A potential meeting between Chinese President Xi Jinping and e-commerce icon Jack Ma this week, coming after a significant surge in tech shares, could serve as the next catalyst to extend the rally in China’s stocks. Prominent entrepreneurs, including Ma, have reportedly been invited to meet with the nation’s top leadership, signaling a potential endorsement of the private sector amid a growing focus on artificial intelligence (AI).
The Hang Seng China Enterprises Index rose as much as 1.7% on Monday, building on a strong week that saw the index reach its highest level since February 2022. A key tech gauge in Hong Kong has entered a bull market, driven by Chinese startup DeepSeek’s AI model, which has been hailed as a breakthrough in the industry.
Bloomberg Intelligence analyst Robert Lea suggests that such a high-profile endorsement would send a clear message of government support for the tech sector, positioning it as a future driver of economic growth for China.
The rally has been largely driven by Alibaba Group Holding Ltd., which has seen its Hong Kong-listed shares surge more than 60% since January 13. Tencent Holdings Ltd. has also experienced significant gains, with its shares rising as much as 7.8% on Monday, following the integration of DeepSeek’s AI chatbot into its popular WeChat app. Tencent’s stock has gained nearly 40% since January’s low.
While some investors worry that the rally may be overcrowded or overstretched, Xi’s endorsement of the tech sector would boost confidence in the $16 trillion Chinese and Hong Kong stock markets, which have enjoyed steady gains since mid-January.
Equity strategist Nenad Dinic at Bank Julius Baer in Zurich cautioned that, although the recent developments align with a short-term trading opportunity in Chinese stocks, the risk of a pullback increases if fresh catalysts from earnings, liquidity flows, or policy signals fail to materialize.
For Alibaba, a meeting with Xi could mark a pivotal moment, especially after Beijing halted Ant Group’s initial public offering (IPO) in 2020, which would have been the world’s largest. This move triggered a broader regulatory crackdown on the tech sector, which many viewed as too large and powerful. A meeting with Xi could send a strong message that China’s Communist Party is taking a more supportive stance toward private-sector companies.
Christopher Beddor, deputy China research director at Gavekal Dragonomics, noted that Jack Ma’s potential involvement in the meeting would symbolize the end of the tech-sector crackdown. While the crackdown has already eased, the optics of Xi encouraging Ma and other tech leaders would send a clear signal that the government’s approach has shifted.
Xi has consistently emphasized the importance of innovation as a key driver of productivity growth. Despite US restrictions on high-end chips, Beijing has intensified efforts to achieve self-sufficiency in cutting-edge technology.
From a valuation perspective, the Hang Seng Tech index is trading at 18.2 times forward earnings, which is relatively modest compared to the 44.9 times it traded at four years ago. According to Sandy Pei, senior portfolio manager for China equities at Federated Hermes, Chinese equities have been trading at depressed valuations, with most risks already priced in. The DeepSeek breakthrough has acted as a catalyst, boosting sentiment surrounding Chinese equities, which remain attractively valued despite recent performance.
DeepSeek’s success has not only bolstered investor sentiment in China’s tech sector but has also had a ripple effect across other sectors, including electric vehicle manufacturers and healthcare companies. This stands in stark contrast to the past few years when Chinese investors waited for government intervention to boost the stock market, often through stimulus measures or ETF purchases by the so-called “national team.”
The meeting between Xi and Ma, along with the continued AI-driven rally, has the potential to reshape investor sentiment and provide further momentum for China’s stock markets in 2025.
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