Hong Kong’s equity benchmark is trading near its highest level in over three years, thanks to a rally sparked by a breakthrough in artificial intelligence earlier in the year as well as strong demand from mainland investors.
The Hang Seng Index advanced as much as 1.1% on Wednesday before trimming gains. It was still on track for a fifth straight session of gains. Alibaba Group Holding and Tencent Holdings were among the top contributors. Another closely watched gauge, the Hang Seng China Enterprises Index, also jumped as much as 1.3%.
Tech stocks have been at the forefront of the HSI rally, driven by optimism over Chinese startup DeepSeek’s breakthrough in artificial intelligence and government support for AI development and other private sectors.
Investor sentiment has also improved as geopolitical tensions between the world’s two biggest economies begin to ease. Nvidia and Advanced Micro Devices’ plans to resume sales of some AI chips to China reinforced the perception that trade relations are thawing. Further signalling diplomatic progress, US Secretary of State Marco Rubio’s met with his Chinese counterpart at a summit in Malaysia on Friday.
“With the best Chinese tech firms listed in Hong Kong, this has injected significant momentum into the HSI since January,” Aidan Yao, Asia senior investment strategist at Amundi, said. “Valuations of Hong Kong-listed companies are reasonable, and global investors — mostly still underweight — may be enticed back as the bullish trend continues.”
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The Hang Seng Tech Index, which tracks 30 largest tech companies listed in Hong Kong, rose as much as 1.8% Wednesday.
Stocks in Hong Kong will lead onshore peers for now as investors focus on China’s efforts to revive demand, diversify supply chains and technological advancements, Ecaterina Bigos, chief investment officer for Asia ex Japan at AXA Investment Managers, said in a Bloomberg TV interview.
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Hong Kong’s benchmark is among the top-performing major indexes in Asia, up 23% year-to-date. Daily turnover hit a record high in April, with the average so far this year nearly doubling that of 2024.
Goldman Sachs Group earlier this month upgraded Hong Kong stocks to market-weight, citing their potential to benefit from a weakening dollar and the US Federal Reserve’s easing cycle.
Charts: Bloomberg
