SHANGHAI: China's shares rebounded on Monday morning, with benchmark indexes shaking off some of the previous week's sharp decline, helped by gains in financials and consumer staples firms.
At the midday break, the Shanghai Composite index was up 1.5% at 3,448.31 points and the blue-chip CSI300 index was up 2.09%. The CSI 300 fell nearly 5.5% last week, capping its biggest monthly loss since October 2018.
"The recent A-share market slump was mainly driven by overseas sentiment. Investor concerns about foreign outflows dragged down stocks with a high percentage of northbound holdings," Meng Lei, A-share strategist at UBS Securities said in an emailed comment.
Both indexes had fallen around 1% earlier in morning trade on rising domestic concern over a surge in Delta variant COVID-19 infections. China on Monday reported 98 new confirmed coronavirus cases in the mainland for the day earlier, the highest daily rise since Jan. 24.
Those concerns also weighed on the fixed income market, where benchmark Chinese government bond yields dropped to their lowest level in more than a year.
Adding to worries over the economic outlook, a private sector survey showed China's factory activity growth fell to a 15-month low in July.
But by mid-morning, investors' focus shifted to attractive valuations, pushing the CSI300 financial sector sub-index up 3.14% by midday. The consumer staples sector was 3.91% higher.
Data from Refinitiv showed foreign investors were net buyers of A-shares on Monday, with inflows through the Northbound leg of the Stock Connect programme topping 5.9 billion yuan ($913.23 million).
In Hong Kong, the Hang Seng Index was up 0.92% at 26,198.65 and Chinese H-shares rose 0.76% to 9,303.16.
China Evergrande Group the heavily indebted property developer, was the top gainer among H-shares, rising 6.84% on Monday morning, after it agreed to sell stakes in its internet unit HengTen Networks Group Ltd for HK$3.25 billion ($418.03 million). HengTen shares soared more than 32%.