Graph of the Week – Tech gives Chinese stocks a boost

Chinese stocks have posted strong returns this year. After a number of false dawns following earlier stimulus packages from policymakers, investors again face the question of whether this time is different for Chinese equities.  

Arguably, there is appetite among investors for diversification away from US equities. At the same time, Beijing is trying to spur the economy. It remains to be seen, however, whether its policies will offset existing structural impediments and the impact of US import tariffs.

In January, a previously little-known Chinese start-up called DeepSeek presented an artificial intelligence (AI) large language model (LLM) showing a performance comparable to those of the leading US models. The unexpected development disrupted the paradigm of a quasi-monopolistic position for prominent US chip manufacturers.

Chinese tech stocks have now gained thanks to their previously low valuations and a newly improved earnings outlook. We expect the benefits of China’s AI to spread quickly across the domestic economy, offering further opportunities for investors.

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Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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