The rise of Deepseek is a catalyst that encourages global investors to allocate more to Chinese stocks despite continued economic concerns, analysts predict. “Before comprehensive talk, China was uninvestible. … Now you see people start to think that it will definitely help them have China.” “In China, the macro environment is still cool, We still see innovation,” Len said, adding that he hopes for progress in the coming years in China’s drug development and other sectors. “Deepseek is part of what could come.” The Chinese AI startup released an open source model in January, which has surprised many US tech investors’ ability to share their thought processes, and has led to an advanced semiconductor Despite export controls, it insisted on dramatically reducing Openai on costs. The worst day since 2020, it plummeted around 17% on January 27th, as global tech stocks fell. The development “supposes questions about the huge amounts currently invested in AI and whether it will be found to be fully spent,” according to David Chao Global Market Strategist, Asia Pacific, Ex- Japan’s Invesco said in February. Three notes. “I expect the current high concentrations in the US stock market to become a temporary phenomenon.” “As a similarly weighted approach to the US market, small-scale US caps and Chinese stocks and US stocks. It just supports an equally weighted approach to stocks,” he said. “Prices in China, particularly Chinese tech companies, are priced at a sharp discount compared to their US counterparts, and there is a valuation gap, just as the AI development gap is narrower. “Deepseek shows how the Chinese tech giant can build AI models that rival ours. Abrdn Solutions, Greater China, and Abrdn said in a February 5th note. The MSCI China index includes Hong Kong and mainland trade stocks. DeepSeek has not been made public, but investment analysts expect some Chinese stocks to benefit from local AI development. “Kingdee and Kingsoft Office remain top names for touching on AI themes,” Bernstein’s Boris Van and Ting Ming Neo said in a February 5 report. They expect Hong Kong-listed software company Kingdee to benefit from the large foundations of small businesses, strong product positioning and subscription models. “If private companies’ budgets resume later in the year and go against current estimates, stocks are well positioned for macro recovery. The AI story is still priced today.” said Bernstein’s analyst. They will be more cautious in the near future about Shanghai-listed Kingsoft Office, operator of Word Processing App WPS, due to uncertainty about how its corporate AI business will succeed. “It’s a long-term AI winner, but you’ll find the right entry point in an hour,” the analyst said. They assess the outperform of both stocks. Within Chinese stocks that are likely to benefit from the increased adoption of AI, JPMorgan Chinese equity strategists also like Kingdee over the Kingsfee office. “DeepSeek’s low-cost and high-quality AI data infrastructure should help you install AI-enabled software applications and increase revenue-based,” said a note on February 3. The company emphasized Kingdee as a pick of its preference. They pointed out that while they are slow to spend much on software, Chinese government agencies are digitizing their data and processes to improve efficiency. JP Morgan China strategists also hope that AI applications will be available more and encourage consumers to purchase new smartphones more frequently. Of the Chinese players that are open to the public, they prefer the best Xiaomi, listed in Hong Kong, as Lenovo is expected to be more affected by tariffs. The team evaluates Xiaomi’s overweight. On February 6th, HSBC analysts raised some estimates of Xiaomi’s revenues on expectations for better smartphones and connected home appliance sales. They pointed out that Xiaomi has a large internal AI modeling team and strategic cooperation with Kingsoft Cloud and AI Startup Minimax. “We believe Xiaomi will benefit as one of the top global edge AI players, thanks to the rise of low-cost models such as the DeepSeek-R1 and the gradual maturation of AI computing infrastructure.” More interest outside the state sector is that Chinese stocks still face uncertainty in US tariffs. Also, questions remain about how fast the world’s second largest economy can grow without adequate support. Wisdomtree’s Ren warned that Chinese investors could face a “very painful” period due to a headline-driven barrage of volatility. She added that new buyers are likely increasing quotas from emerging markets rather than US stocks. However, there are other signs that the wind has changed. Interest in China began to be featured after a stimulating announcement in Beijing in late September, Ren noted. She said Deepseek’s latest AI breakthrough shows innovations being rolled out from China’s private, non-state-owned sector. The Enterprise Fund (CXSE), owned by Wisdomtree China Ex-State, had risen nearly 4% per year as of Thursday’s closing. In contrast, Bosera ETFs for tracking high-yielding state-owned enterprise stocks fell by more than 3.5% during that time. According to Allianz Global Investors, this is after state-owned enterprises traded in mainland China outperformed companies that are better than non-state-owned companies for the third year in a row. – CNBC’s Michael Bloom contributed to this report.
