Hong Kong Stocks Rally as Investors Anticipate Major Fund Inflows Under China's Supportive Plans

Market Overview: Hong Kong and China Stocks Surge

Hong Kong stocks rose sharply, setting up a winning month ahead as investors anticipate significant fund inflows following China's stepped-up efforts to bolster its financial markets against the backdrop of U.S. tariff policies. The Hang Seng Index advanced 1% to 20,258.80 at 10:10 AM local time, building on a 0.8% gain for the year, while the Tech Index increased by 1.5%. Meanwhile, the Shanghai Composite Index climbed 0.5%.

Key Drivers of Growth

• Baidu led the rally with a 4% surge to HK$84.80.
• Alibaba Group climbed 2.8% to HK$87.15.
• Trip.com advanced 2.7% to HK$555.50.
• Xiaomi added 0.7% to HK$37.10.

Swiss investment bank UBS forecasts that China’s plan to inject long-term capital into the stock market could lead to 1.7 trillion yuan (US$236.2 billion) in inflows from various investment sources, including insurers and mutual funds. The China Securities Regulatory Commission unveiled measures to boost index-linked investment, responding to U.S. policy uncertainty.

Impact of U.S. Policies

President Trump has threatened tariffs on Chinese goods, raising concerns over the potential impact on the H-share market. In light of this, the local markets are preparing for temporary shutdowns, coinciding with the Lunar New Year holiday.

In economic news, China's PMI manufacturing index fell to 49.1 in January, signaling a slowdown, as noted by Goldman Sachs.

Asian Market Reactions

Major Asian indices displayed mixed performance, with South Korea’s Kospi gaining 0.8%, while Australia's S&P/ASX 200 rose by 0.4%. However, Japan’s Nikkei 225 lost 0.5% amid the global market volatility.