Hong Kong shares soar to three-year high as tech rally continues

Hong Kong stocks rallied to a three-year high on Tuesday, led by gains in tech shares, while investor sentiment was bolstered by China's fresh stimulus and improving economic data.

** The Hang Seng Index closed up 2.5% at 24,740.57, its highest level since February 2022. The Hang Seng Tech Index advanced 4%.

** Baidu surged 12.2% to the highest since October, as investors continued to scoop up its shares following the launch of two new artificial intelligence models. Alibaba climbed 5.8% and Tencent gained 3.2%.


** On the mainland, China's blue-chip CSI 300 index climbed 0.3%, while the Shanghai Composite index edged up 0.1% to a three-month high.

** The Hang Seng Index has surged over 23% this year, ranking it as the best performer among major global indexes, as investors increasingly see the beaten-down markets as a shelter amid a faltering U.S. exceptionalism.

** Improving consumption data and fresh stimulus to boost domestic spending have helped alleviate concerns about economic fundamentals despite U.S. tariff risks, emboldening investors to chase the rally.

** "We believe there is further room for a re-rating and even a premium to emerging markets could be justified," HSBC analysts said in a note.

** There is a rotation from AI to quality growth sectors, and "old-economy" sectors may eventually benefit, they added.

** The Hang Seng rally has also narrowed the discount between Hong Kong shares and their onshore peers, with the Hang Seng Stock Connect China A/H Premium Index dipping to the lowest level since 2020.

** Around the region, MSCI's Asia ex-Japan stock index was firmer by 1.3% while Japan's Nikkei index was up 1.2%.