By Jiahui Huang

Chinese equities surged as upbeat earnings by big tech companies further ignited sentiment, adding to a recent rally driven by leader Xi Jinping's meeting with top corporate executives and the AI hype around homegrown startup DeepSeek.

Hong Kong's benchmark Hang Seng Index soared to a three-year high on Friday, ending 4.0% higher at 23477.92. The Hang Seng Tech Index, which tracks the 30 largest tech companies listed in the city, rose 6.5%, its biggest one-day gain since October, when investors' mood was lifted after Beijing's aggressive stimulus in late September.

The Shanghai Composite Index rose 0.85% and the Shenzhen Composite Index climbed 1.6%.

Investors have become increasingly bullish on Chinese equities after a week of positive news for the world's second-largest economy. E-commerce giant Alibaba reported better-than-expected earnings; Chinese President Xi met with tech business leaders, signaling that the private sector was back in Beijing's favor; and more companies announced integrations of DeepSeek's AI large language model into their products and services.

"DeepSeek has attracted global attention as it shows China's ability to compete at the highest level in AI," HSBC Global Research analysts wrote in a note. Foreign fund inflows have picked up over the past two weeks, they said.

Technology stocks led the advance as several leading Chinese companies reported earnings beats on Thursday. Alibaba Group and PC maker Lenovo Group surged 15% each on Friday. Bilibili soared 16%.

"From a long-term perspective, we turn more positive on the outlook for the China stock market," Daiwa analysts Patrick Pan and Yue Tan said in a note. China's technological breakthroughs and Beijing's pro-business shift are "game changers for China stock prices," they said.

Before the DeepSeek-led rally in Chinese stocks, market sentiment was subdued, given investors' concerns about the lack of a long-term growth driver, a prolonged property downturn and weak domestic consumption. While the sentiment has become more optimistic, some analysts have remained cautious.

Goldman Sachs said Xi's meeting on Monday was a clear sign from the top leadership that China will support private enterprises, but implementation, including more demand-side stimulus and market-friendly policy reforms, remain key to rebuilding investors' confidence.

Analysts at Daiwa said expectations for Beijing's policies are now high ahead of the National People's Congress meeting in early March, where top policymakers will release their economic plan for the year and the GDP growth target for 2025. Investors might be setting themselves up for disappointment, they said.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

February 21, 2025 06:25 ET (11:25 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.