Analysts say the current movement in Chinese stocks is focused on stocks related to artificial intelligence, regardless of the slowdown in economic growth. “AI is the cleanest and most obvious topic at the moment,” said Leonid Mironov, portfolio manager at Gavekal. He said more than half of the holdings in his new China stock fund, approved just last week, are tied to semiconductors, China’s self-sufficiency and high-tech manufacturing. Consumer and healthcare are just 6% of the portfolio, he said. China reported its weakest retail sales growth in April since the end of the coronavirus pandemic. “The technology race is still going to continue,” said Liquan Ren, director of modern alpha at WisdomTree. “AI ecosystem companies are performing well; [but it’s] “It’s not big enough to support China’s overall macro environment,” she said. “It’s really, really uneven.” Although China’s high-tech giants such as ByteDance and Huawei are not listed, many domestically produced semiconductor, high-tech parts, and AI model companies have been listed in recent years. It’s important to recognize that there has been a rotation in tech stocks over the past couple of months, said Aaron Costello, head of investment strategy in Asia at the University of Cambridge. “You can no longer say it’s ‘technology-driven’; it’s more narrowly focused: semiconductors, hardware, software, hyperscalers, etc.,” he said.These hardware stocks tend to be traded on the mainland stock market rather than the Hong Kong Stock Exchange, where Hong Kong’s Hang Seng index is up more than 4.5% this year. Mironov’s approach is to keep Tencent and Alibaba as the fund’s largest positions, as well as hardware companies such as Shanghai-listed Anji Microelectronics. [beneficial] “Our policy is to focus on the bottom line of these small and medium-sized stocks,” Mironov said. Popular AI model companies Zhipu and MiniMax, both listed in Hong Kong, are still on the sidelines as they seek sustainable business models and signs of increasing customer loyalty, Mironov said. This is in contrast to Morgan Stanley, which is overweight in two AI model companies as well as Alibaba. The investment firm is also overweight in Shanghai-listed semiconductor companies. Cambricon’s price target is 2,000 yuan ($294).
