Beijing’s supportive economic policies and optimism presented at the ongoing parliamentary session have buoyed a new bull run, riding momentum from January’s release of DeepSeek’s groundbreaking artificial intelligence (AI) model that shifted global attention to Chinese assets, while sending Hong Kong and Chinese mainland stock markets on a tear.
Analysts have seen a swell of optimism among overseas investors, and some pundits are expecting more fund inflows as the Chinese government is determined to achieve an ambitious 5 per cent economic growth target for this year while using stabilisation tools to counter any uncertainties raised by US President Donald Trump.
As China’s top economic officials laid out their priorities for 2025 during a press conference on Thursday afternoon, Hong Kong stocks extended gains in the final trading hour – closing up 3.3 per cent and hitting the highest level since February 17, 2022. It marked a 50 per cent rise from a year earlier, beating major international markets.
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The Hang Seng Tech Index surged 5.4 per cent, closing at a level not seen since December 2021.
The CSI 300 Index, which tracks blue-chip firms in Shanghai and Shenzhen markets, climbed 1.4 per cent while the Shanghai Composite Index rose 1.2 per cent. In the past year, both indices were up 11 per cent.
China is about to embrace major opportunities, according to a fund manager at a major investment firm.
“The era of undervalued Chinese assets, especially core assets, has ended, and a new development cycle may be beginning,” said Gao Yuncheng, partner and fund manager at Greenwoods Asset Management, during an internal communication meeting on Wednesday, according to state media.
He was quoted as saying that, after years of transformation, China’s economy has entered a new growth cycle, driven by intelligent manufacturing as a new growth engine – what he calls the intelligent-manufacturing, or tech-manufacturing, cycle.
For retail investors, some have experienced mixed feelings: joy as their stocks rose again, but frustration over when to sell, and perhaps regret for reducing their positions during previous dips.
“It is definitely a bull market, as Chinese industrial enterprises and consumption-platform enterprises have greatly improved their efficiency in the past three years,” said Ceci Qiu, a retail investor who works in Hong Kong’s finance industry.
“But I didn’t expect it to rise so quickly.”
Wu Qing, chairman of the China Securities Regulatory Commission, said at the press conference in Beijing on Thursday afternoon that investors’ expectations and market confidence have notably improved since a variety of supportive policies were rolled out from September.
“Moving forward, we will focus on deepening comprehensive reforms in capital-market investment and financing, accelerating the next round of market opening and reform, empowering tech companies, and promoting the healthy development of the stock market,” Wu said.
Earlier this year, the release of the home-grown large language model DeepSeek-R1, rivalling ChatGPT, turned the tide and ignited fresh investor confidence that China could forge ahead in tech and innovation, even amid ongoing chip bans and chokeholds on core technologies.
Wu said the success of DeepSeek has forced investors and the finance world to “re-evaluate the values of A-shares, Hong Kong stocks, and Chinese assets in other markets”.
For the first time, China’s government work report, released on Wednesday, included a “ramped-up effort in stabilising the real estate and equity market” as a key economic priority.
China’s growth target of around 5 per cent for the year, coupled with vows for more loose monetary policies, has fuelled optimism that more aggressive stimulus measures will be enacted to counter headwinds, which include deflationary pressures, a prolonged property slump, hefty local-government debts, and trade tensions with the United States.
China’s A-share market saw a net capital inflow of US$3.8 billion in February, after outflows for three months prior, according to the estimates by Morgan Stanley.
In late February, the Wall Street investment bank upgraded the rating of Chinese stocks from “underweight” to “market weight”. And its China strategist, Laura Wang, said global investors should increase their holding of Chinese stocks in their portfolios.
Companies raised US$7.8 billion in funding through initial public offerings in the Hong Kong stock market from January-February, up 255 per cent from the same period last year.
Last year, China’s equity market slumped into a prolonged gloom, when stagnation seemed to be China’s inevitable future and international capital was favouring other Asian markets such as India and Japan.
Wu added that China had also stepped up investor protection and regulatory oversight, by clamping down on illegal activities that investors resent, including financial fraud, market manipulation and insider trading.
Last year, more than 90 per cent of the newly listed companies on the STAR Market, ChiNext, and Beijing Stock Exchange were hi-tech and innovative enterprises, highlighting “the China Securities Regulatory Commission’s consistent focus on supporting technological innovation”.
China’s recent rally is also an indication of how Trump has disappointed the market, said Xu Tianchen, senior China economist with the Economist Intelligence Unit.
“In a chaotic world, investors find that China offers the greatest stability and predictability, as almost the entire world is struggling to cope with Trump’s uncertainties – even the US itself,” he said.
China may benefit from bearing the brunt of Trump’s offensive during his first term – and sustained outperformance is not impossible – if Beijing outwits Washington by providing continued stimulus in the short term and reform in the long term, he added.
Starting on Tuesday, the United States imposed fresh tariffs on Canada, Mexico, and China, triggering retaliatory measures and putting significant pressure on market sentiment.
As stock markets sank while digesting the negative impact of these tariff hikes, the gains made since last year’s US presidential election rally were wiped out.
More from South China Morning Post:
- As China’s ‘employment problems’ mount, Premier Li vows to create jobs, ward off poverty
- China determined to ‘resolutely’ keep yuan stable amid US tariff pressure
- As Shanghai goes, China goes: finance hub seeks to be magnet city for foreign investors
- As DeepSeek shakes up global tech sector, Chinese lawmakers and advisers examine AI risks
- China’s Xi Jinping makes tech and private sector appeal on ‘two sessions’ sidelines
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