Multiple foreign institutions have recently expressed optimism about Chinese assets. According to reports, strategists at Bank of America have recommended that investors take a bullish stance on Chinese stocks, believing that trade and technology tensions with the U.S. will not escalate. They predict that the sustained rise in the U.S. stock market will halt in early 2025, and its competitive advantage will gradually weaken.

Goldman Sachs has also issued a warning that the rise of DeepSeek presents a mid-to-long-term opportunity for revaluing Chinese tech stocks. The firm maintains an overweight rating on the MSCI China Index, forecasting a 14% increase this year, with an optimistic scenario potentially reaching 28%. Additionally, A-shares are expected to benefit from the development of AI soft technologies, with related stocks likely to outperform the market.

Bank of America Recommends Bullish Stance on Chinese Stocks

On the evening of February 7, Bank of America strategists stated that the U.S. stock market will cease its sustained rise in early 2025, advising investors to focus on Chinese stocks. According to Bloomberg, strategists, including Michael Hartnett, pointed out that the returns from markets in Brazil, Germany, the UK, China, and Canada have surpassed those of the S&P 500 index, attributed to the failure of the "big seven" tech companies to provide the necessary momentum. These strategists believe that trade and technology tensions will not escalate and noted that the narrative surrounding the strength of the U.S. economy is diminishing, with investors also paying attention to geopolitical stability in the Middle East and Ukraine. In terms of bonds, Bank of America expects U.S. Treasury yields to drop below 4%, as the Trump administration seeks to control spending and promote tax cuts.

Goldman Sachs and Deutsche Bank Bullish on Chinese Assets

Goldman Sachs analyst David J. Kostin stated in a recent report that the rise of DeepSeek marks a shift in the AI industry from hardware to software applications, providing a mid-to-long-term revaluation opportunity for Chinese tech stocks. The report noted that while U.S. investment in AI significantly exceeds that of other regions, DeepSeek's R1 model achieves performance comparable to leading models at a cost of less than $6 million. This could narrow the valuation gap of up to 66% between U.S. and Chinese tech stocks. Goldman Sachs maintains an overweight rating on the MSCI China Index, predicting it will rise from a baseline of 66 points to 75 points this year, with an optimistic increase of up to 28%. Regarding A-shares, Goldman noted that A-shares have a higher weight in hard technology and are actively positioning in AI applications, thus are likely to benefit from the development of AI soft technologies. Goldman emphasized that China’s policy cycle has entered the implementation stage, with details and actions expected to drive further stock market gains.

Deutsche Bank also stated that 2025 will be a year of global emergence for Chinese companies, and the valuation discount phenomenon will disappear. The firm believes that the bull market cycle for A-shares and Hong Kong stocks began in 2024 and is expected to continue, surpassing previous highs. BlackRock’s Wang Xiaojing expressed optimism about the Chinese market over the next 12 to 36 months, believing that Chinese stocks and interest rate bonds will benefit. Over the past year, the cost of capital has significantly decreased, and the growth of the stock market has yet to reflect cash flow value, with this trend expected to continue in the coming years.

The release of the AI model by DeepSeek has reignited interest in Chinese tech companies. Recently, both A-shares and Hong Kong stocks surged, with the Shanghai Composite Index closing up over 1% above 3300 points, the Shenzhen Composite Index rising 1.75%, and the ChiNext Index up 2.53%. The Hang Seng Index increased by 1.16%, while the Hang Seng Tech Index rose 1.80%, entering a "technical bull market" with a 20% gain since its January low. Xiaomi and Alibaba performed notably in the Hang Seng Tech Index, each rising nearly 30%. Alibaba and Tencent are poised to capture a larger market share in AI applications going forward.

Bloomberg Intelligence strategist Marvin Chen noted that as onshore investors flock to Hong Kong tech stocks, southbound capital inflows have seen a slight increase, a trend that may continue due to the positive factors around artificial intelligence. HSBC analysts pointed out in a report that global attention to DeepSeek could stimulate investors to reassess China's innovation capabilities, becoming a significant catalyst for the revaluation of the Chinese stock market.

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（Source: uSMART HK）