Shares of Alibaba Group Holding Ltd. experienced a significant surge on Wednesday, propelled by a broad rally in China-based stocks, following an announcement from China's sovereign fund to increase purchases. This upward momentum comes just one day before Alibaba's fiscal third-quarter earnings report, scheduled to be released ahead of Wednesday's opening bell.

Investors showcased optimism ahead of the report, despite a decline in the FactSet consensus of earnings per share by 5% since the end of 2023 to 19.12 yuan ($2.67). The decrease can be attributed to signs of China's ongoing economic struggles in the new year. Additionally, the FactSet sales consensus has fallen by approximately 5% to 260.26 billion yuan ($36.25 billion) since the end of the third quarter.

Alibaba's U.S.-listed stock saw an impressive 3.9% increase in afternoon trading, reaching a three-month high. Over the past two days, the stock has climbed 7.9% and has skyrocketed by 13.9% since its 14-month low on January 18th, when it closed at $68.05.

The rally was further fuelled by China's Central Huijin Investment sovereign fund, which announced its intention to expand purchases of stock index funds. This move aims to stabilize the weakening stock market and resulted in a 4.8% surge in the iShares MSCI China exchange-traded fund on Tuesday, marking its largest one-day gain since July 28, 2023. The ETF has risen by 6.2% in the past two days, after closing at its lowest price since October 2022.

Other notable China-based companies also experienced positive gains amid the rally. Nio Inc., an electric-vehicle maker, saw its stock increase by 9.9% towards its biggest gain this year. The rally boosted the stock after it closed at its lowest price since June 2, 2020, spurred by concerns of softening demand for electric vehicles amidst mounting competition.

Xpeng Inc., another EV maker, witnessed an 11% jump from Monday's eight-month closing low, while Li Auto Inc. experienced a surge off Monday's close as well. Furthermore, automaker BYD Co., which trades over the counter in the U.S., saw its shares surge by 7.1% from its lowest closing price since October 28, 2022.

Additionally, JD.com Inc. saw a rally of 6.9%, iQiyi Inc.'s shares rose by 10.6%, Bilibili Inc.'s shares powered up by 11.1%, and shares of TAL Education Group also experienced positive gains.

Investors are eagerly awaiting Alibaba's earnings report, as the company remains a key player in the China-based stocks market and its performance can significantly impact investor sentiment.