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Asia stocks at multi-month highs on China optimism; Shanghai leads gains

Asian equities finished mostly higher on Monday, led by a rally in Chinese markets, on optimism about the health of the world's second-largest economy.

Data over the weekend showed industrial profits in the mainland grew at a stronger pace in the first half of the year compared to 2013, thanks to an 18 percent annual surge in June.

"The mini-stimulus that was delivered in April and May seems to be having an effect. We think that the pace of growth that we saw in the second-quarter is going to be reasonably well-sustained and the authorities will get a 7.5 percent growth rate," said Paul Bloxham, chief economist for Australia at HSBC.

Investors continued to monitor geopolitical risks. In Gaza, fighting subsided on Sunday after Hamas Islamist militants said they backed a 24-hour humanitarian truce in light of the Muslim holiday Eid al-Fitr. More than 1,000 Palestinians have been killed in the 20-day conflict.

Read MoreWeek ahead in Asia:Japan data, earnings

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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China shares rally

Shanghai equities jumped over 2 percent to new seven-month highs, rising for a seventh straight day, thanks to strong gains amid lenders.

Bank of Communications surged 10 percent on reports that it plans to sell stakes to private investors under a new government reform plan while Industrial and Commercial Bank of China jumped 2 percent after the bank announced a near $13 billion preferred share issue late Friday.

Meanwhile, Hong Kong shares briefly breached the 24,500 mark to its highest level since 2010.

Read MoreCorporate Asia is 'hoarding' not spending cash

Nikkei adds 0.4%

Japan's benchmark Nikkei index erased early losses to finish at a new six-month peak, extending gains following Friday's 1 percent rally.

Banks led the gains with Mizuho, Sumitomo Mitsui and Mitsubishi UFJ ending over 1 percent higher.

Nissan Motor ended 0.8 percent higher percent despite announcing on Saturday that it was recalling more than 226,000 cars in the U.S. over faulty airbags. The automaker is also due to release earnings for the April-June period later in the day.

Read MoreWhy this Japan earnings season is important

ASX slips 0.1%

Australia's benchmark S&P ASX 200 extended losses into a second day, retreating further from Thursday's six-year peak.

National Australia Bank ticked up 0.3 percent on news that it offloaded a $1.2 billion portfolio of distressed British loans

Contractor Leighton Holdings dropped more than 2 percent after reporting a 25 percent fall in first-half underlying profit.

Kospi up 0.7%

South Korean shares jumped to their highest levels in nine months as investors digested the latest second-quarter earnings.

KB Financial soared over 5 percent after its net profit more than doubled from a year ago while Kia Motors rose 0.5 percent despite reporting a 31.7 percent annual fall in operating profit.

Read MoreThis is big business in Korea (and it's not K-pop)

India flat

India's NSE index finished down 0.5 percent as profit-taking from Friday's record high offset Asia-wide gains.

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