DeepSeek AI has driven surges in Chinese stocks, while India’s are facing the brunt of declines. China’s equity markets have accrued an extra $1.3 trillion in one month, while India’s markets have dipped by more than $270 billion.
Seeing the surge in stocks due to DeepSeek, Ken Wong, Asian equity portfolio specialist at Eastspring Investments, believes China has a growing circuit of companies forming an integral part of the AI ecosystem. His firm has even been accumulating Chinese internet holdings in the last few months while seemingly leaving their smaller Indian stocks.
DeepSeek drives stock market surge in China, with hedge funds increasingly investing in the country. Investors are becoming more intrigued with Chinese AI and tech stocks, slowly helping the country regain its investability appeal. After establishing multiple crackdowns, China ultimately pushed away several key investors who sought new markets in India and other Asian counterparts. However, the new DeepSeek tool may have just helped put back Chinese equities on the map, unraveling a new AI theme for investors. Hedge funds, in particular, have been pouring more investments into Chinese stocks over growing hopes for additional economic stimulus and the chatbot’s growth.
For starters, Fidelity International’s Taosha Wang said their institution is leaning more towards the Chinese market, saying there are more opportunities coming from the new “exciting” AI tool.
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Multiple tech corporations like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. are already seeing new profits due to the application’s growth, hinting at more gains for the overall Chinese economy. Alex Au, managing director at Alphalex Capital Management HK Ltd, shared his thoughts: So far, the AI application has already had investors pull back from India and into China’s stocks. The Indian stock market has already lost billions of dollars in just a few weeks, while the opposite can be said for the Chinese market. Vivek Dhawan, a fund manager at Candriam, even believes that, on a risk-reward basis, China has become more attractive than India.
However, some of India’s stock bulls, like Morgan Stanley, remain optimistic about the country’s stock market. They believe the nation will continue to grow and accrue revenue, saying that not all inflows will move to China and that the latest correction is just temporary. Some investors believe DeepSeek’s success and China’s bullish stock rally could be short-lived. Andrew Swan, head of Asia ex-Japan equities at Man Group, believes that as much as DeepSeek has brought in more inflows to China, upcoming announcements on other Chinese stimuli should be considered.
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Nevertheless, his company has already increased its China exposure to 40% from 30% while slashing its India exposure to 18% from 21%. Meanwhile, some traders and investors have cautioned against running for Chinese stocks, considering their past failures in the country’s market rallies. Helen Zhu, CIO at Nan Fung Trinity HK Ltd., has even expressed her doubts over whether DeepSeek’s AI success could last long term. Not to mention, President Trump has already implemented 10% tariffs on China, adding to geopolitical tensions that could easily sway market conditions. Aiden Yao, Asia senior investment strategist, even expects China’s external market conditions to remain “fluid and challenging” in the future.
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