SHANGHAI, Sept 4 (Reuters) - China's major indexes ended at fresh 20-month highs on Monday despite heightened geopolitical tensions, as investors downplayed the longer-term impact on stocks from North Korea's latest nuclear test.
The blue-chip CSI300 index rose 0.4 percent, to 3,845.62 points, while the Shanghai Composite Index also gained 0.4 percent to 3,379.58 points.
North Korea on Sunday conducted its sixth and most powerful nuclear test, which it said was of an advanced hydrogen bomb for a long-range missile, prompting the threat of a "massive" military response from the United States if it or its allies were threatened.
But Chinese equity markets, which have in the past largely ignored sabre rattling on the Korean peninsular, remained clam.
"The nuclear test by North Korea could influence the risk appetite for the short-term, though in our view it will not have an enduring impact on the A-share market," domestic brokerage Essence Securities wrote in a report.
Investors at home and abroad appear to be increasingly optimistic about China's economy, as they start to plough more money into the country's stock markets, at a time when the yuan has also climbed to 14-month highs against the dollar.
Overseas investors spent a net 27 billion yuan ($4.13 billion) buying mainland shares in August via the cross-border Connect schemes, according to state media, representing the biggest monthly inflow this year. That has pushed the premium Chinese shares command over their Hong Kong peers to the highest in more than a year.
Sector performance was mixed. Banking stocks rose 0.9 percent, snapping a three-day losing streak.
"The national team continued to substantially increase its exposure to financial stocks in the second quarter and will unlikely substantially withdraw its presence from the A-share market in the near term," Gao Ting, Head of China Strategy at UBS Securities, wrote in a report.
($1 = 6.5435 Chinese yuan) (Reporting by Luoyan Liu and John Ruwitch; Editing by Jacqueline Wong)