By Globalfinserve Business Desk
March 27, 2025
After years of sluggish post-pandemic recovery and market pessimism, China’s financial landscape is experiencing a dramatic turnaround. Hong Kong’s Hang Seng Index (HSI), which had recorded four consecutive years of losses, has surged nearly 20% year-to-date, outperforming global indices such as the S&P 500 and Japan’s Nikkei 225.
The catalyst for this resurgence? The release of DeepSeek, a powerful and cost-efficient AI model, which has reignited confidence in China’s tech sector. International investors, previously wary of regulatory crackdowns, are now returning to Chinese and Hong Kong markets, drawn by promising policy shifts and renewed innovation potential.
✅ Key Takeaways from China’s Market Resurgence
- DeepSeek AI drives market rebound:
- The launch of DeepSeek’s AI model in January triggered a $1 trillion value shift from US to Chinese tech stocks.
- Hong Kong stocks outperform global indices:
- The Hang Seng Index surged nearly 20% in 2025, outpacing the S&P 500 (-3%) and Nikkei 225 (-5.8%).
- Major IPOs returning to Hong Kong:
- Tesla supplier CATL received approval for a $5 billion IPO, the largest listing since 2021.
- Foreign investors ramping up exposure:
- Global institutions, including Franklin Templeton and Goldman Sachs, are boosting their investments in China.
- Consumption still lags:
- Despite market optimism, China’s domestic consumption remains weak, with GDP contribution still low at 38%.
✅ DeepSeek AI: The Catalyst Behind China’s Stock Rally
The turnaround in Chinese equities began with the January 2025 launch of DeepSeek, a powerful AI model that outperformed its US competitors in cost-efficiency and processing speed.
1. The DeepSeek Shockwave
- Trillion-Dollar Value Shift:
- Following DeepSeek’s debut, US tech giants, including Nvidia, Meta, and Amazon, saw a combined $1 trillion value erosion, while Chinese tech stocks gained nearly the same amount.
- Alibaba (9988.HK), Xiaomi (1810.HK), and BYD (1211.HK) posted double-digit gains, driven by renewed confidence in China’s tech capabilities.
- Government Endorsement:
- DeepSeek’s founder, Liang Wenfeng, was seen at a symposium with President Xi Jinping, alongside Tencent’s Pony Ma and Huawei’s Ren Zhengfei, signaling Beijing’s backing of tech innovation.
- Institutional Interest:
- Goldman Sachs President of Asia-Pacific, Kevin Sneader, highlighted the significance of DeepSeek at the Milken Global Investor Symposium, calling it a “shot in the arm” for investor confidence.
✅ Hong Kong Stocks Outperform Global Peers
The Hang Seng Index (HSI) has surged nearly 20% in 2025, driven by renewed investor confidence and large-scale IPO activity.
1. Performance Compared to Global Indices
- Hang Seng Index: +19.8% YTD
- S&P 500: -3% YTD
- Nikkei 225: -5.8% YTD
- Shanghai Composite Index: +11.4% YTD
2. Blockbuster IPOs
- CATL’s $5 Billion IPO:
- Tesla’s battery supplier, Contemporary Amperex Technology Co. Ltd. (CATL), announced it received approval for a $5 billion IPO in Hong Kong.
- This marks the city’s largest listing since 2021, signaling renewed confidence in Hong Kong’s capital markets.
- Increased Listing Activity:
- Bonnie Chan, CEO of Hong Kong Exchanges and Clearing, confirmed that Chinese firms are once again flocking to Hong Kong for fundraising.
- She stated that investors who previously viewed Chinese equities as “uninvestable” have started increasing their exposure since September 2024.
✅ Global Investors Returning to China
Major financial institutions are reversing course on China, increasing their equity positions and exploring new growth opportunities.
1. Institutional Sentiment Shift
- Franklin Templeton CEO Jenny Johnson remarked at the HSBC Global Investment Summit that China is once again investable, highlighting the market’s resilience.
- Goldman Sachs is raising its target allocations for Chinese equities, citing favorable policy signals from Beijing.
2. Foreign Capital Inflows
- Hong Kong’s Stock Connect program, which allows mainland Chinese investors to buy Hong Kong-listed shares, saw a spike in inflows.
- European and US hedge funds are reportedly increasing their exposure to Chinese tech and financial stocks.
✅ Beijing’s Policy Shifts: Stimulus and Consumption Boost
Despite the market’s rebound, China’s domestic consumption remains fragile, contributing only 38% to GDP, significantly below the levels seen in advanced economies.
1. Consumption Challenges
- Limited Stimulus:
- Since September 2024, Beijing has promised more stimulus to boost consumption, but concrete measures remain limited.
- Income Disparity Issues:
- Economist Keyu Jin highlighted at the Milken event that hundreds of millions of rural residents still lack access to healthcare, education, and social security, limiting their purchasing power.
2. Long-Term Potential
- Janus Henderson CEO Ali Dibadj noted at the HSBC conference that betting against China is difficult, given its 1.4 billion-strong population, historic growth record, and government-backed incentives.
- Financial firms expect a “gradual structural shift” in China’s economy, with potential for long-term consumption growth.
✅ US Market Sentiment Deteriorates
While China’s market is rallying, US equity sentiment is weakening.
1. US Tech Under Pressure
- The “Magnificent Seven” tech stocks are down for the year:
- Nvidia: -20% YTD
- Tesla: -30% YTD
- Trump Tariff Fears:
- Former President Donald Trump’s renewed tariffs on auto imports and Venezuelan oil have further weighed on US equities.
- The market anticipates more tariffs to be announced on April 2, adding to uncertainty.
2. Globalization Concerns
- HSBC Chairman Mark Tucker warned that globalization is ending, as protectionism rises.
- This shift has driven investors to seek opportunities in emerging markets like China and India.
✅ Key Takeaways for Investors
- China’s Tech Comeback:
- The DeepSeek AI breakthrough has sparked massive interest in Chinese tech, with US institutional investors increasing their exposure.
- Hong Kong’s IPO Revival:
- With blockbuster IPOs returning, Hong Kong’s market is becoming a prime listing hub once again.
- US Tech Weakness:
- As US tech stocks decline, Chinese equities are attracting foreign inflows.
- Long-Term Consumption Growth:
- Despite short-term consumption challenges, financial institutions remain bullish on China’s long-term potential.
✅ Conclusion
China’s market resurgence, led by DeepSeek’s AI breakthrough, has sparked a wave of optimism among global investors. The Hang Seng’s 20% rally and blockbuster IPOs signal renewed confidence in Hong Kong as a financial hub. While US tech stocks struggle with tariff concerns, China’s equity markets are gaining momentum, making them increasingly attractive for international investors.
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