Hong Kong stocks climbed to a 10-month high as Beijing's latest efforts to salvage the beleaguered property sector boosted sentiment, with some analysts advising caution as cleaning up the sector would be a challenging task.

The Hang Seng Index edged up 0.4 per cent to 19,636.22 at close on Monday, the highest level since August 1. The Tech Index gained 0.6 per cent while the Shanghai Composite Index jumped 0.5 per cent.

Electric vehicle maker BYD jumped 1.98 per cent to HK$227, peer Li Auto advanced 4.2 per cent to HK$99.90 and Geely Auto added 4.1 per cent to HK$10.64. E-commerce platform JD.com gained 2 per cent to HK$136.80 and gaming firm NetEase rose 1.3 per cent to HK$164.90.

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The People Bank's of China on Friday announced some of the most aggressive measures yet to stimulate the property sector, including a 300 billion yuan funding to clear excess housing inventory, lowering the minimum mortgage down payment requirements and removing the national floor for mortgage interest rates.

A view of unfinished residential buildings developed by China Evergrande Group in the outskirts of Shijiazhuang, Hebei province, China February 1, 2024. Photo: Reuters alt=A view of unfinished residential buildings developed by China Evergrande Group in the outskirts of Shijiazhuang, Hebei province, China February 1, 2024. Photo: Reuters>

"We believe Beijing is headed in the right direction with regard to ending the epic housing crisis," Nomura economists including Ting Lu said in a note on Monday. Still, markets would need to exercise more patience as the cleaning up process will be challenging, they added.

Ahead of Monday's gains, the city's benchmark index had advanced for four straight weeks, the best winning streak since the opening month of 2023, which added some US$350 billion in market capitalisation to the city's exchange, according to Bloomberg data.

Still, some investors say caution is warranted after the recent stellar gains, as future share price direction will be determined by interest rate movements, corporate earnings and any subsequent fiscal steps taken by the government.

"For policies to be effective, especially in terms of fundamentals, the overall intensity and speed of implementation are crucial," analysts at CICC said in a note over the weekend. "Given the current uncertainty, we are reluctant to completely abandon the barbell strategy and fully shift to cyclical sectors."

Hong Kong's Hang Seng Index compiler said it will add handset assembler BYD Electronic International to the benchmark following its latest quarterly review, replacing Country Garden Services Holdings. BYD Electronics shares rose 1.6 per cent to HK$34.35 while Country Garden Services slipped 1.9 per cent to HK$6.69.

Other key Asian markets also traded higher. Japan's Nikkei 225 climbed 0.7 per cent, while South Korea's Kospi and Australia's S&P/ASX 200 both gained 0.6 per cent.

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