Hong Kong's financial markets have begun the new year with a powerful surge, with stocks climbing to their highest point in a month. The rally was primarily fueled by renewed confidence in China's domestic artificial intelligence sector, setting a bullish tone for 2026.
Market Rally Led by Tech and AI Stocks
By the midday trading break on Friday, January 2, the benchmark Hang Seng Index had gained 2.2% to reach 26,189.79. This marked the index's highest closing level since December 2, extending the positive momentum from 2025, which was its best annual performance since 2017.
The technology sector was at the forefront of this upward move. The Hong Kong tech sector index leaped by an impressive 3.4%, hitting its highest point since November 18. Similarly, the dedicated artificial intelligence (AI) index added 3.2%. This widespread optimism follows a significant development in the AI space earlier in the week.
DeepSeek Report and Biren's Blockbuster Debut Fuel Sentiment
A key catalyst for the rally was a research paper published this week by AI firm DeepSeek. The paper showcased a more cost-effective method for developing artificial intelligence, which reignited investor belief in Chinese technological capabilities. Analysts at Guolian Minsheng Securities noted in a client note that "AI technology narratives will still be the main theme running throughout the year", with DeepSeek's advancements continuing to drive a revaluation of Chinese assets.
Adding explosive momentum to the trading day was the market debut of Shanghai Biren Technology. Shares of the Chinese AI chip designer more than doubled in their Hong Kong listing, marking the financial hub's first IPO of 2026 with a spectacular bang. Wee Khoon Chong, APAC Macro Strategist at BNY, observed that "Tech optimism continues" and the stellar IPO performance gave an additional boost to overall market sentiment.
Major Gainers and Market Context
The buying frenzy was not limited to AI. Several other major technology and semiconductor firms posted significant gains:
- Hua Hong Semiconductor: The chipmaker's stock jumped nearly 10%, reaching its highest price since November 20. This extends recent gains following the company's announcement of a deal to enhance its 12-inch wafer foundry capacity.
- Baidu: The search engine giant rallied 7.5%, climbing to its highest share price level since September 2023.
Meanwhile, stock markets in mainland China remained closed on January 1 and 2 for the New Year holiday. Trading is scheduled to resume on Monday, January 5. The strong performance in Hong Kong, often a bellwether for Chinese tech sentiment, sets a positive stage for the region's financial year ahead.
