Hong Kong stocks end at four-year high on AI optimism, TikTok deal progress

Hong Kong shares closed at their highest level in four years on Wednesday, buoyed by technology stocks, as confidence in China's artificial intelligence capabilities and signs of progress in a potential U.S. deal involving TikTok lifted appetite for risk assets.

** Mainland Chinese stocks hovered near a 3-1/2-year peak.

** China's blue-chip CSI300 Index 3399300 ended higher by 0.6%, while the Shanghai Composite Index 000001 gained 0.4%. Hong Kong's benchmark Hang Seng Index HSI was up 1.8%.

** Tech majors, which traded in Hong Kong HHSTECH, jumped 4.2% following an overnight rally of their counterparts in New York KWEB.

** Baidu BIDU surged nearly 16% to its highest level since October 2023. Shares of Alibaba BABA were up 5% at their strongest point since November 2022.

** The CSI Semiconductor Material & Equipment Thematic Index (.CSI931743) rose 3.6%, with chip maker SMIC 981 shares up nearly 7%, after media reported the company was running trials on the country's first domestically produced advanced chipmaking equipment.

** A number of key developments across AI infrastructure layers in China have been noteworthy, including renewed narratives around the AI infrastructure layer and new Chinese AI model launches, Goldman Sachs' analysts said in a note.

** The investment bank lifted Alibaba's 12-month target price to HK$174, assuming higher cloud growth based on its latest AI full-suite offerings and resilient computing demand.

** Media reported last week that Alibaba and Baidu had started using internally designed chips to train their AI models, partly replacing those made by Nvidia NVDA.

** Sentiment was further lifted as U.S. President Donald Trump announced on Tuesday an agreement between Washington and Beijing to keep TikTok operating in the United States.

** Consumer-related shares showed a muted response after China on Tuesday unveiled measures to boost services consumption.