Mainland stocks closed at their highest level since 2015 on Monday, extending a months-long rally driven by easing trade tensions and abundant liquidity while pushing market capitalization to a record peak.

In Hong Kong, the property sector weighed on stocks as the benchmark Hang Seng Index ended down 93 points, or 0.37 percent, at 25,176, giving up earlier gains.

The Hang Seng China Enterprises Index dipped 0.06 percent to end at 9,033 while the Hang Seng Tech Index rose 0.65 percent to close at 5,579. The electric vehicle sector jumped 1.9 percent.

The benchmark Shanghai Composite Index rose 0.85 percent to 3,728, its strongest close since August 2015, while the Shenzhen Component Index closed 1.73 percent higher at 11,835. The CSI 300 Index also climbed by 0.9 percent to a 10-month peak.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, gained 2.84 percent to close at 2,606.

The Shanghai benchmark has now advanced some 22 percent since the low struck in early April, buoyed by the extension of the US-China trade truce, Beijing's crackdown on excessive competition, and a rotation of funds from bonds into equities, which brokers say has flooded the market with liquidity.

The total market capitalisation of over 5,400 China-listed companies has risen above 100 trillion yuan for the first time, reflecting both price appreciation and a surge in listings over the past decade.

Winnie Wu, Bank of America's chief China equity analyst, said positive developments on the geopolitical front and clearer policy direction from Beijing have all helped compress the equity risk premium and trigger a re-rating, despite the rally running against fundamentals odds.

"There are renewed hopes on domestic retail flows," she wrote in a note to clients.

In a sign of heightened investor activity, onshore turnover reached nearly 2.8 trillion yuan on Monday, the highest since October when Beijing’s sweeping stimulus measures triggered a sharp rally.

Hao Hong, chief investment officer at Lotus Asset Management, said the market may face near-term resistance due to profit-taking pressure, but added that many remain hopeful the bull run can extend despite headwinds.

Leading the rally on Monday onshore, the rare-earth sector surged 5.3 percent to a fresh high since December 2021. The AI sector jumped 3.8 percent and the information technology sector rose 2.5 percent. (Reuters/Xinhua)