SHANGHAI – Mainland China Stocks Close Higher Amid Middle East Tensions and U.S.-Iran Peace Talks

Mainland China stocks ended marginally higher on Tuesday, reversing earlier losses, as investors anxiously awaited potential peace talks between the U.S. and Iran, which could ease tensions in the Middle East and help alleviate a global energy supply shock.

The U.S. expressed confidence that peace talks with Iran would proceed in Pakistan this week. A senior Iranian official also confirmed that Tehran was considering participating, as the end of a two-week ceasefire approaches.

China’s benchmark Shanghai Composite Index rose by 0.07%, while the blue-chip CSI300 Index gained 0.22%.

Coal-related stocks led the gains, with a sub-index tracking the industry rising 2.54%.

China may be forced to burn more fossil fuels this year due to a forecasted moderate-to-strong El Niño weather event in the summer and autumn. This could disrupt operations at hydropower stations across the region, while fuel supplies from the Middle East remain volatile.

In Hong Kong, the benchmark Hang Seng Index advanced 0.48%.

"We see about 5-10% upside for Chinese equities toward year-end, supported by a few positive developments, although near-term volatility remains high," analysts at Morgan Stanley noted in a report this week. "We also expect volatility to persist through May to July, given the uncertainty surrounding the U.S.-China summit, first-quarter earnings, IPO lockups, and the ongoing Middle East situation."

Meanwhile, shares of Chinese circuit board maker Victory Giant Technology jumped 60% in their Hong Kong debut on Tuesday. The company raised HK$20.1 billion in its share sale, marking Hong Kong’s biggest listing in nearly seven months.

Hong Kong’s Cathay Pacific Airways plans to raise about HK$2 billion through a one- or two-tranche fixed-rate bond, sources told Reuters.

-Reporting by Shanghai Newsroom; Editing by Mrigank Dhaniwala and Harikrishnan Nair/Reuters