China, Hong Kong shares edge higher on industrial profit data, tech optimism

China and Hong Kong stocks edged higher on Monday, led by technology shares, as data showing solid industrial profit growth and renewed AI enthusiasm lifted sentiment.

At the midday break, the Shanghai Composite index .SSEC was up 0.2% at 4,085.88 points. China's blue-chip CSI300 index .CSI300 was also up 0.2%.

Technology stocks led gains, bolstered by renewed excitement about artificial intelligence spending that has lifted chip shares across the region.

The Nasdaq-style Star 50 Index .STAR50 rallied 3.5% to a three-month high. The CSI Semiconductor Index .CSI931865 surged 5.5% to a three-month high and the CSI Info Tech Index .CSIINT jumped 3.2%.

In Hong Kong, the Hang Seng Index .HSI was up 0.2% at 26,016.21, and the Hang Seng Tech Index was up 1.3%.

Profits at China's industrial firms grew at their quickest pace in half a year last month, adding to broader signs of an uneven economic recovery in the first quarter as policymakers brace for the impact of the Middle East war.

However, stalled U.S.-Iran peace talks kept investor sentiment in check after U.S. President Donald Trump cancelled a trip to Islamabad by U.S. envoys for talks on the weekend.

"Equity markets have gradually returned to pricing on fundamental despite recurring external geopolitical headwinds," analysts at Guotai Haitong Securities said in a note.

Thematic rotation has picked up pace and risk appetite is on the mend, with a shift from overseas supply chains to domestic substitution remaining a key theme to watch, they said.

Elsewhere, China's top leadership will hold the April Politburo meeting this week to discuss economic policies for the coming months.

"We expect policymakers to express greater concerns about the global energy shock and rising geopolitical uncertainties," instead of additional easing measures," analysts at Goldman Sachs said in a note.

-Reporting by Jiaxing Li in Hong Kong; Editing by Subhranshu Sahu/Reuters