The Chinese stock market witnessed an invigorating opening on February 21, as the three major indices started strongly, signaling a surge in investor confidence. The Shanghai Composite Index rose by 0.18% to 3356.69 points, the Shenzhen Component Index climbed 0.25% to 10821.81 points, and the ChiNext increased by 0.15% to 2228.92 points. This robust market performance was primarily fueled by the explosive growth in computing power stocks, underscoring their significance in today's digital economy.
According to recent data from International Data Corporation (IDC), the market size for computing power in China is projected to reach 1.2 trillion yuan in 2024, reflecting a robust year-on-year growth of 35%. Furthermore, analysts forecast that this trend will continue into 2025, with growth rates exceeding 30%. This heightened demand has propelled the earnings expectations of related companies upward, serving as a powerful catalyst for the surge in computing power stocks.
Among the notable performers on this day was Inspur Electronic Information Industry Co., which opened up 5% and even touched the daily limit during trading. As a globally recognized supplier of computing power equipment, Inspur has greatly benefited from the explosion in market demand, substantially increasing its order volume. Expectations for its net profit for 2024 suggest an impressive year-on-year growth of 80%. Another strong performer was Sugon, whose stock rose over 8% as it continues to lead in high-performance computing technologies and expand its market share.
Aside from computing power stocks, companies like Huawei with its HarmonyOS, Alibaba, and various AI application stocks also took the spotlight. Alibaba, in particular, performed exceptionally well in the US market on February 20, with its shares closing up more than 8%. This surge was largely attributed to its better-than-expected earnings report. In the third quarter of fiscal year 2025, Alibaba reported revenues of 280.15 billion yuan, a year-on-year increase of 8%, with operating profit skyrocketing by 83% to 41.205 billion yuan. Non-GAAP net income also witnessed a 6% increase, amounting to 51.066 billion yuan. The report highlighted that “AI + Cloud” has emerged as a new engine for the company’s growth, with Alibaba Cloud achieving revenue of 31.742 billion yuan, representing a remarkable 13% growth, nearly doubling the growth rate from the previous quarter. Such stellar results have sparked investor confidence in Alibaba’s future prospects and have also driven the rise of related concept stocks within the A-share market.
However, despite the uplift in certain sectors, other areas like AI healthcare, robotics, and rare earth magnet stocks have experienced some pullbacks. This duality of market performance reflects the inherent volatility and uncertainty that characterize stock markets, making it crucial for investors to navigate these complexities strategically.
On the liquidity front, the People's Bank of China conducted a 182.5 billion yuan reverse repo operation for a seven-day term at a rate of 1.50%. With 98.5 billion yuan of reverse repos maturing the same day, this resulted in a net injection of 84 billion yuan into the market. Such liquidity measures play a supportive role for the stock market, as increased money supply typically leads to declines in money market interest rates. This scenario creates a more favorable short-term financing environment for businesses and financial institutions, potentially driving more capital into the stock market and supporting stock price increases.
In margin trading, the total margin balance across the two exchanges increased by 6.695 billion yuan, totaling 1.863952 trillion yuan. This uptick suggests enhanced investor confidence in the market, with a greater willingness to invest. Conversely, the exchange rate of the Chinese yuan against the US dollar set at 7.1696 reflects a steady increase of 16 basis points, indicating a stable currency environment which further supports stock market stability.
From a macroeconomic perspective, the current market environment is indeed intricate and multifaceted. On the one hand, China's economy is continuously recovering, aided by favorable policies that bolster market performance. On the other hand, global economic uncertainties, including trade tensions and geopolitical conflicts, pose risks that could influence the dynamics of the A-share market.
Despite the promising high opening of A-shares and the remarkable performance of computing power stocks, investors are reminded to maintain a rational and cautious approach. Market conditions can shift unpredictably, and while chasing trends, it is vital to focus on the fundamentals of businesses and identify stocks that truly offer investment value. For everyday investors, avoiding herd mentality and strategically allocating assets becomes essential for survival in the stock market over the long term. As we look ahead, whether the A-share market can sustain this robust momentum remains to be seen, but there is hope that the market will surprise us with more positive developments in the near future.