were all higher by almost 1%, while real estate stocks climbed 0.9%.
The smaller Shenzhen index ended up 2.5% and the start-up board ChiNext Composite index was higher by 3.3%.
Data on Monday showed profits for China's industrial firms dropping in April on slowing demand and manufacturing activity, suggesting the previous month's rebound may have been a one-off and added pressure for policymakers to step up support for a cooling economy.
Premier Li Keqiang said on Friday China aimed to keep value-added taxes for the manufacturing industry at low levels and encourage companies to innovate, a move that Li said will ultimately help create jobs and maintain sustainable economic growth.
China's financial regulators said on Friday the country's banking and insurance regulator will take control of Inner Mongolia-based Baoshang Bank due to the serious credit risks it poses, in a rare takeover of a domestic lender. Regional banks' shares fell and their funding costs rose on Monday.
Policymakers will unlikely let the Shanghai Composite slip below the key level of 2,800, as such a fall could trigger credit risks from pledged-share financing, Citic Securities' analysts wrote in a note on Monday.
FTSE Russell is forging ahead with plans to add Chinese A shares to its widely-tracked global benchmarks next month despite the trade war. The move will bring at least $10 billion of capital inflows to the local market, analysts at Chuancai Securities wrote in a note on Monday.
MSCI will implement an increase of A-shares' weighting of its indexes after markets close on Tuesday.
Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.1%, while Japan's Nikkei index closed up 0.3%.
The largest percentage gainers on the main Shanghai Composite index were Shanghai Hongda Mining Co Ltd and Wuxi Taiji Industry Co Ltd, up 10.1%, followed by Sanan Optoelectronics Co Ltd, up by 10%.
So far this year, the Shanghai stock index is up almost 16% and the CSI300 has risen 20.8%. But, for this month, Shanghai stocks have declined 6%. About 19.67 billion shares were traded on the Shanghai exchange. The volume in the previous trading session was 16.72 billion.
As of 07:21 GMT, China's A-shares were trading at a premium of 26.69% over the Hong Kong-listed H-shares.
The Shanghai stock index is below its 50-day moving average and above its 200-day moving average.
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