Investment Banks say the high-profile meetings of Chinese President Xi Jinping with the country's technology leaders and the breakthrough development of DeepSeek are changing sentiment towards the country's hit stocks.
Bankers say Chinese tech stocks are now at risk of attracting long-term investors – a shift that means significant changes in mindset and money flows.
“(Last year) Many investors we talk to still see China as a 'trade market' – fast currencies to play trade bounces, while global long-term capital still distrusts and has little participation,” Chinese stock analysts from banks U.S. Securities said in a February 17 note.
Also on AF: China's XI meets the top tech chief, and Baidu shares are absent from the CEO
However, this view may be shifting to “investable”, BOFA analysts said.
They added: “It is encouraging that we believe that China's basic investment papers are constantly improving.”
Similarly, Goldman Sachs raised its target on the Chinese stock index on Monday, estimating that AI adoption could boost earnings growth and potentially bring in $200 billion inflows.
These views reflect the move of Hong Kong's Hang Seng Index, which is within a three-year high this week. Investors are cheering Xi Jinping’s meeting with tech leaders, including Jack Ma, the former founder of Parisa Alibaba.
The high-profile workshop was seen as a sign of thawing in Beijing's approach to the technology industry. Communist countries have previously suffered extensive suppression of at least erosion in the technology industry A market value of $1 trillion Its well-known person.
The story of two parties
Monday's meeting highlighted changes in Beijing's priorities, especially compared to similar gatherings held in 2018.
That year, executives were awarded coveted front seats, from the high-tech to energy industry, with few familiar names.
But in the seven years of rapid progress, the lineup has changed significantly, with Huawei founder Ren Zhengfei and Byd's Wang Chuanfu sitting opposite XI.
Alibaba's Jack Ma and Tencent's Pony Ma were one of the biggest targets of Beijing's previous private-sector crackdowns, also sitting in the front row. Wang Xing, founder of Meituan, China's largest delivery platform, sat in the second row.
Also on the front line is also the founder of the launch of DeepSeek by smartphones and EV-Maker Xiaomi and AI.
These companies are giants in their sectors and in dispute abroad, realizing Xi Jinping’s belief that China needs “new productivity” to escape the trap of income, compete with the United States and revitalize the stubborn domestic domestic domestic competitive economic analyst explain.
“The lineup of entrepreneurs shows that XI's priorities for the private sector are to support his goals of technological self-reliance and supply chain security,” said Neil Thomas, a Chinese political researcher at the Asian Institute of Social Policy. China Analysis Center.
In contrast, the 2018 seminar drafted companies from various industries that include many smaller companies, such as software engineering company Neusoft and auto parts maker Wanxiang. According to local media reports, Tencent and Baidu attended the meeting but did not receive a front-row seat.
“Hard medicine”
“The mentality of Chinese leaders has changed,” said Alfredo Montufar-Helu, director of the China Center of the Conference Committee.
Montufar-Helu said: “It's a difficult pill for them, but compared to 2018, they now recognize that these Chinese tech companies contribute more to economic growth than they do. I thought it was bigger before.”
The most notable thing is Alibaba's master's degree, who shook hands with XI. Many see this exchange as a recovery from a tech leader who largely withdraws from public life after authorities stopped the IPO of his fintech company Ant Group in 2020.
Macquarie economists Larry Hu and Yuxiao Zhang said in a report: “Jack Ma's appearance is highly symbolic,” he said. Because his company is the first to be hit.”
Alibaba's stock has risen 53% this year, showing MA on a TV that shook hands with XI on Tuesday, showing 3% on TV since Reuters first reported on the conference plan.
China's “Great Ten”
In addition to Xi Jinping's meeting with China's technology VIP, the emotional shift is also attributed to the buzz around DeepSeek, Wall Street last month When it says it develops an open source AI model that is much cheaper than Western competitors and much less energy-efficient.
For investors, this also shows that China has not been affected by major US sanctions.
In the spotlight are the so-called “wonderful ten” Chinese technology stocks that can replace the grand seven in the United States.
X. “China's outstanding ten can only be described as crushing the grand 7,” said Jeff Weniger, head of equity strategy at WisdomtreeAsset Management.
“This started half a year ago, but few people noticed it.”
Ten are e-commerce heavyweight Alibaba and JD.com, automaker Geelyand Byd, Tech Conglomerate Xiaomi, online giants Tencent and Netease, Search-Engine-Engine Operator Baidu, catering companies Meituan and Chipmaker Smic.
Guessen's Resistance Winning
The outstanding ten played an important role in helping Hang Seng over 17% this year, competing with Germany's DAX for the title of best performance in the main market. Purchasing has been concentrated on tech shares, while the Hang Seng Tech index soared 33% in just one month.
To be sure, Agent Warning Most of the rally is driven by hedge funds and retail investor funds, which is easy to leave quickly. However, the fact that positioning is so light makes many people expect further gains.
“While it's hard to predict the duration of such AI-driven rally in Chinese internet stocks,” JP Morgan analyst led by Alex Yao wrote in a comment on February 17. We firmly believe that this trend will last for more than a month.”
“The AI boom in the U.S. stock market has been steadily developing for two years, during which time the average stock price of 'Mag 7' has risen by 256%.
The magnificent seven consists of letters, Amazon, Apple, Mega, Microsoft, Nvidia and Tesla.
- Reuters, other editors and inputs with Vishakha Saxena
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