Chinese stocks in Hong Kong posted a 15-month high amid a rally in the IT sector

Chinese stocks on the Hong Kong Stock Exchange rose at their fastest pace in 15 months during trading on July 8, Bloomberg reported. Investors began shifting capital from overheated technology sectors in other countries, including South Korea, to undervalued assets in China. News that local AI model developers are designing their own chips provided an additional boost.

The Hang Seng China Enterprises Index rose 4.5%—its biggest gain since April 2025, according to Bloomberg. Alibaba shares soared 12.6%, Tencent gained nearly 4%, and shares of chipmaker SMIC rose 3%. Overall, Hong Kong’s technology index rose by just under 5%.

The rebound came after several key Hong Kong indices entered "bear market" territory (a term used to describe a decline of more than 20% from a recent peak) due to a crisis of confidence in the e-commerce sector and general concerns about the outlook for China’s economy, Bloomberg notes. Since the start of the year, the Hang Seng Tech and Hang Seng China Enterprises indices are still down 14% and 9%, respectively, remaining among the world’s worst-performing indices.

In the U.S. market, by contrast, the technology sector found itself caught up in a wave of selling the day before. On July 7, the Nasdaq 100 index lost 1.8% as investors continued to offload overvalued AI-related stocks.

Until now, the Chinese market had lagged far behind its neighbors, while the stock exchanges in South Korea and Taiwan posted record gains thanks to the semiconductor boom, according to Bloomberg. Now the situation has reversed. In South Korea, the Kospi index plummeted 5.4%, bringing its decline from last month’s all-time high to about 20%. This decline pushed the Kospi into a technical “bear market” after an impressive rally that had previously made it the world’s best-performing major benchmark in 2026. Taiwan’s Taiex also posted a decline.

“The outperformance of Hong Kong markets is linked to global funds scaling back their paired trades. They are pulling money out of markets tied to AI infrastructure and redirecting it to segments with lower valuations and value stocks,” explained Jason Chan, senior investment strategist at Bank of East Asia (as quoted by Bloomberg).

A Reuters report that the startup DeepSeek is developing its own chip for AI systems, along with a report from The Information that Zhipu plans to design its own processor, provided further cause for optimism regarding Chinese companies’ stocks.

"Given the geopolitical context, this is a powerful catalyst. To achieve these goals, DeepSeek will inevitably have to collaborate with local chip manufacturers," says Stephen Zeng, an analyst at Bloomberg Intelligence.

Expectations surrounding Alibaba's quarterly earnings report also contributed to the positive sentiment—in particular, analysts are highly impressed by the partnership between its marketplace, Lazada, and Meta Platforms.

This article was AI-translated and verified by a human editor