Why Chinese Stocks Futu, GDS Holdings, and New Oriental Education & Technology Rose Today

Chinese stocks surged today after the Chinese government announced its gross domestic product (GDP) target for 2025 and outlined new stimulus measures intended to revive the struggling economy. The Hang Seng index in Hong Kong climbed by 2.8%.

Shares of Futu Holdings (NASDAQ: FUTU) saw a notable increase of 12%. Similarly, GDS Holdings (NASDAQ: GDS) rose by 10%, while New Oriental Education & Technology (NYSE: EDU) gained approximately 6%.

Beijing's Economic Forecast

In a recent government publication, Chinese officials set a GDP growth target of 5%, which aligns with the country's long-term economic goals. Officials also announced a deficit-to-GDP ratio target of 4%, an increase of 1% from the previous year. This represents the largest deficit China has seen since 2010, as reported by CNBC.

The government has also laid out its plans for economic stimulus, which includes issuing nearly $179 billion in long-term treasury bonds, around $69 billion in support bonds for major commercial banks, and $610 billion in special-purpose bonds aimed at assisting local governments facing financial challenges.

“There is nothing to criticize here. It’s a solid growth target, along with a clear commitment to bolster the economy,” remarked Vey-Sern Ling, managing director at Union Bancaire Privee, according to Bloomberg. “This should provide reassurance to market participants.”

Interestingly, the government also indicated plans to enhance cooperation in the science and technology fields. There will be deeper reforms related to investments and financing in capital markets, an encouragement for long- to medium-term capital to enter the market, and enhancements to strategic resource reserves and market stabilization mechanisms.

These actions arise in the context of an ongoing trade dispute with the United States, with recent tariff hikes imposed on Chinese imports reaching 20%. Although officials have appeared more flexible regarding trade tensions due to the fragile economic landscape, a stronger response is anticipated as tariffs take effect.

“China is ready to fight until the end in any trade war,” warned a foreign ministry spokesperson after the nation announced reciprocal tariffs.

Impact of Stimulus on Chinese Stocks

Chinese stocks experienced challenges at the beginning of the year due to economic headwinds, including deflation and a weakened housing market. Nonetheless, the rise of innovative companies and improving prospects in artificial intelligence have positively impacted the sector in early 2025. Government stimulus typically boosts stock values in the sector, and the government’s support of technology is viewed favorably.

Futu operates as a digital wealth management and online brokerage platform, enabling both Chinese citizens and international investors to trade stocks on various exchanges from the U.S. to Hong Kong. GDS Holdings manages data centers across China and Southeast Asia, greatly benefiting from the surge in AI investments. New Oriental Education & Technology is an online tutoring and education platform. Both Futu and GDS have seen significant stock price increases over the past year and, while their valuations are strong, they still tend to trade at lower multiples relative to major tech stocks in the U.S.

Despite the ongoing trade war contributing to market volatility, Chinese stocks are starting to show signs of recovery and may represent a valuable hunting ground for investors. However, potential investors should remain cautious as China grapples with economic challenges, and achieving the desired 5% GDP target may be uncertain. A long-term investment approach is advisable in this scenario.

Bram Berkowitz holds no positions in any of the mentioned stocks. The author has no affiliations with any companies mentioned above.

stocks, economy, China