Chinese stocks are surging as US markets struggle under President Donald Trump’s economic policies. The Hang Seng China Enterprises Index has jumped 13% since January 17, the last full trading day before Trump took office, making it the best-performing index among 92 global benchmarks.
The broader Hang Seng Index follows closely at 12%, according to Bloomberg data. Meanwhile, cryptocurrencies have plummeted (with Bitcoin even touching $94k at one point), the US dollar has weakened, and the S&P 500 remains stagnant.
The unexpected rally in Chinese equities comes despite Trump’s promises to crack down on China. His 10% tariffs on Chinese imports, imposed within his first month, are far below the 60% or more he threatened during his campaign. Investors betting on China’s downfall are now reconsidering as the country’s tech sector gains ground and money managers slowly change their strategies.
Chinese AI breakthrough fuels stock surge
Chinese tech stocks are leading the market. Alibaba, Lenovo, and BYD have each surged over 33%, Bloomberg reported. On Wednesday, Alibaba jumped 8% after reports claimed the company is working with Apple to bring AI features to China.
A key driver behind the surge is DeepSeek, the Chinese AI startup that stunned the global tech industry last month by unveiling an AI model rivaling US tech giants at a fraction of the cost. This of course triggered a reassessment of China’s role in AI development. Investors who once dismissed China’s tech industry as “uninvestable” are now piling in.
Hedge funds are taking notice. A Goldman Sachs trader note released last week said that hedge funds bought more Chinese shares than at any time in the past four months. The Hang Seng China gauge closed at its highest level since October.
As investor confidence rises, CATL, a major Tesla battery supplier, just filed for a $5 billion listing in Hong Kong, and if approved, it would be a game-changer for the city’s IPO market, which has struggled through a dry spell in deal-making.
Trump ramps up tariffs, Modi braces for impact
Meanwhile as he promised last week, Trump is moving ahead with his reciprocal tariff plan. White House press secretary Karoline Leavitt told reporters Wednesday that the announcement could come before Trump meets Indian Prime Minister Narendra Modi on Thursday.
“I do believe it will come before the prime minister’s visit tomorrow,” she said.
Trump’s tariff plan targets any country that imposes import duties on the US “Very simply, it’s if they charge us, we charge them,” Trump told reporters aboard Air Force One, as reported by NBC News.
The tariffs are now a key part of his economic strategy. House Speaker Mike Johnson told Reuters that Trump may grant exemptions for pharmaceutical and auto industries, but the broader plan is moving ahead.
Trump first imposed tariffs on Canada and Mexico, then had to pause them for 30 days after both countries agreed to crack down on illegal border crossings and drug trafficking. On Monday, he signed an order imposing 25% tariffs on steel and aluminum imports.
Modi, who is visiting Washington, D.C., is trying to avoid a trade war. Reuters, citing government officials, reported that Modi is preparing to cut India’s tariffs across multiple sectors ahead of his meeting with Trump.
While in Washington, Modi is set to meet Elon Musk, head of Trump’s Department of Government Efficiency (D.O.G.E). According to a CNBC report, their discussion will focus on expanding Starlink and Tesla operations in India.
Wall Street’s volatility eases a bit
Despite low volatility levels on Wall Street, demand for options that hedge against tail risks—low probability but high-impact events—has spiked. Many investors are still hoping that Trump will boost corporate profits, but they’re not taking any chances.
“If you’re a money manager, do you shift your entire portfolio on the back of one headline? You can’t, because you don’t know if the headline is going to last. So what do you do? You use options,” said Mandy Xu, head of derivatives market intelligence at Cboe Global Markets. She added, “People are nervous and reaching for tail hedges.”
The rush for protection has sent option prices surging toward record highs, even though the VIX (Wall Street’s “fear index”) remains below its long-term average, Cboe data shows. Investors are betting heavily on put options that will pay out if the S&P 500, which has risen 3% since late 2024, suddenly tanks.
Retail traders are driving most of this demand, Xu said, while hedge funds, pension funds, and asset managers are leaning toward VIX call options instead. But retail investors are also gambling on riskier short-term trades.
On Jan. 31st, the same day Trump threatened tariffs, a record-breaking 2.4 million “zero-day” options contracts tied to the S&P 500 were traded—contracts that expire within a day if target prices aren’t hit.
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Source: https://www.cryptopolitan.com/chinese-equities-outperform-amid-trump-era/