China stocks hit 3-month high as Iran ceasefire offers cautious optimism

China stocks edged up to a three-month high on Wednesday, led by artificial intelligence and chip sectors, as the extended Iran ceasefire offered some limited respite with peace talks still hanging in the balance.

The blue-chip CSI300 index .CSI300 added 0.7% at market close after hitting its strongest level since January 14.

The Shanghai Composite index .SSEC closed 0.5% higher at 4,106.26, its third straight session of gains.

Tech sectors led gains onshore, with the AI industry index .CSI930713 adding 3.3% and chip sector index .CSI931865 gaining 2.9%. The CSI 5G Communications Index .CSI931079climbed 5.1%.

ChiNext Index .CNT, a Nasdaq-style second board for startups, added 1.7% to the highest level since 2015.

U.S. President Donald Trump said he would indefinitely extend the ceasefire with Iran to allow for further peace talks. Although it was not clear on Wednesday whether Iran or Israel would agree, investors largely took heart from the development.

"Middle East geopolitical risks are gradually easing, and the market is becoming increasingly desensitized to geopolitical conflicts," analysts at Nanhua Futures wrote in a note.

"Markets are now building an upward momentum, with earnings improvements likely becoming the core driver for the next phase."

"The improvement in liquidity conditions and rising investor risk appetite are working in tandem, driving stock indices higher," they added.

In Hong Kong, the Hang Seng Index .HSI was down 1.2% at 26,163.24. The Hang Seng Tech Index .HSTECH was down 1.9% to a one-week low.

Around the region, MSCI's Asia ex-Japan stock index .MIAPJ0000PUS was weaker by 0.5%, while Japan's Nikkei index .N225 was up 0.4%.

-Reporting by Jiaxing Li in Hong Kong; Editing by Harikrishnan Nair and Ronojoy Mazumdar/Reuters