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Stocks rally despite new Sino-US tariffs

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AI and EV shares lead the gains

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Focus shifts to China's tariff responses and upcoming NPC

(Updates closing prices, adds quotes)

By Jiaxing Li

Hong Kong, Feb 4 (Reuters) - Chinese stocks listed in

Hong Kong surged on Tuesday as investors loaded up on artificial

intelligence and electric vehicle shares while shrugging off

news of tit-for-tat Sino-U.S. tariffs on each other's goods.

China's finance ministry announced a package of tariffs

on a range of U.S. products in an immediate response to

President Donald Trump's 10% tariff on Chinese imports that went

into effect at 0501 GMT.

Investors had been hoping Trump would retract the proposal

to raise tariffs on China at the last minute, just as he did

with Canada and Mexico on Monday.

However, as the deadline passed and U.S. tariffs came

into force, Beijing announced its own levies of 15% for U.S.

coal and LNG and 10% for crude oil, farm equipment and some

autos. The new tariffs on U.S. exports will start on Feb. 10,

China's finance ministry said.

"China is trying to get some bargaining power before getting

close to the negotiating table. It doesn't mean that they will

not go for negotiation talks," said Steven Leung, who handles

institutional trading at stockbroker UOB-Kay Hian in Hong Kong.

Trump's press secretary said the president will speak with

Chinese President Xi Jinping in the next couple of days

The Hang Seng China Enterprises Index closed up 3.5%

at a fresh three-month high. The Hang Seng Tech Index

surged 5.1%, and Hong Kong's benchmark Hang Seng index

added 2.8%.

The Hang Seng Index has advanced 3.6% so far this year,

outperforming major global markets including Japan and

the U.S. S&P 500 index. Wong Kok Hoong, head of equity

sales trading at Maybank, said investors had so far viewed

tariffs as a negotiation strategy between the two superpowers.

Trump's announcement of the 10% tariff had also come as a

relief, for his threats soon after he won the election last year

were to impose 60% tariffs on China.

"It's the glass-half-full way of looking at Hong Kong and

China... perhaps only a 10% tariff and not the dreaded 60% from

the get-go," he said. "In a way markets may be slowly

interpreting tariffs as a negotiation tactic, and one can strike

a deal with this POTUS."

Beijing's initial proposal to Trump's tariffs will centre on

restoring the "Phase 1" trade deal signed in 2020 during his

first term, the Wall Street Journal reported on Monday, citing

sources.

Leading gains on Tuesday, AI-related stocks rallied as

investors continued to pile up wagers on home-grown firms after

startup DeepSeek released a large language model at a lower

cost.

China's top chipmaker SMIC surged 8.5% to a record

high, and peer Hua Hong Semiconductor advanced 12.7%.

The EV sector also lifted the market, with carmaker XPeng ( XPEV )

jumping 11.8% after the company said it delivered a

nearly three-fold increase in smart EVs in January year-on-year.

Financial markets in mainland China will reopen on Wednesday

after the long Lunar New Year holiday. China's benchmark

blue-chip index fell 3% in January before the holiday,

surrendering nearly half of September's 40% rally.

The markets may look through the political noise to focus on

China's responses to U.S. tariffs and the upcoming National

People's Congress (NPC) meeting in the next few weeks, analysts

at Citi said in a note.