China Tech Rally Hits Valuation Wall, Home Prices Extended Losses In January

Li Chen
19 Feb, 2025
Hong Kong

Stock market indexes in China and Hong Kong struggled to make headway after the artificial intelligence euphoria-driven rally faltered. 

The Hang Seng index decreased 0.3%, and the CSI 300 index edged higher in volatile trading.

Tech stocks focused Hang Seng Tech index hovered near a five-year high after Baidu reported a 2% decline in annual revenue. 

Investors feared that the latest rally over the last five weeks may have run out of steam after valuations surged to a five-month high. 

Market participants bid up tech stocks in the hope that the affordable, artificial intelligence-driven chatbot Deep Seek could spark another wave of earnings growth for the leading tech companies. 

However, Alibaba Group and Baidu Inc, the two main components of the tech index turned lower, sapping the market sentiment. 

Moreover, property developers remained in focus after home prices continued to decline in January. 

New home prices in first-tier cities declined 3.4% from a year ago in January, the National Bureau of Statistics said on Wednesday. 

The prices in four main cities—Beijing, Shanghai, Shenzhen, and Guangzhou—fell at a slower pace from the fall of 3.8% in December.

Prices in the second- and third-tier cities decreased at a 5% and 6% annual pace, respectively.

Existing home prices in the top-tier cities declined 5.6%  in January, and fell 7.6% in second-tier and 8.2% in third-tier cities. 

 

China Indexes and Stocks

The Hang Seng index decreased 0.3% to 22,911.93, and the mainland China-focused CSI 300 index jumped 0.7% to 3,940.16.

Baidu Inc. declined 2% to HK $88.35 after the search engine company reported weaker-than-expected 2024 results.

Revenue declined to RMB 19.34 billion from RMB 20.80 billion, net income increased to RMB 5.19 billion from RMB 2.60 billion, and earnings per diluted share rose to RMB 1.78 from 85 cents a year ago.

The company returned $356 million to shareholders in the quarter, bringing total repurchases to over $1 billion in 2024.

The company’s core business struggled, with online marketing revenue declining 7% from the same quarter last year, despite diversification efforts.

External ERNIE API calls marked a 178% increase, signaling a growing enterprise adoption.

China Vanke rose 2.4% to HK $5.93, Longfor Group Holdings advanced 0.8% to HK $10.20, and Sun Hung Kai Properties gained 0.4% to HK $70.80.

HSBC Holdings plc increased 1.2% to HK $88.40, and the Hong Kong and London-based financial service provider reported a 2% increase in profit in 2024.

Net income advanced 2.2% to $22.9 billion from $22.4 billion, and diluted earnings per share edged up a fraction to $1.25.

The company announced a new $2 billion stock repurchase plan after completing a $9 billion buyback in 2023.

The company said it plans to pay a cash dividend of 36 U.S. cents for the fourth quarter, increasing its total payout to 87 U.S. cents in the year, compared to 61 U.S. cents in 2023.