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Chinese stocks have rallied to a three-week high, as investors bet that mainland shares will be included in a global index next month.

The Shanghai Composite rose 2.67% to 2,898 points, with shares of financial companies leading the list of gainers.

That is on market expectations that the MSCI Emerging Market Index will include Chinese shares.

The move, if it happens, would boost sentiment for Chinese stocks at an international level.

The positive sentiment also flowed into neighbouring Hong Kong, where the benchmark Hang Seng index gained 1.3% - or 270.16 points - to 20,898.20.

Elsewhere in Asia, Japan's benchmark Nikkei 225 rose 0.49% - or 83.93 points - at the midday mark to 17,151.95 points.

Latest data from Japan showed household spending fell 0.4% in April, compared to the previous year.

Meanwhile industrial output showed a surprise 0.3% rise for April, compared with forecasts for a 1.5% drop.

The increase in industrial production came despite earthquakes which hit the Kumamoto prefecture in April, a major manufacturing hub for big Japanese firms, including Sony and carmaker Toyota.

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Prime Minister Shinzo Abe is likely to point to weakness in household spending as one of the reasons for a widely expected postponement of the nation's sales tax hike.

Mr Abe is reported to want to delay the hike to 2019. The next tax hike was supposed to take place in April next year, with an increase to 10% from the current 8%.

An official announcement could take place on Wednesday, at the end of Japan's current session on parliament.

In Australia, the S&P ASX/200 was flat at 5,391.90 points.

Over in South Korea, the benchmark Kospi nudged up 0.64% to 1,979.68.