(Bloomberg) — Chinese stocks in Hong Kong extended a recent rally as the nation’s growing capabilities in artificial intelligence boosted optimism over the market’s outlook.
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The Hang Seng China Enterprises Index jumped 4.1% on Friday, topping an October peak following a stimulus blitz, to hit the highest since February 2022. Alibaba Group Holding Ltd., Xiaomi Corp. and Tencent Holdings Ltd. contributed the most to the advance. The CSI 300 Index, an onshore benchmark, climbed 0.9%.
China is fast catching up with the global AI frenzy after missing out in the past few years. AI startup DeepSeek’s prowess has served as a wake-up call for investors who had underestimated the nation’s growth potential in the sector, and led to a broader re-evaluation of the beaten-down equity market.
The DeepSeek revelation “is a reflection that China is making progress on its new productive forces and self sufficiency goals,” said Marvin Chen, a Bloomberg Intelligence strategist. “The tech momentum may carry the market into March,” when attention turns to the Two Sessions meeting and corporate earnings as the next driver, he added.
Alibaba shares extended gains following a Reuters report that President Xi Jinping plans to chair a conference next week with business figures including the e-commerce firm’s co-founder Jack Ma. This may indicate renewed support for the private sector.
Adding to the wave of optimism are signs that Donald Trump’s tariffs on Chinese products — 10% in the initial offensive — may turn out to be less drastic than feared.
While global money managers have been burnt by the Chinese market’s ups and downs over the past few years, some now see the odds of a more durable rally this time around.
Deutsche Bank called the ongoing tech progress a “Sputnik moment” for the country, while a trader note by Goldman Sachs Group Inc. said hedge funds are purchasing Chinese shares in large chunks, driven almost entirely by long buys.
But skeptics worry that the AI buzz may have taken the rally too far, with stocks that announce any cooperation with DeepSeek seeing knee-jerk gains.
“At the end of the day, you don’t really know what the potential monetization opportunities are over the medium to longer term,” Helen Zhu, chief investment officer for NF Trinity, said in a Bloomberg TV interview. There’s “potential uncertainty on whether what DeepSeek has been able to do can be repeated,” she added.
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