In a significant turnaround, China's stock markets closed higher on Tuesday, bouncing back from a recent two-month low. The rally was primarily fueled by a strong performance in the technology sector, buoyed by signs of easing geopolitical pressures and renewed global confidence in the artificial intelligence industry.
Market Rebound Led by Tech and AI
China's blue-chip CSI300 Index concluded the session with a solid 1% gain, while the Shanghai Composite Index advanced by 0.9%. Mirroring the positive sentiment on the mainland, Hong Kong's benchmark Hang Seng Index also moved upwards, rising by 0.7%.
The onshore market saw particularly robust activity in specific sectors. Shares related to artificial intelligence spearheaded the gains, climbing an impressive 2%. The momentum extended to the communications sector, with the CSI 5G Communications Index jumping nearly 4%.
Geopolitical Calm and Global Cues Boost Sentiment
A key factor behind the market's optimism was a notable de-escalation in geopolitical rhetoric. The positive shift was highlighted by former US President Donald Trump's comment on Monday, where he described relations with China as 'extremely strong'. This followed a conversation with Chinese leader Xi Jinping, who reiterated that Taiwan's 'return to China' is a fundamental aspect of Beijing's global vision.
Hong Kong-listed technology majors also enjoyed a positive day, rising 1.2%. This uptick was partly influenced by an overnight rally in their counterparts on New York's stock exchanges. Despite this gain, it's important to note that the Hong Kong tech index remains down by nearly 20% from the four-year peak it reached in early October.
Analyst Outlook and Corporate Moves
Despite a trend of profit-taking this month in sectors that had performed well in 2025, such as technology and innovative drugs, analysts maintain a bullish long-term view. Analysts from Zhongtai Securities expressed confidence, stating in a note, 'We believe the current tech rally is far from over and is likely to resume after a short-term pullback. The key reason is that a fundamental reversal in the U.S. AI industry appears unlikely, which should leave ample room for valuation expansion among comparable A-share companies.'
Individual stocks also contributed to the positive narrative. Shares of e-commerce giant Alibaba increased by 2.1% as investors awaited its earnings report, which was anticipated to influence sentiment across the Chinese tech landscape. In another significant move, Xiaomi's stock closed 4.4% higher after its founder and chairman, Lei Jun, purchased additional shares in the open market, signaling strong insider confidence.
