Hang Seng Index: AI Race Heats Up as Real Estate, Tech Stocks Lead the Way

US Markets Fall on Services Inflation Trends

On Friday, January 24, US equity markets ended the week in negative territory. Investors reacted to January’s Services PMI data, raising uncertainty about a potential Fed rate cut. The Nasdaq Composite Index declined by 0.50%, while the Dow and the S&P 500 fell 0.32% and 0.29%.

US Services Inflation Accelerates

The US S&P Global Services PMI declined to 52.8 in January, down from 56.8 in December. Economists attributed the pullback in sector activity to adverse weather. However, services sector price trends raised concerns about a more hawkish Fed rate path. Service sector inflation accelerated at the most marked pace since September, challenging bets on an H1 2025 Fed rate cut. Rising inflation trends may force the Fed to delay rate cuts.

Higher borrowing costs may pressure company earnings, valuations, and demand for riskier assets.

China’s Private Sector PMIs Disappoint

China’s economic data came under scrutiny following better-than-expected Q4 GDP numbers. On January 27, the National Bureau of Statistics (NBS) reported that Manufacturing PMI fell to 49.1 in January, down from 50.1 in December. The manufacturing sector contracted for the first time since September, signaling weakening demand. Meanwhile, services sector activity stalled as the NBS Non-Manufacturing PMI dropped from 52.2 in December to 50.2 in January.

January’s data highlighted China’s economic challenges as Beijing rolls out stimulus measures amid potential US tariffs.

Hang Seng Index Rises on Beijing’s Stimulus Plans

The Hang Seng Index advanced by 0.95% on Monday morning. Investors brushed aside the weak private sector PMI data amid expectations of Beijing’s capital injection plans boosting demand for Hong Kong and Mainland China-listed stocks.

Brian Tycangco, editor and analyst at Stansberry Research, shared news of Beijing’s second round of insurance fund stock investment pilot programs, saying:

“While 50bn yuan isn’t an enormous amount, deploying this before the Spring Festival this week is sure to cause waves in the A share market.”

Real estate and tech stocks led the gains. The Hang Seng Mainland Properties Index gained 1.86%, while the Hang Seng Tech Index advanced by 1.14%. Tech giants Baidu (9888) and Alibaba (9988) surged by 3.74% and 3.13%, respectively. News of Chinese AI platform DeepSeek surpassing ChatGPT on Apple’s app download rankings in the US fueled demand for tech stocks. The news suggested China could compete in the AI race despite US restrictions.

However, Mainland China’s equity markets saw more modest gains. The CSI 300 and the Shanghai Composite rose 0.05% and 0.32%, respectively. The weak PMI numbers left the Mainland China markets trailing the Hang Seng.

Nikkei Index Retreats Amid Tech Stock Concerns

Japan’s Nikkei Index declined by 0.58% on Monday morning despite the USD/JPY pair hovering above the 155.5 level. The launch of China’s DeepSeek AI platform fueled concerns about tech stock valuations. Tokyo Electron (8035) and Softbank Group Corp. (9984) tumbled by 4.53% and 6.28%, respectively, dragging the Index into negative territory.

ASX 200 Supported by Banking, Mining, and Tech Stocks

Australia’s ASX 200 Index gained 0.36% on Monday morning. Banking, mining, and tech-related stocks contributed to the gains.

Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) rose 0.49% and 0.28%, respectively. Iron ore spot prices extended gains from Friday, advancing by 0.50% on Monday, boosting demand for mining stocks.

Meanwhile, falling US Treasury yields drove demand for high-yielding Aussie banks. The Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) posted gains of 0.51% and 0.615, respectively.

Outlook: Risks and Opportunities Ahead

Geopolitical tensions and economic uncertainty remain key themes. US tariff threats, central bank policies, and AI developments will likely influence market sentiment. While tech and AI sectors may outperform, trade-sensitive industries, including mining, may face ongoing volatility.

Traders should closely monitor US tariff developments, inflation trends, and monetary policy signals to navigate evolving market dynamics. Discover strategies to navigate this week’s market trends here.