By Summer Zhen and Jiaxing Li
HONG KONG (Reuters) – China’s apparent breakthrough in AI and rapprochement with tech giants has sent Hong Kong stocks and internet giants soaring, but the buyers behind it are flighty and brokers say global investors are wary of big bets while markets swing wildly.
Hong Kong’s Hang Seng (^HSI) has roared back from a run of lean years to vie with Germany’s DAX as the world’s best-performing market for the year so far, with gains of 13% and 13.1% respectively, against a 4% rise for the S&P 500 (^GSPC).
Hong Kong tech shares have surged 31% since the middle of January to hit three-year highs on Monday, while President Xi Jinping sat down with top tech leaders in Beijing.
Prices gyrating as investors scoured pictures and footage of the meeting for the faces of top bosses neatly underscored the fevered speculation and the degree of hope behind the rally.
Trading also illustrated what has become an adage of investing in China in recent years, that the biggest prize goes to the earliest movers, especially if they can get out as soon as the euphoria begins to fade.
“As with moves in the past two years or so in HK/China, it’s very retail driven (and volatile) – a trading market,” said Wong Kok Hoong, head of equity sales trading at Maybank.
“Hedge funds or the more Hong Kong-China centric funds are well aware of the dangers of not rushing in from the onset.”
Data from brokers seems to show that is exactly who is buying.
CICC estimates that cumulative southbound flows – that is, buying by mainland investors – have reached HK$26.6 billion ($3.4 billion) since the Lunar New Year holiday in early February, on par with a record-breaking rush in September.
A Morgan Stanley note on hedge fund positioning showed net exposures near their highest in a year, with buyers mostly in Asia and taking long positions, rather than covering short bets.
“Hot money is driving the market for the past two weeks,” said Steven Leung, who handles institutional clients at brokerage UOB KayHian in Hong Kong, referring to funds controlled by investors seeking short-term returns.
The rally’s triggers include the sudden popularity of Chinese AI startup DeepSeek, which has developed an AI model far cheaper than U.S. rivals, relief that China has not been hit with big U.S. sanctions, and the sight of Xi meeting with tech leaders.
Shares in Alibaba (BABA, 9988.HK) have headlined the rally on news of an AI partnership with Apple (AAPL) along with the appearance of founder Jack Ma, who has kept a low profile over years of crackdowns on China’s tech giants, at this week’s symposium with Xi Jinping.
