In the current landscape of the Hong Kong stock market, we observe a convergence of powerful forces driving change and presenting new opportunities for investorsThe presence of internet giants establishing substantial market share, along with leading semiconductor manufacturers striving for domestic alternatives, indicate a landscape rich with potentialMoreover, a nurturing ethos within the market hints at the emergence of disruptive innovators akin to the newly launched DeepSeek technology, which could reshape industries.

This "bridgehead" of the new Chinese economy is brimming with a new type of productive force, effectively moving the market away from previous periods characterized by undervaluation and untapped potentialIt is paving the way towards an expansive horizon of AI and technology, embodying the fervor of a country's aspirations to redefine its global standing.

History often makes its statements quietly, and as the spring of 2025 approaches, a revolution borne from "Chinese-style innovation" is quietly rewriting the narrative governing our capital marketsThe advent of the Deep Seek R1, with a surprisingly low entry cost of under $6 million, dismantled the barriers posed by the capabilities of systems like GPT-4. Additionally, the astonishing online debut of the humanoid robot Zhi Ren, which became an instant sensation at the Spring Festival gala, has positioned Chinese technology as a focal point of international capital markets, directing attention to the East.

Since the nadir on January 13, the Hang Seng Index has gained over 20%, while the Hang Seng Technology Index surged by more than 37%. Following the significant "924" market rally, the Hong Kong stock market has once again knocked on the doors of a technical bull market.

With this substantial spike in market activity, we now find ourselves facing a pivotal "discrepancy." What can we expect concerning the sustainability of Hong Kong's market rally? And where will this current technical bull market lead us next?

When comparing the recent market surge to the "924" event, we must ask ourselves what distinguishes them.

The shift from "emotional repair" to a "narrative turn" is striking

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Unlike the "924" rally, predominantly driven by macroeconomic policy expectations that resulted in a momentary emotional uptick, the recent uptick in the Hong Kong market is fueled by deeper systemic energies—stirred by technological revolutions and industrial synergyIt marks an important juncture in the narrative of a great power.

If we trace the origins of this current rally to the advent of the DeepSeek-R1 model during the Spring Festival, sparked by its cost-effectiveness and open-source model that reignited optimistic assessments of China's AI industry applications, we can witness a shift toward equal technological footing that invigorated China's computational capabilities and applications.

The proliferation of a positive market sentiment has been catalyzed by a series of significant developmentsFrom the convening of private sector roundtables to Tencent's incorporation of DeepSeek to enhance its AI application framework, not to mention Alibaba's ambitious and surprising capital expenditure plans for AI—these elements have all contributed to the ongoing positive sentiment within the marketplace.

This market surge cannot be attributed to any singular influenceInstead, it's been a symbiotic development that has led to the dual-driven "AI revolution plus valuation recovery," ushering in a transformation of asset valuations in China.

As we navigate through this progression, three categories of Chinese assets are coming to the fore:

First, at the application level, the innovations stemming from DeepSeek have introduced drastic cost optimizations, enabling a rapid expansion of AI applications across different verticals, potentially driving a "Cambrian explosion" of AI functionalities in the market.

Second, in terms of terminals, the integration of AI technologies into intelligent devices through interfaces and large model assistants enriches user experiencesWith ongoing product iterations, demands for AI terminals—including robotics, consumer electronics, and smart vehicles—are on the verge of significant expansion.

Third, we must consider the foundational computational power that underpins "hard technology." Just as energy-efficient appliances do not decrease the need for electricity but can increase usage, foundational computational power remains critical within the industry landscape, providing assuredness amid the waves of AI development.

A report from Deutsche Bank, entitled "China Eats the World," may have shocked the establishment, yet within the trading floor of the Hong Kong Stock Exchange, the signals are apparent:

Alibaba's staggering single-day trading volume hitting HKD 44.5 billion, Tencent's market capitalization bouncing back to HKD 4 trillion, and the record high share prices for SMIC tell us a unified story:

The Chinese tech giants, once branded with "valuation discount" labels, are now transforming into the darlings of global capital seeking future growth.

International capital has clearly recognized this paradigm shift

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The Hang Seng Technology Index’s performance in leading global indices indicates not only a recovery of undervalued assets but a measured recalibration of international capital's perceptions of Chinese tech assets.

In essence, Hong Kong's current market is a tapestry woven from the robust ecosystems fostered by internet behemoths, the ambitious narratives of semiconductor leaders, and an environment ripe for the next generation of disruptors like DeepSeek.

The pinnacle of this new Chinese economy, characterized by its increased productive capabilities, is steering previous years' undervalued territories into the vast seas of AI and technology potential.

Looking ahead, we ponder the trajectory of this rallyStanding at the crossroads now, the market has transitioned through a substantial uptick, and consensus has shifted from skepticism to broader agreement.

Beyond fear of missing out (FOMO) after missing previous opportunities, it is crucial to uphold rationality and logic, acknowledging that market trends are inherently non-linearMajor advancements are seldom attained without encountering setbacks along the way.

According to China International Capital Corporation (CICC), several factors will govern the future performance of Hong Kong stocks:

First, catalysts specific to the industries themselves, akin to how the recent Alibaba earnings conference steered market sentiments.

Second, we need to gauge the degree of technical exhaustion; during periods when fundamental progress is stagnant, we should continue to monitor emotional influences on short-term market behaviors.

Third, the resilience of capital inflows continues to rely on more pronounced signals from fundamental and industrial trends; ongoing purchasing power remains primarily driven by southern investors alongside passive, transactional market participants, making them susceptible to emotional fluctuations.

Fourth, broader macroeconomic developments, such as the forthcoming Two Sessions and policy updates, as well as external disturbances like the Federal Reserve's interest rate adjustments and the U.S. presidential policy developments.

For the tech sector represented by the Hang Seng Technology Index, a strong re-evaluation and awakening are paramount

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This cognitive re-pricing serves as a crucial step toward medium and long-term maturity, perpetuating the underlying logic.

The market is simultaneously engaging with certainty and expectations—balancing reality with aspirations.

On the subject of "reality," it’s worth noting that the three critical long cycles for Hong Kong stocks have breached their nadirs and are now on an upward trajectory.

From a liquidity cycle perspective, while U.S. inflation data has shown fluctuations, the direction of interest rate policies is unlikely to reverse; the global resonance of accommodative measures remains intact.

Regarding the valuation cycle, though the Hang Seng Index has experienced a half-year of corrective rallies, its current PE-TTM standing is at a mere 29% based on ten-year average metricsWith the recovery of risk premiums and margins for safety, significant pressures remain unestablished.

Examining profit cycles, Hong Kong's earnings are heavily influenced by China's overall economic performance, currently situated at the foundational recovery stageWith ongoing policy efforts and a technology narrative replacing outdated economic paradigms, indicators of a new cycle are beginning to emerge.

When it comes to our overarching vision—the beginnings of an AI breakthrough that leads to much more than just advancements in artificial intelligence.

In the long run, as the third wave of AI sweeps across the globe, the rise of domestic AI capabilities signifies more than just a shift in technologyIt embodies a re-evaluation of China's technological prowess and a realignment of market valuations—proving China's tech scene is becoming increasingly competitive on the global stage, advancing from a position of catch-up to one of leadership in certain sectors.

With the valuation frameworks of NASDAQ in tension due to Sino-American technological rivalries, while the narrative of hard tech in the A-shares market evolves from mere thematic speculation to actual viability, the Hong Kong market retains its unique offshore identity as the optimal conduit for global capital seeking to tap into Chinese tech.

Reflecting on the immense valuation gains witnessed by the “Seven Giants” in the AI surge, the valuation frameworks for Hong Kong's tech leaders may just be beginning to flex their upward potential.

This signifies that the current upheaval in the global financial markets not only reflects short-term emotional fluctuations but heralds deeper transformations in market structures.

As we approach Spring 2025, witnessing the technological waves brought forth by DeepSeek reverberate across the waters of Hong Kong, and as Tencent and Alibaba navigate toward advanced arenas of AI, the market breakthrough encapsulates an industrial revolution scripted by Chinese engineers through their codes, alongside capital forming a pivotal awakening of value.

National policies have clearly amplified the call for a "strong tech nation": from private sector sittings to the widespread rollout of new AI infrastructures, these macro-level narratives are translating into tangible profitability at the stock level, reshaping the future of the Hong Kong Stock Exchange.

The values embodied in Hang Seng ETFs and Hang Seng Technology ETFs may reach far beyond mere short-term price contestations; they seem to be emerging as key topics for global asset allocation considerations.

This moment in the Hong Kong stock market signifies that the morning haze over Victoria Harbour is lifting, and the giant vessel carrying the nation's innovative strengths is sounding its horn as it embarks toward the depths of the AI revolution.

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