DeepSeek Dominates Discourse Amidst Lunar New Year Quiet
The financial landscape in East Asia witnessed a subdued trading session as markets grappled with the extended Lunar New Year holidays. Mainland China, Indonesia, Malaysia, and Taiwan remained closed, while South Korea observed its own New Year celebrations. Hong Kong experienced a truncated trading day, concluding early with modest gains driven primarily by internet giants like Tencent, Xiaomi, Alibaba, and Baidu. The backdrop of these market closures allowed the narrative to be dominated by DeepSeek, an AI entity whose pronouncements and potential impact on various sectors became a focal point of discussion.
DeepSeek’s Influence and Market Reactions
DeepSeek’s presence resonated across the market, particularly in the energy sector. Utilities and related sub-sectors, including nuclear energy and materials, experienced downward pressure as investors reassessed anticipated energy demands in light of AI-driven efficiencies. The query from a Mainland reporter about outperforming the A-shares market elicited a response from DeepSeek advocating for investments in leading companies with robust fundamentals, technical strength, and alignment with policy support. This advice, coupled with the decline in US technology stocks, underscored the interconnectedness of global markets and the region’s exposure to technological shifts.
Real Estate Sector Dynamics and Nationalization Speculation
The troubled state-owned enterprise (SOE) developer, Vanke, saw its stock price appreciate following the appointment of Shenzhen Metro Chairman Xin Jie as the new Chairman of the Board, replacing the resigned CEO. This move fueled speculation about potential government intervention and support for the struggling developer, raising the prospect of Shenzhen’s local government effectively taking control. The broader discussion surrounding the potential nationalization of property developers gained traction, particularly in light of recent observations from trips to China and Hong Kong, suggesting that such a drastic measure might be necessary to stabilize the sector. Positive news emerged regarding new home sales in January, reportedly increasing by 33% year-over-year in major cities, offering a glimmer of hope for the beleaguered real estate market. Geopolitical developments also played a role, with the resumption of direct flights between India and China signaling improving relations.
Reflecting on the Year of the Dragon and Looking Ahead to the Year of the Snake
The conclusion of the Year of the Dragon provided an opportunity to reflect on market performance. The Hang Seng index saw a remarkable 33% return over the past year, while the Hang Seng Tech index surged by an impressive 50%. These gains, exceeding many investors’ expectations, highlight the positive trajectory of the market. The concept of higher highs and higher lows reinforcing an uptrend underscores the optimism surrounding the market’s future. As the Year of the Snake commences, market participants hope for a continuation of this upward momentum.
Hong Kong Market Performance and Sectoral Trends
The Hong Kong market experienced a quiet trading session, with the Hang Seng and Hang Seng Tech indexes registering marginal gains on significantly reduced volume. The majority of stocks declined, reflecting a cautious sentiment among investors. Short selling activity also decreased considerably, suggesting a reduced appetite for bearish bets. Growth and small-cap stocks outperformed their larger, value-oriented counterparts, indicating a preference for companies with higher growth potential. Technology, consumer staples, and communication services emerged as the top-performing sectors, while materials, financials, and energy lagged behind. Within these sectors, sub-sectors like consumer staples, household/personal products, and technology hardware showed strength, whereas national defense, nonferrous metals, and coal experienced weakness. Southbound Stock Connect, which facilitates trading between Hong Kong and Mainland China, remained closed.
Mainland China Markets Remain Closed
Mainland China’s stock markets, including Shanghai, Shenzhen, and the STAR Board, remained closed for the Lunar New Year holiday. This extended closure limited market activity in the region and further accentuated the focus on DeepSeek and its potential implications. The reopening of these markets will be closely watched for any reactions to the evolving narrative surrounding AI, the real estate sector, and global market trends.
