Mainland and Hong Kong stocks finished sharply higher on Monday, as investors snapped up shares of carmakers, solar energy firms and metal producers on signs that Beijing's crackdown on price wars is starting to bear fruit.

The benchmark Hang Seng Index closed up 494 points, or 1.89 percent, at 26,622 while the Hang Seng China Enterprises Index jumped 1.62 percent to 9,454 and the Hang Seng Tech Index climbed 2.08 percent to 6,324.

Raw materials, consumer and tech were among the best performing sectors.

On the mainland, the benchmark Shanghai Composite Index, flirting with decade highs, rose 0.9 percent to 3,862 while the Shenzhen Component Index closed 2.05 percent higher at 13,479.

The combined turnover at these two indexes was 2.16 trillion yuan, up from 2.15 trillion yuan on Friday.

Shares related to glass and non-ferrous metals led gains while counters related to motorbikes and coal suffered major losses.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, gained 2.74 percent to close at 3,238.

Sentiment was also aided by the People's Bank of China's pledge to step up policy support to aid growth.

China's bluechip CSI300 Index jumped 1.5 percent to its highest level in three-and-a-half years.

China's industrial profits jumped 20.4 percent in August from a year earlier, reversing a 1.5 percent year-on-year decline in July, data released on Saturday showed.

"August industrial profits' surge is mostly due to the base effect, but signs of early success of the 'anti-involution' campaign are emerging," Hong Hao, chief investment officer of Lotus Asset Management said, referring to the government's crackdown on over-production.

"Profit recovery will likely continue in the coming months, auguring well for further market gains."

Goldman Sachs said that "the notable improvement of profitability in raw material sectors such as steel hints at the government's anti-involution policies at work."

Meanwhile, expectations of fresh stimulus rose after the People's Bank of China said on Friday it will strengthen coordination between monetary and fiscal policies to support economic growth.

Goldman expects China to cut both interest rates and banks' required reserve ratios in the fourth quarter. (Reuters/Xinhua)