Goldman's Hailey He remains "cautiously optimistic" about Chinese stocks, noting that "AI enthusiasm sparked by Deepseek" has driven tech shares into a bull market.
On Friday, China had a solid session with SHCOMP +1%, CSI 300 +1.3%, and HSI +1.2% as technology companies outperformed on AI tailwinds.
HK shares gained 4.5% for the week, marking the best weekly performance since the first week of October. Key drivers of this bullish price action included EV, AI, and robotics stocks—all amid a week in which the tit-for-tat trade war between the US and China escalated.
During the session, HSI saw auto stocks surge, with Geely up 8%, Li up 6.5%, and BYD gaining 5%. HSTECH rose nearly 2%, rebounding into technical bull market territory, now up 22% from its January lows. Alibaba shares climbed 1.5%, while Tencent gained around 2%.
Goldman's He provided more color around "cautiously optimistic":
As China returns from one week CNY holiday, market sentiment on China asset improves as seen from the bullish price action in both equities and fixed income. Tariff reprieve, AI enthusiasm sparked by Deepseek and easy liquidity all contributed to the move.
China equities staged a meaningful rebound this week on AI optimism. HSI tech, the parameter of foreigner confidence, surged 23% from January lows. GS Asia internet research is bullish on further AI advancement and cost efficiencies. To highlight, the cost of Doubao, the most popular AI Chatbot in China, is 85% cheaper than industry average. In terms of stocks, we continue to see Tencent as best positioned in introducing To-C AI agent applications given the Weixin super-app with both social and transaction capabilities. We continue to be bullish on Alibaba (China's largest public cloud hyperscaler) and data centers (GDS, VNET) that will benefit from ongoing public cloud and AI computing demand growth from multi-year higher AI adoption. The latest piece from equity research on China AI can be accessed here.
In a separate note, Sat Duhra, portfolio manager at Janus Henderson Investors in Singapore, told clients, "This is a sector that has been ignored but like other purely domestic sectors, there are some bright spots," adding, "The recent DeepSeek announcement is a timely reminder that behind the scenes, industrial policy — for example Made in China 2025 — has pushed many sectors toward world-class status."
Deutsche Bank analyst Peter Milliken told clients, "We think 2025 is the year the investing world realizes China is out-competing the rest of the world."
"Investors, we believe, will have to pivot sharply to China in the medium term and will struggle to get access to its stocks without bidding them up," Milliken wrote.
The increasing bullishness in Chinese tech sharply contrasts with several years of bearish sentiment that weighed on shares as the world's second-largest economy grappled with a property downturn, deflation, and a demographic winter.
Any escalation in the tit-for-tat trade war between the US and China can quickly end the bull party, hence why Goldman's He is "cautiously optimistic."