The fluctuations observed in global markets in recent times have been attributed largely to the financial maneuvers of the United States, particularly following the announcement of tariffs by the newly inaugurated PresidentWhile such developments have instigated panic and volatility in numerous markets, a distinct pattern emerges with Chinese assets, particularly within the tech sector, as they undergo a reevaluation, spurred on by a force named DeepSeek.

The entrance of the A-share market post-Chinese New Year was met with great anticipation from investorsDespite the global downturn triggered by the tariffs on goods from Mexico and Canada following President Biden’s announcement, Hong Kong’s stock market exhibited a contrast, rallying against the tide of international lossesOn February 3, 2025, the first trading day after the Spring Festival, major global securities experienced a plunge, prompting what was dubbed “Black Monday.” Nonetheless, with the influence of the “DeepSeek concept,” the Hong Kong market managed to project an independent trajectory, exemplified by a V-shaped recovery in both the Hang Seng Tech Index and the Hang Seng China Enterprises Index

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Stock performances were particularly noteworthy, with significant upward movements from firms like Kingsoft Cloud, which surged over 31%, and SMIC, climbing by more than 10%. Alibaba also observed a robust increase of 6%.

On the day preceding the launch of the A-share market, the upward momentum continued, as the Hong Kong market indices opened strong with gains beyond 3%. High-profile tech stocks maintained their rally, underscoring a favorable climate for investmentsFor instance, SMIC registered an additional 8% climb after its earlier gainsOther prominent firms like XPeng Motors, Bilibili, and Li Auto all reported increases surpassing 7%. By the end of that trading day, the Hang Seng Index achieved a closing increase of 2.83%, with the Hang Seng Tech Index rising by 5.06% and the Hang Seng China Enterprises Index gaining 3.46%. Meanwhile, other markets in the Asia-Pacific region saw modest rebounds as well

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The Nikkei 225 in Japan and the Korean Composite Index both experienced around a 1% increaseA pertinent question arises: why did the Hong Kong market manage to thrive amidst global concerns surrounding U.Stariffs? What does this signify for the impending opening of the A-share market?

According to analysts at Zhongtai International, the elevated valuations within U.Sstock markets combined with the uncertainty surrounding the newly initiated trade conflicts have fueled significant volatilityIn contrast, Hong Kong's relatively lower valuations have insulated it from excessive exposure to international fluctuations, partly due to sustained underweighting by foreign investorsMeanwhile, the burgeoning interest in DeepSeek has garnered substantial attention in global markets, offering a refreshing narrative that may alleviate some of the valuation concerns that have plagued Chinese assets over the past few years

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Positively, the anticipation surrounding China’s AI industry plays a critical role in bolstering investor confidence, particularly regarding software and computational infrastructure firms in China, conjecturing a surge in capital inflow towards these sectors in the immediate future.

The onset of tariffs has instigated a wave of anxiety in global marketsThe A-share market was still engaged in the festivities of the Snake Year when President Biden announced tariffs on goods from Mexico, Canada, and ChinaHowever, a turn of events was soon to unfoldOn February 3, at 9:21 AM local time, Mexican President AMLO disclosed via social media that the enforcement of tariffs on Mexican goods would be postponed by a month following discussions with the U.SPresidentAdditionally, Canadian Prime Minister Justin Trudeau expressed that the tariff plans for Canadian goods would also see a delay of at least 30 days

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This unexpected shift alleviated some of the market's concerns about an escalation in trade tensions, although the initial reaction was marked by a notable downturnBy the market's close on February 3, the S&P 500 had dipped by approximately 0.76%, while the NASDAQ dropped by about 1.2%.

Individual stocks in the U.Spresented a bleak scenario, with tech giants such as NVIDIA witnessing declines of up to 6%, and Apple and Tesla falling by 5.2% and 3.4%, respectivelyThe European stock market mirrored the U.Splight with significant dips across the boardCanada reported a peak decline of 3.09%, while the VIX Index, often referred to as the "fear index," surged over 24%, reflecting the palpable anxiety permeating through the marketsFast forward to February 4, when China announced retaliatory tariffs against the U.S., stating that starting February 10, 2025, certain imports from the U.S

would incur tariffs that escalated significantly based on product categoryThis move was described as a vital attempt to combat the unilateral actions taken by the U.S.

What stands out amid such turmoil is Hong Kong's remarkable ability to stage a rebound firstDuring a ceremonial address at the Hong Kong Stock Exchange, Financial Secretary Paul Chan highlighted the remarkable recovery of the Hang Seng Index, which had accumulated an impressive increase of nearly 4,500 points over the previous Dragon Year—a rise exceeding 28% that reversed three consecutive years of downturnsLooking forward to the upcoming Snake Year, Chan expressed optimism about further enhancing Hong Kong's financial landscape, with government support and collaborative efforts being pivotal in navigating the challenges and seizing opportunities to boost the attractiveness of the local equity market.

By the afternoon of February 3, the Hang Seng Tech Index had registered a notable comeback from earlier losses, with the following day witnessing significant gains as the index neared its highest mark since December 10, 2024. Noteworthy driving forces behind this independent momentum can be traced back to the DeepSeek concept

Reports from major financial institutions indicate that the global market reacted positively to DeepSeek’s revelation of a new language model in January, and its implications for the tech sector in China are substantialAnalysts emphasize that DeepSeek's ability to significantly reduce training costs reshapes previously held notions surrounding AI development expenses, thereby bolstering confidence in the technological capabilities of Chinese enterprisesThis affordable and open-source approach could democratize AI development, allowing a broader pool of companies to innovate, possibly transforming the traditional high-investment paradigm endemic to the American AI scene.

Speculation arises as to whether the A-share market will witness a “blazing start” upon its reopeningThe optimistic developments in the Hong Kong market have fueled anticipations surrounding the A-share opening post-holiday

A burgeoning sense of positivity is also emerging within the Chinese property sector, as indicated by HSBC’s findings that new home sales in January 2025 surpassed forecasts, asserting resilience in the housing market and instilling confidence in a potential turnaroundObservers note a stark contrast in performance between state-owned enterprises and private firms, with active land transactions providing promising signals for stabilization in housing pricesLeading analysts are proclaiming a new bull market cycle in the A-share arena, further underlined by supportive policies and renewed liquidity measuresAs China’s financial cycles approach critical turning points, the potential for upward movements in corporate profits is palpable, anticipating a conducive environment for capital markets.

Amidst these optimistic projections for A-shares, financial institutions are advocating for investment strategies highlighting growth sectors, particularly those aligned with advancements in technology and manufacturing, and emphasizing the importance of seizing structural opportunities as the policies evolve