Hong Kong stocks advanced on Tuesday, with investors boosting artificial-intelligence (AI) firms amid optimism that trade negotiations will yet avert a trade war.

The Hang Seng Index closed up 2.8%. The Hang Seng Tech Index jumped 5.1%.

In terms of star stocks, XPeng rose 12%; Kingsoft Cloud rose 10%; Bilibili and Li Auto rose 9%; SMIC up 8%; JD.com up 7%; Meituan rose 6%; Xiaomi, Alibaba and Tencent rose 4%.

Shortly after tariffs on China imposed by U.S. President Donald Trump took effect on Tuesday, China's Finance Ministry said it would impose levies of 15% on imports of U.S. coal and LNG and 10% for crude oil as well as on farm equipment and some autos, starting on Feb. 10.

“The market is increasingly looking forward to the development of the mainland’s AI models, high-end chips or breakthrough technologies, pushing up the Hong Kong stock market today,” said Jason Chan, senior investment strategist at Bank of East Asia.

Although US tariffs are widely expected to hit China’s already strained economy, investors are getting some encouragement from the fact that stocks remain cheap in the country, even after a rally last year. Stocks in the Hang Seng China Enterprises Index offer a forward 12 months price-to-earnings ratio of around 8.4, compared to around 14 for a broad gauge of shares in Asia.

There is around 3% further upside in the HSCEI after today’s moves, according to Jason Chan, a senior investment strategist at Bank of East Asia in Hong Kong.