Mainland stocks closed up on Thursday, hovering near their highest level in more than three years, as investors remained bullish on AI plays despite concerns over potential US restrictions on Chinese innovative drugs.

In Hong Kong, the benchmark Hang Seng Index ended down down 113 points, or 0.43 percent, at 26,086.

The Hang Seng China Enterprises Index fell 0.73 percent to end at 9,260 while the Hang Seng Tech Index edged down 0.24 percent to end at 5,888.

Tech shares fell at the open but were roughly flat by market close, with Alibaba up slightly after the company said it plans to raise US$3.2 billion through the sale of a zero-coupon convertible bond.

On the mainland, the benchmark Shanghai Composite Index ended up 1.65 percent at 3,875 while the blue-chip CSI300 Index ended up 2.3 percent near its highest level since March 2022.

The Shenzhen Component Index closed 3.36 percent higher at 12,979.

The combined turnover of the Shanghai and Shenzhen indexes stood at 2.44 trillion yuan, up from 1.98 trillion yuan on Wednesday.

Stocks from the glass, appliance, and electronic information industries led gains while oil and tourism shares saw declines.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, gained 5.15 percent to close at 3,053.

Onshore AI shares jumped 6.8 percent, their largest single-day gain since October 18, 2024, with sector bellwether Cambricon Technologies surging 9 percent.

Shares of optical module giants Zhongji Innolight and Eoptolink Technology climbed 14 percent and 13 percent, respectively.

Technology and artificial intelligence stocks have been the main drivers of China's stock market rally this year, with the Star50 Index up 34 percent in the year to date.

Biotech shares, both onshore and offshore, slumped at the start of trading for the day following reports that the Trump administration is considering sweeping restrictions on Chinese drug imports. However, losses were trimmed by market close, with the CSI Brand Name Drug Index down just 0.8 percent.

The draft targeting Chinese innovative drugs is unlikely to be implemented in practice, analysts at Orient Securities said in a note to investors, citing challenges such as restricting patients from accessing more effective treatments.

Shares of pig producers Muyuan rose 5.6 percent amid media reports that China's government has summoned its biggest pig breeders to discuss measures to cut production. (Reuters/Xinhua)