Technology Stocks Soar in Hong Kong Led by Alibaba’s Strong Earnings; Yen Bides Time Despite Inflation Surge in Japan

Hong Kong Stock Market

The Hong Kong Stock Market witnessed a resurgence in technology stock prices on Friday, February 21, with Alibaba Group Holdings leading the charge. The market had experienced a brief pause, but the upswing resumed amid optimism fueled by Alibaba’s robust earnings.

At around 03:00 GMT, the Hang Seng Index jumped by 2.81% to 23,212 points. The Shanghai Composite Index gained 0.66%, while the Shenzhen Composite Index climbed by 1.05%.

The tech sector was once again the driving force behind the rally, continuing a trend that commenced over a month ago. The success of DeepSeek, a Chinese artificial intelligence (AI) startup, had sparked the initial surge, despite ongoing trade tensions with the United States.

The recent lull in tech stock growth was attributed to profit-taking, but Alibaba’s solid earnings report on Thursday rekindled investor enthusiasm. By 03:00 GMT, Alibaba’s shares had soared by 11% in Hong Kong, bringing their year-to-date gain to 62%.

Alibaba reported higher-than-expected revenue, with an 8% year-over-year increase for the third quarter of its fiscal year. This strong performance was driven by increased reliance on AI and followed a series of setbacks for the company.

Jack Ma, Alibaba’s charismatic co-founder, also met with Chinese President Xi Jinping on Monday, further fueling positive sentiment towards the company’s prospects.

In Alibaba’s wake, BYD surged by 5.1%, and Tencent gained nearly 3%. "Alibaba’s strong earnings fully justify the recent rotation of tech-focused capital from the US towards Chinese AI players," said Chris Weston of Pepperstone, as quoted by Bloomberg.

Japanese Yen

Meanwhile, the Japanese yen depreciated by 0.52% against the US dollar to 150.42 yen per dollar at around 03:00 GMT. This followed a surge to its highest level in two and a half months on Thursday.

The yen had been buoyed by growing expectations that the Bank of Japan (BoJ) would continue to raise interest rates in response to persistent inflation and robust economic growth in the final quarter of 2024.

In line with these expectations, Japan’s inflation accelerated to 4% in January, the highest level in two years (3.2% excluding fresh food). This further supports the likelihood of additional rate hikes.

However, the yen failed to sustain its momentum in the immediate aftermath of the inflation report. Dealers were cautious after comments from the BoJ governor and a Japanese minister suggesting that yields on Japanese government bonds may have risen too quickly, potentially weighing on the country’s finances.

This could lead the BoJ to exercise caution and avoid overly aggressive tightening. "Japan’s stronger-than-expected inflation had all the ingredients for a knock-out punch" for the yen, but "instead, the trade turned messy as Japanese authorities stepped in to talk their currency down," said Stephen Innes, analyst at SPI Asset Management.

"It’s a reminder that the BoJ doesn’t operate in isolation, they have a captive Ministry of Finance with their own set of concerns. Most economists expect another rate hike this summer, but the market isn’t fully convinced," he added.

Tokyo Stock Market

In Tokyo, the Nikkei 225 index rose by 0.11% to 38,719.34 points, and the broader Topix index remained flat, gaining 0.01% to 2,734.97 points, as of 02:30 GMT.

The Tokyo market benefited from the weaker yen, which supports the earnings of major export-oriented companies such as Sony, which saw its shares rise by 2.09%. However, investors remained cautious due to the threat of US tariffs on automobiles and pharmaceuticals, which are set to take effect from April, according to Tokai Tokyo Intelligence.

Oil Market

In the oil market, crude prices remained in focus amid ongoing discussions about the situation in Ukraine. The US West Texas Intermediate (WTI) crude futures fell by 0.12% to $72.39 per barrel, while Brent crude futures, the international benchmark, declined by 0.10% to $76.40 per barrel.