HONG KONG: Chinese stocks listed in Hong Kong surged on Tuesday as investors loaded up on AI and EV shares, despite looming U.S. tariffs on China.
U.S. President Trump's 10% levy on Chinese goods is due to go into effect at 1:01 pm in Beijing (0501 GMT), but investors hope Trump's last-minute decision to suspend imminent tariffs on Canada and Mexico may signal there is room to negotiate.
Trump's press secretary said the president will speak with Chinese President Xi Jinping in the next couple of days.
"With Trump delaying tariffs on Canada and Mexico, will there be negotiations before further escalation on China as well? The market thinks there could still be room for talks," Jason Chan, senior investment strategist at Bank of East Asia.
The Hang Seng China Enterprises Index jumped 2.6% at midday trading break to a three-month high, while Hang Seng Tech Index surged 3.9%. The benchmark Hang Seng index added 2%.
AI-related stocks led the rally as investors continued to pile up wagers on home-grown firms after startup DeepSeek released a large language model at a cheap cost.
China's top chipmaker SMIC surged as much as 9% to a record high, and peer Hua Hong Semiconductor advanced 8.7%.
The EV sector also lifted the market, with carmaker XPeng jumping 12.6% after the company said it delivered a nearly three-fold increase in smart EVs in January year-on-year.
Financial markets in mainland China will reopen on Wednesday after the long Lunar New Year holiday, and are poised to play catch-up with global markets, he added.
China's benchmark blue chip index fell 3% in January before the holiday, surrendering nearly half of September's 40% rally.
The markets may look through the political noise to focus on China’s responses to U.S. tariffs and the upcoming National People's Congress (NPC) meeting in the next few weeks, analysts at Citi said in a note.
Capital Economics said the additional 10% tariff that Donald Trump has applied on Chinese goods will have a relatively modest impact on China’s economy, especially if the PBOC allows the yuan to adjust, but predicted the trade war with the U.S. will be protracted.
(Reporting by Hong Kong Newsroom; Editing by Kim Coghill)
