Chinese Stock Rally Resumes as Xi Vows Support for Private Firms

Chinese stocks in Hong Kong gained after a meeting between President Xi Jinping and prominent entrepreneurs signaled Beijing’s endorsement of the private sector. 

The Hang Seng China Enterprises Index rose 1.8%, taking its rally since a January low to nearly 24%. Technology stocks including Alibaba Group Holding Ltd. and Xiaomi Corp. contributed the most to Tuesday’s advance. The CSI 300 Index, an onshore benchmark, ended 0.9% lower amid signs of profit taking.

Xi promised to abolish unreasonable fines against private firms and urged entrepreneurs to maintain their competitive spirit. The show of support is seen adding fuel to this year’s world-beating rally in Chinese stocks, which has largely been driven by optimism over DeepSeek’s artificial intelligence capabilities. Alibaba’s Jack Ma and DeepSeek founder Liang Wenfeng were among the attendees at the meeting. 

It’s a rare moment in the limelight for the nation’s behemoth tech sector, after being shunned by investors for years amid price wars, sluggish consumer demand, and regulatory uncertainties. Wall Street strategists including those at Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. have released bullish calls in recent weeks as they expect AI to support corporate earnings and prompt a re-evaluation of the broader market.

“President Xi’s meeting with Chinese entrepreneurs marks a significant shift in China’s approach to the private sector,” said Charu Chanana, chief investment strategist at Saxo Markets. “This should add further momentum to the China tech names which have been rallying on the back of DeepSeek development and flows getting diverted from the capex-heavy Magnificent Seven.”

Up about 26% in 2025, the Hang Seng Tech Index is beating gains seen in the broader equity indexes in Hong Kong and China. 

In contrast, Chinese government bonds fell, with the one-year yield rising as high as 1.5% — a level unseen since August. That came as investors shift funds into stocks and liquidity tightens in the money market.

Despite growing optimism, skeptics caution that AI will do little to resolve economic woes ranging from the property crisis and a lack of consumer confidence. It’s also unclear how DeepSeek’s technological achievements will filter through to corporate earnings. 

Chinese stocks have seen multiple false dawns over the past years — most recently the stimulus-driven rebound in late September that cooled within months. The huge swings seen on Tuesday suggest some investors are keen to lock in profit, rather than bet on long-term gains. The Hang Seng China gauge was up 2.6% and the CSI 300 Index up 0.5% before selling pressure emerged in the afternoon.

Focus is now on an annual legislative meeting in March, where the nation’s top leaders are expected to unveil the economic blueprint for 2025 and may discuss concrete support measures for the private sector. 

What Bloomberg Intelligence says:

“Renewed enthusiasm for China’s tech firms is based mostly on the false premise that DeepSeek’s breakthrough in AI will drive a renaissance in the sector’s earnings outlook. We disagree and believe the earnings outlook at most firms remains largely unchanged. Rising economic uncertainty, plus the risk of escalating tensions with the US, make for an uncertain sector outlook in 2025.”

— Analysts Robert Lea and Jasmine Lyu

Despite Deepseek driving a strong re-rating in China’s tech space, “any material changes in the earnings outlook for this year will have to be driven by fundamental improvement in consumer demand,” said Gary Tan, a portfolio manager at Allspring Global Investments in Singapore.

With assistance from Winnie Hsu and Tian Chen.

This article was generated from an automated news agency feed without modifications to text.