Chinese Equities Rebound as Tech Giants Offset US Tariff Impact
Chinese equities listed in Hong Kong outperformed regional peers, buoyed by gains in tech behemoths that countered the adverse effects of a newly imposed US tariff on China.
Hang Seng China Index Recovers
The Hang Seng China Enterprises Index trimmed its losses to 1.2% after initially plummeting by 2.5%. Rallies in Alibaba Group Holding and Semiconductor Manufacturing International Corp. provided support.
AI Advancements Boost Sentiment
Chinese startup DeepSeek's cost-effective AI model has showcased Beijing's prowess in the industry. Investors are optimistic that such advancements will narrow the technology gap with the US.
Stimulus Expectations Fuel Growth
The upcoming annual legislative meeting in March raises hopes for further stimulus measures. The market, which had gained significantly following a policy blitz in September, has since lost half its gains.
Tech Stocks Surpass Peers
Alibaba's Hong Kong shares surged by 6.1% to their highest level since November. The company's new AI model reportedly outperformed Meta Platforms' Llama and DeepSeek's V3 in various tests. The Hang Seng Tech Index, however, shed 1.2% after slipping by as much as 3.2%.
US Tariffs Weigh on Assets
On Saturday, President Trump imposed tariffs on Canada, Mexico, and China. China's Commerce Ministry vowed to implement countermeasures and file a complaint with the World Trade Organization. Beijing is reportedly preparing an opening bid to avert more severe tariffs and technology restrictions.
Economic Impact
A private survey released on Monday revealed a decline in China's manufacturing activity for the second consecutive month. The additional tariff is expected to further hamper growth.
Stimulus Measures
Analysts anticipate that Beijing will cut reserve requirements and benchmark rates, and moderately devalue the yuan if the US tariffs take effect.
Market Performance
The onshore CSI 300 Index retreated by 3% in January. Investors remain cautious and seek more aggressive measures from authorities to revitalize the market.