(Bloomberg) – Deepseek’s breakthrough in artificial intelligence has helped to drive stock fund rotation from India back to China.
Most of them read from Bloomberg
Hedge funds are piling up on Chinese stocks at the fastest pace in months as the bullishness of deep-sec-driven technology rally raises hopes for more economic stimulation. In contrast, India is struggling with record-breaking cash departures over concerns over slowing macro growth and slowing corporate revenues and expensive stock valuations.
China’s land and offshore stock markets have added a total of more than $1.3 trillion in the past month amid such reallocation, while India’s market has shrunk more than $720 billion. The MSCI China Index is on track to surpass its Indian counterpart in the third month, the longest winning streak in two years.
Ken Wong, an Asian Equity Portfolio Specialist at Eastspring Investments, said Deepseek “indicates that there are companies that actually form a key part of the AI ecosystem. His company is , while adding Chinese internet holdings over the past few months, trimming small Indian stocks “running beyond multiples of valuation.”
This rotation invites funding from China in terms of face from pivots to India seen over the past few years. This was based on India’s infrastructure spending splurge and its potential as an alternative manufacturing hub to China. India, which focuses on the country, is also considered a relative heaven in Donald Trump’s tariff plans.
China appears to have regained its previous appeal, particularly with a fundamental reassessment of investment potential in technology. After scaring investors with corporate crackdowns a while ago, Beijing showed in the news that Jack Ma, co-founder of entrepreneurs, including Alibaba Group Holding Ltd., has been invited to meet the country’s top leaders. As has been reported, it may actually help promote new AI themes.
Vivek Dhawan, fund manager at Candriam, said Deepseek-related developments will likely help boost China’s economy and its markets and provide an expanded boost. “By putting all the pieces together, China is more attractive than India in its current setup.
The difference in ratings adds to the appeal of China. The MSCI China Index is trading with a forward revenue estimate of just 11 times, compared to about 21 times the MSCI India Index.
Bloomberg data analysis of regional allocations by some of the largest active Asian equity funds shows that most people have reduced exposure to Indian stocks and have added Chinese stocks in recent months It’s there.
Deepseek has helped accelerate the flow to China, but further announcements of China’s stimulus remain important, according to Andrew Swan, head of Asia Ex-Dapan equity at Man Group.
“We believe that policy will turn to consumption and targeted attempts will be rolled out to encourage current high levels of savings to be rolled out,” Swann said. The former Japanese equity fund he manages has increased China’s exposure from 30% to 40% over the past year, trimming India’s exposure from 21% to 18%.
A complete reversal of fund flow is unlikely, and India’s Stockbulls, including Morgan Stanley, have said that the recent revisions have been overdone and that the country’s long-term growth narrative remains the same.
Meanwhile, the additional 10% tariffs Trump has imposed on China have strengthened Amundi Sa’s neutral stance on Chinese stocks, according to senior Asian investment strategist Aidan Yao. “While a ceasefire is possible as both sides converge on trade negotiations, external dynamics will remain fluid and challenging for China in the near future.”
There is also skepticism among traders burned by past failed Chinese rallies. Some people point to the increased busy trading and valuations as a cautious reason.
Helen Zhu, Chief Investment Officer of Nan Fung Trinity Hk Ltd., sees uncertainty about whether Deepseek’s AI success can be repeated. “After all, you really don’t know what the potential monetization opportunities are in the medium to long term,” she said.
Nevertheless, there is a clear topic of “Chinese back” in the market these days. Plus continues to accumulate, with Alibaba adding $100 billion in market value over the past five weeks, and the Hang Seng Tech Index has entered the bull market.
“Deepseek News was an impactful catalyst when market participants were able to file lawsuits to re-enter the country,” said Nicole Wong, portfolio manager at Manulife Investment Management. “From a tactical perspective, I think it makes sense to use this momentum.”
– Supported by Chiranjivi Chakraborty, Abhishek Vishnoy, Mary Nikola and Joan Wong.
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