Hong Kong-listed Chinese stocks extended their recent rally on Friday, fueled by growing optimism surrounding the nation’s advancements in artificial intelligence and renewed confidence in the market’s overall prospects.
The Hang Seng China Enterprises Index jumped as much as 3.1% on Friday, inching closer to surpassing an October peak following a recent stimulus push.
Breaching that level would mark the gauge’s highest point since February 2022.
Alibaba Group Holding Ltd., Xiaomi Corp, and Tencent Holdings Ltd. were among the top contributors to the advance.
The CSI 300 Index, an onshore benchmark, also climbed 0.9%.
China’s ‘Sputnik moment’: AI capabilities spark re-evaluation
After lagging behind in the global AI race for several years, China is rapidly catching up.
The demonstrated prowess of AI startup DeepSeek has served as a “wake-up call” for investors who had previously underestimated the nation’s growth potential in the technology sector.
This has led to a broader reassessment of the previously beaten-down Chinese equity market.
According to Marvin Chen, a Bloomberg Intelligence strategist, The DeepSeek revelation “is a reflection that China is making progress on its new productive forces and self sufficiency goals. 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.
Signs of government support: a boost for private enterprise
Alibaba shares saw further gains following a report by Reuters that President Xi Jinping is planning to chair a conference next week with business figures, including Alibaba’s co-founder Jack Ma.
This event is interpreted as a strong signal of renewed government support for the private sector, boosting investor sentiment.
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, further calming market anxieties.
A more durable rally? Sentiment shifts among global investors
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.
Despite the enthusiasm, some remain skeptical, cautioning that the AI buzz may have fueled an overextended rally, with stocks seemingly responding indiscriminately to any announcement of cooperation with DeepSeek.
“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.
Looking ahead: stimulus expectations and economic challenges
Bulls are hoping Beijing will unleash further stimulus at the Two Sessions — the annual meetings of China’s top legislative and advisory bodies — helping to sustain the market’s upward trend.
Added policy support is crucial with the property sector still struggling and the economy remaining lackluster.
The Hang Sang China Enterprises Index has gained 13% so far in 2025, among the best performances in Asia.
It is about 1% away from taking out the October peak.
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