(Yicai) Feb. 21 -- China’s mainland and Hong Kong stock markets posted significant gains in the tech sector today after US investment bank Morgan Stanley raised its rating on Chinese equities, amid a new wave of technological innovation.

The Hang Seng Tech Index in Hong Kong surged 6.5 percent to 5,859.30, bringing its total gain this year to 31 percent. Meanwhile, the Shanghai Star Market Index and the Shenzhen ChiNext Index advanced 4.4 percent and 2.5 percent respectively, reaching 1,263.68 and 2,281.51.

Morgan Stanley raised its rating on Chinese stocks from "Underweight" to "Equal Weight" in a report released yesterday. The firm also lifted its year-end target for the MSCI China Index to 77 points from 63 points and increased its target for the Hang Seng Index to 24,000 points from 19,400 points.

The move reverses Morgan Stanley's bearish view on the Chinese stock market in November last year, when the New York-based investment bank downgraded China’s stock rating from "Equal Weight" to "Underweight" due to concerns over trade tensions and downward pressure in the real estate sector.

The recent strong performance of the Hang Seng Index has been mainly driven by a new wave of artificial intelligence innovation sparked by AI startup DeepSeek, Laura Wang, chief China stock strategist at Morgan Stanley, said in a recent report.

The release of Hangzhou-based DeepSeek’s cost-effective large language model, DeepSeek-R1, has demonstrated China’s significant progress in AI, prompting global investors to reconsider the investment potential of the country’s tech sector, Wang said.

E-commerce giant Alibaba Group Holding is one of the standout companies in this latest Hong Kong stock market rally. Its share price [HKG:9988] soared 14.6 percent to HKD138.50 (USD17.82) today after the Hangzhou-based firm released excellent financial results. The stock has gained 68 percent in value so far this year in the Hong Kong market.

Alibaba’s net profit more than tripled in the quarter ended Dec. 31 from a year earlier to CNY48.9 billion (USD6.7 billion), thanks to AI driving growth in its cloud services business, according to its latest earnings report. Revenue jumped 8 percent to CNY280.2 billion (USD38.4 billion).

Editor: Kim Taylor