Chinese Stocks Surge on Beijing's Private Sector Endorsement
Hong Kong-listed Chinese stocks soared on Tuesday following a meeting between President Xi Jinping and prominent entrepreneurs, signaling Beijing's renewed support for private businesses.
* The Hang Seng China Enterprises Index jumped 1.8%, extending its rally from a January low to nearly 24%.
* Tech giants like Alibaba and Xiaomi led the advance, contributing significantly to the index's gains.
* The broader CSI 300 Index ended 0.9% lower, indicating profit-taking.
Xi pledged to eliminate unwarranted fines against private firms and encouraged entrepreneurs to stay competitive. The show of support boosts optimism over the ongoing surge in Chinese stocks, driven by anticipation of advancements in DeepSeek's AI capabilities.
Among the attendees were Alibaba's Jack Ma and DeepSeek founder Liang Wenfeng. The meeting marked a rare opportunity for the country's tech sector to shine after facing years of investor skepticism due to price wars, weak consumer demand, and regulatory uncertainties.
Wall Street analysts at Goldman Sachs, Morgan Stanley, and JPMorgan predict continued growth in AI's ability to drive corporate earnings and spark a reassessment of the market.
"Xi's meeting signals a pivotal shift in China's stance towards the private sector," said Charu Chanana of Saxo Markets. "This should further fuel the rally in Chinese tech stocks, bolstered by DeepSeek and reduced investment in traditional infrastructure."
Despite the optimism, skeptics caution that AI alone cannot solve fundamental economic challenges like the real estate crisis and dwindling consumer confidence. It remains unclear how DeepSeek's innovations will translate into actual corporate profitability.
Chinese stocks have experienced several false recoveries in recent years, including the stimulus-driven rebound in September 2024 that faded within months. The volatility witnessed on Tuesday suggests some investors are locking in profits rather than betting on long-term growth.
Attention now turns to the annual legislative meeting in March, where China's leaders are expected to announce economic plans for 2025 and discuss concrete measures to support the private sector.
"The renewed enthusiasm for Chinese tech firms rests on the misconception that DeepSeek's AI breakthroughs will radically improve their earnings outlook," said Bloomberg Intelligence analysts. "We believe this outlook remains largely unchanged. Economic uncertainty and tensions with the US create a challenging sector landscape in 2025."
"While DeepSeek has prompted a re-rating in tech stocks, meaningful earnings improvements will depend on a fundamental recovery in consumer demand," added Gary Tan of Allspring Global Investments.