China Tech Rally Continues, Week In Review

Key News

Asian equities were mixed but mostly higher overnight as Hong Kong and Mainland China outperformed and Indonesia and the Philippines underperformed.

DeepSeek announced that it would be restricting access to its servers due to capacity constraints. This is interesting as, while its model was efficient and relatively cheap to develop, ever-increasing demand for querying it still demands a great deal of server space. This led cloud computing and data infrastructure names to continue their rise. Tuya, in particular, gained +43% after advertising to developers that they can access DeepSeek’s models through their system.

The electric vehicle ecosystem also performed well overnight, especially Geely, up +8%, and Li Auto, up +8%. The gains were seemingly driven by enthusiasm over potential technological advances in China’s vehicle industry using AI. However, semiconductor names were mostly lower.

Tencent was the most heavily traded stock in Hong Kong by value, gaining +1.86%, followed by smartphone maker Xiaomi, which gained +4.96%. These names helped lead the technology surge this week higher, finishing strong overnight.

US Treasury Secretary Scott Bessent gave an interview to Bloomberg News yesterday. He said that he was not sure of the long-term inflationary impact of tariffs. He said that the effect would be offset by other policies, such as deregulation. He also cited China’s excess capacity as a reason for the lack of inflationary pressure stemming from tariffs. Our thesis continues to be that tariffs are an opening salvo in a trade negotiation. The first call did with Xi apparently did not accomplish this, though. As the most complex and important trade relationship the US has, getting China trade right will take some time.

All sectors were higher in Mainland China’s markets.

The Hang Seng and Hang Seng Tech indexes both closed higher by +1.16% and +1.80%, respectively, overnight on volume that increased +38% from yesterday. Mainland investors bought a net $136 million worth of Hong Kong-listed stocks and ETFs overnight via Southbound Stock Connect. The top-performing sectors were Information Technology, which gained +4.54%, Real Estate, which gained +2.00%, and Consumer Discretionary, which gained +1.81%. Meanwhile, the worst-performing sectors were Energy, which fell -1.10%, Health Care, which fell -0.42%, and Utilities, which fell -0.21%.

Shanghai, Shenzhen, and the STAR Board all closed higher by +1.01%, +1.61%, and +0.75%, respectively. The top-performing sectors were Consumer Discretionary, which gained +2.74%, Real Estate, which gained +2.25%, and Information Technology, which gained +1.96%. Meanwhile, the worst-performing sectors were Utilities, which gained +0.03%, Financials, which gained +0.66%, and Energy, which gained +0.72%. Exchange rates and yields were mostly flat overnight.

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