A potential encounter this week between President Xi Jinping and e-commerce icon Jack Ma, coming after a blistering run by tech shares, could be the next catalyst to extend the rally in China’s stocks.
Prominent entrepreneurs including Ma have been invited to meet the nation’s top leaders, people familiar with the matter said last week. The potential show of support for the private sector coincides with the recent surge in equities in Hong Kong, driven by growing capabilities in artificial intelligence.
The Hang Seng China Enterprises Index extended gains on Monday, after reaching its highest level since February 2022 last Friday. The gauge was up as much as 1.7% before trimming its advance. A tech gauge in Hong Kong entered a bull market earlier this month, fueled by Chinese startup DeepSeek’s AI model that’s hailed as a game-changer.
“Such a high-profile endorsement sends a clear message of support from China’s government, which views the tech sector as a future driver of economic growth,” said Bloomberg Intelligence analyst Robert Lea.
One major driver of the rally is Alibaba Group Holding Ltd., whose Hong Kong-listed shares have surged about 60% since Jan. 13. Tencent Holdings Ltd. is also catching up, with its shares rising as much as 7.8% on Monday after the company said it’s integrating DeepSeek’s artificial intelligence chatbot into WeChat. The stock is up almost 40% from a January low.
Some investors say the rally is overcrowded and stretched, but Xi’s support would be a boost of confidence to the $16 trillion Chinese and Hong Kong stock markets that have enjoyed steady gains since mid-January.
“The recent developments align with our expectation of a short-term trading opportunity in the Chinese stock market, rather than signaling a structural shift,” said Nenad Dinic, an equity strategist at Bank Julius Baer in Zurich. “Nevertheless, without fresh catalysts from earnings, liquidity flows, or policy signals, the risk of a pullback is increasing.”
A meeting involving Xi and Ma can be a pivotal turning point for Alibaba since Beijing spiked Ant Group Co.’s initial public offering at the 11th hour, halting what would have been the world’s biggest IPO, and marking the start of a regulatory campaign to rein in the sector that had grown perhaps too large and powerful for comfort. It would also send a powerful signal that China’s Communist Party is adopting a more supportive stance toward private-sector companies.
Crystal-clear message
“Having Jack Ma in particular would provide a symbolic end to the tech-sector crackdown, which essentially started with him back in 2020,” said Christopher Beddor, deputy China research director at Gavekal Dragonomics in Hong Kong. “In practice, the crackdown has been over for a while now. But the optics of Xi telling Ma and other tech leaders to go forth and prosper would send a crystal-clear message that the government’s stance has been completely reversed.”
China is well aware that innovation is the key driver for productivity growth. Xi has continuously pushed for “new productive forces” amid the U.S. curbs on high-end chips to China. That’s only prompted Beijing to redouble efforts at self-sufficiency in cutting-edge technology.
The valuation of the tech index doesn’t appear frothy, given that the Hang Seng Tech gauge is trading at 18.2 times forward earnings, compared to 44.9 times four years ago.
Meanwhile, China’s 30-year bond futures slumped for a third straight day to the lowest since late January, due to outflows into stocks and tight liquidity in the money market. In the cash market, the 10-year yield climbed to 1.67%.
“Chinese equities have been trading at extremely depressed valuations with most risks well discussed and reflected in the prices,” said Sandy Pei, a senior portfolio manager for China equities at Federated Hermes. “The DeepSeek event has acted as a catalyst, boosting sentiment around Chinese equities. Despite recent performance, the market remains attractively valued.”
DeepSeek has effectively boosted investor sentiment in China’s tech sector, and the rally has been spreading beyond just tech into other sectors, including electric vehicle makers and health-care companies. That’s quite the opposite from what many Chinese investors have experienced in recent years, waiting for the government to boost the stock market, whether through stimulus roll-out or via trading purchases by ETFs known to be favored by the so-called “national team.”
Strategists at Goldman Sachs Group Inc. raised their targets for MSCI China and CSI 300, expecting double-digit gains from here. The country’s AI development has “altered the narrative of China technology, re-rated investors’ optimism about the growth of and economic benefits from AI,” strategists including Kinger Lau wrote in a note dated Monday.
