Figurines with computers and smartphones are seen in front of the words "Artificial Intelligence AI" in this illustration taken, Feb 19, 2024. [Photo/Agencies]
BEIJING - China's rapid advancements in the artificial intelligence (AI) sector, exemplified by DeepSeek, a cost-competitive newcomer among global AI models, have captured global attention and driven capital inflows into the country's sci-tech capital market.
Since February, following Deutsche Bank's high-profile report declaring that "2025 is the year the investing world realizes China is outcompeting the rest of the world," several international investment banks have upgraded their ratings or raised target prices for the Chinese capital market.
Citi recently upgraded its rating for Chinese stocks to overweight. Chinese shares look attractive even after their recent rally, Citi strategists wrote, citing DeepSeek's AI technology breakthrough, the government's support for the tech sector and "still-cheap valuations."
Goldman Sachs anticipates that the widespread adoption of AI over the next decade could boost the overall earnings of Chinese stocks by 2.5 percent annually. It has also raised its targets for the MSCI China Index and the CSI 300 Index to 85 and 4,700, respectively, signaling potential double-digit growth for both indices over the next year.
Liu Jinjin, chief China equity strategist at Goldman Sachs, noted in a recent report that "investors' optimism about the growth and benefits of the AI economy has driven significant gains in the Hang Seng Tech Index and the MSCI China Index, which surged by 27 percent and 19 percent, respectively, from late January to late February."
The momentum in China's sci-tech sector, fueled by AI technology and its applications, has attracted international capital. Leading Chinese tech companies, including Alibaba, SMIC, Xiaomi and BYD, have seen notable stock price increases, reflecting growing investor confidence in China's innovation-driven growth.
Investors from the Republic of Korea (ROK), in particular, have shown heightened interest in Chinese stocks. According to the latest data released by Korea Securities Depository, ROK investors' monthly trading volume in Chinese mainland and Hong Kong stocks reached $782 million in February, nearly tripling from a month earlier and hitting the highest level since August 2022.
Experts attribute this surge to China's rapid development in high-tech fields, which has significantly boosted investor confidence, with expectations that this enthusiasm will continue.
CITIC Securities described the current moment as a "pivotal historic opportunity" for global capital to invest in the Chinese stock market. The widespread application of AI across industries has significantly improved the efficiency and profitability of China's real economy.
During China's two sessions this year, the rise of DeepSeek and its global impact became a focal point. Wu Qing, head of China's top securities regulator, emphasized that DeepSeek's success has not only impressed the global AI industry but also redefined the world's perception of China's capabilities in technological innovation.
This achievement has driven a revaluation of Chinese assets, he noted. China will support the development of sci-tech innovation enterprises -- both listed and those in the pipeline -- to further enhance the appeal and investment value of the Chinese stock market, according to the China Securities Regulatory Commission.
To facilitate the listing of high-quality tech companies, the commission will adopt more inclusive issuance and listing systems, leveraging mechanisms such as the "green channel" and supporting the listing of pre-profit enterprises.
A mix of policies will be implemented to bolster sci-tech innovation, including refining the issuance and registration process for sci-tech innovation bonds and advancing the securitization of intellectual property assets, according to the commission.
"We are optimistic about the medium-term prospects for Chinese equities," stated Morningstar investment management and research teams in their 2025 outlook.
They expect stimulus measures initiated in 2024 to continue evolving, cite a more benign regulatory backdrop, anticipate moderate earnings growth from Chinese companies, and maintain a positive outlook on several of the major technology firms as consumers regain their footing.
