Mainland and Hong Kong equities closed down on Monday as investors turned cautious on heightened tensions between Beijing and Tokyo over the weekend and opted to book profits following a recent rally.

The benchmark Hang Seng Index ended down 188 points, or 0.71 percent, at 26,384 while the Hang Seng China Enterprises Index was 0.74 percent down at 9,328 and the Hang Seng Tech Index was 0.96 percent down at 5,756.

So far this year, the Hang Seng Index has gained 30 percent.

Across the border, the benchmark Shanghai Composite Index was down 0.46 percent at 3,972 while the Shenzhen Component Index was 0.11 percent lower at 13,202 and the ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, lost 0.2 percent to 3,105.

The combined turnover for the Shanghai and Shenzhen main indexes was 1.91 trillion yuan, down from 1.96 trillion yuan on Friday.

China's blue-chip CSI300 Index ended 0.7 percent lower, but is still up 17 percent for the year.

Shares related to lithium mines and forestry led gains while those related to antimony and glass fibre suffered major losses.

Shares of Chinese software maker Linkage, which derives most of its sales from Japan, fell as much as four percent to their lowest level since July 24.

Chinese online tourism giant Trip.com slipped 3.5 percent.

Bucking the sombre mood, onshore artificial intelligence firms jumped one percent amid media reports that Huawei would unveil new AI technology on November 21.

China stocks have been range-bound this month after key benchmarks rose nearly 20 percent this year.

"We view 2026 as a year of stabilisation after 2025's high returns, Morgan Stanley said.

"Index upside is modest with moderate earnings per share growth and valuation settling at a higher regime, as China reclaims its footing in the global tech race and trade tension abates," Morgan Stanley said. (Reuters/Xinhua)