China's Stock Market Soars: A Rally of Rare Earths and Construction

On Monday, China's stock market closed at a 3-1/2-year high, mainly powered by gains in the rare earth and construction sectors. The Shanghai Composite index rose 0.7% to its highest closing since January 2022, while the CSI300 index mirrored this growth. Driving the onshore gains was news of a new $170 billion hydropower dam in Tibet, lifting the CSI Construction & Engineering Index by 4.3%.

A positive sentiment also surrounded the rare earth sector, advancing 3.2% following Beijing's issuance of the first 2025 rare earth mining and smelting quotas. Meanwhile, in Hong Kong, the Hang Seng Index increased by 0.7%, with tech giants like Meituan, JD.com, and Alibaba seeing gains after the government's appeal to end ongoing price wars—a move dubbed as part of an 'anti-involution' campaign.

The rally has been supported by positive catalysts including anti-involution policies and a robust tech sector, sparking investor interest due to China's solid economic foundation. As the July Politburo meeting approaches, discussions on economic policies for the second half of the year are eagerly anticipated, though substantial new stimuli are not expected in the short term.

(With inputs from agencies.)