Hang Seng Index: AI Stocks Mixed as Tencent Surges, Baidu Drops Pre Earnings

US Markets Mixed Despite Weak US Data

On Friday, February 14, US equity markets ended the week with mixed performances as investors assessed US data. The Nasdaq Composite Index rose 0.41%, while the Dow and S&P 500 posted losses of 0.37% and 0.01%, respectively.

Tariff uncertainty pressured risk assets after Trump’s February 13 announcement of tit-for-tat tariffs, potentially effective April 1. Tariffs could raise import prices, fueling inflationary pressures. Tariff-driven inflation could offset softer demand-driven inflation, potentially supporting a more hawkish Fed rate path. Higher borrowing costs may pressure corporate earnings, valuations, and demand for risk assets.

In the bond markets, 10-year Treasury yields extended Thursday’s losses, falling to a session low of 4.447%, reflecting sentiment toward US data.

US Retail Sales Signal Softer Demand-Driven Inflation

On February 14, US retail sales declined by 0.9% month-on-month in January, reversing a 0.7% rise in December. Analysts attributed the sharp fall to severe weather, wildfires, and tariffs. The pullback in consumer spending could ease demand-driven inflationary pressures, supporting expectations of a more dovish Fed policy.

However, a tight labor market and resilient wage growth may challenge the Fed’s willingness to cut rates further. Recent unemployment and wage growth figures suggested a potential pickup in consumer spending and inflationary pressures.

Friday’s US session set the tone for Monday’s Asian market performance.

China Symposium in Focus Amid Tariff Threats

Amid ongoing US-China tariff tensions, China’s President Xi Jinping attended a symposium on private enterprises. While details of his speech remain undisclosed, markets expect Beijing to introduce measures to bolster domestic and overseas business expansion to counter potential tariff impacts. Updates from the symposium could influence Hong Kong and Mainland China market trends.

The AI sector remains another key focus as global competition for dominance intensifies.

On February 14, CN Wire reported:

“Baidu Search and the Ernie AI Agent Platform have announced that they will fully integrate the latest deep search capabilities of DeepSeek and the Ernie large model.”

Brian Tycangco, editor and analyst at Stansberry Research, commented:

“First Alibaba, then Tencent, and now Baidu. Every major AI company in China is integrating DeepSeek. DeepSeek put China in the global AI race, driving demand for Hang Seng Index-listed AI stocks.”

Year-to-date, Alibaba (9988) is up 50.49%, with Tencent (0700) advancing by 18.04%. Baidu meanwhile trails, rising 8.71%. In contrast, Nvidia (NVDA) has gained just 3.40% year-to-date.

Hang Seng Index Reverses Early Losses

In Asian markets, the Hang Seng Index advanced by 0.17% on Monday morning, recovering from early losses. Investor optimism about private enterprises boosting business activity and potential stimulus measures bolstered demand for Hong Kong-listed stocks.

However, it was a mixed morning for Hong Kong’s tech giants. Tencent rallied 4.67% as its Weixin app began testing DeepSeek integration. Meanwhile, Baidu tumbled 6.63% ahead of its February 18 Q4 earnings report.

Mainland China’s equity markets logged modest morning gains amid ongoing uncertainty about US tariffs. The CSI 300 and the Shanghai Composite Index rose 0.07% and 0.06%, respectively.

Nikkei Index Advances on Earnings and Tech Strength

Japan’s Nikkei Index rose 0.13% on Monday morning. The gains were modest as upbeat Q4 GDP data from Japan boosted bets on a second Bank of Japan rate hike in H1 2025. Japan’s economy grew by 0.7% quarter-on-quarter in Q4 2024, accelerating from 0.4% in the previous quarter.

Notably, the USD/JPY pair reacted to the data, falling 0.34% to 151.771. A stronger Japanese Yen may impact overseas earnings and valuations.

Despite the stronger Yen, Sony Corp. (6758) rallied 3.67%, extending its earnings-driven gains from February 14. However, Nissan Motor Corp. (7201) dropped by 0.56%, pressured by the stronger Yen.

ASX 200 Retreats as RBA Decision Looms

Australia’s ASX 200 Index declined by 0.50% on Monday morning, tracking the Dow Jones into negative territory. Investors turned cautious ahead of crucial corporate earnings results and the looming RBA interest rate decision.

Markets are pricing in a possible RBA rate cut on February 18. However, uncertainty about the RBA’s rate path influenced sentiment. While losses were broad-based, banking and gold-related stocks led the declines.

Westpac Banking Corp. (WBC) tumbled 4.09% after releasing disappointing earnings. Net interest margins (NIM) fell in the quarter, a key earnings metric.

Meanwhile, Northern Star Resources Ltd. (NST) slid 3.88% after gold prices tumbled 1.56% to $2,883 on February 14.

This morning, BHP Group Ltd. (BHP) and ANZ (ANZ) will also report earnings, keeping the mining and banking sectors in focus.

Outlook: Risks and Opportunities Ahead

Looking ahead, corporate earnings, central bank policy decisions, US tariff developments, and the AI sector’s growth will continue to influence sentiment. AI stocks could extend their gains as strategic partnerships and innovation fuel optimism. However, US tariff uncertainty may continue to heighten volatility across targeted sectors.

Discover key strategies to navigate these market risks here.