Chart of the Day - HK.cash (21.02.2025)

The Hang Seng Index surged dramatically today, posting its largest single-day gain in recent months as Chinese technology stocks led a broad-based rally. The index closed up 3.7% at 23,362.09, with the tech sector experiencing its most significant jump in three years, primarily driven by Alibaba's stellar earnings report and growing optimism around China's AI capabilities.

Tech Sector Renaissance

Alibaba's shares soared nearly 14% after reporting impressive quarterly results, with revenue beating estimates and strong growth across its core businesses. The company's aggressive push into artificial intelligence, particularly CEO Eddie Wu's declaration of AGI development as their "primary objective," has reignited investor interest in Chinese tech stocks. The Hang Seng Tech Index rocketed 6.37% to levels not seen since early 2022, marking a decisive entry into bull market territory.

Tech Outperformance. Source: Bloomberg L.P.

AI Catalyst and Policy Support

The rally gains additional momentum from DeepSeek's recent AI breakthrough, which has prompted a broader reassessment of Chinese technology companies' potential in the global AI race. President Xi Jinping's recent meeting with Jack Ma and other tech executives has also bolstered sentiment, suggesting a more supportive regulatory environment for the sector's development. This shift in policy stance has helped drive a remarkable $1.3 trillion gain in Chinese stocks as global funds pile into the market.

Structural Reforms and Economic Transition

While the immediate market response is overwhelmingly positive, some analysts maintain a cautious stance. Lazard Inc.'s chief market strategist Ron Temple advocates a "rent don't own" approach, emphasizing the need for major structural reforms to sustain these growth spurts. This perspective gains relevance as Chinese officials, led by Premier Li Qiang, push for economic rebalancing toward domestic consumption and services sector expansion.

Forward Outlook

Looking ahead, the market's trajectory will likely be influenced by several key factors:

• The success of China's economic rebalancing efforts toward consumption-led growth
• Ongoing developments in US-China trade relations, particularly as Treasury Secretary Scott Bessent engages with Chinese counterparts
• The evolution of China's AI capabilities and its tech sector's global competitiveness
• The effectiveness of government measures to support private enterprise and capital markets

The current rally, while impressive, will need sustained policy support and concrete progress in economic reforms to maintain its momentum through 2025.

HK.cash (Interval D1)

Hang Seng, represented by HK.cash, is approaching its October high at 23,471. For bulls, the next resistance is set at the December 2021 high of 24,331, followed by the lower peak of a double top at 25,114. Bears, on the other hand, will attempt to break below the 78.6% Fibonacci retracement level, targeting the 61.8% Fibonacci retracement level. The RSI is in the overbought zone, which could suggest a potential correction or cooldown. Meanwhile, the MACD continues to show bullish divergence. Source: xStation