Staff Reporter
Goldman Sachs analyst Hailey He has expressed a “cautiously optimistic” outlook on Chinese stocks, highlighting that “AI enthusiasm sparked by DeepSeek” has propelled technology shares into a bull market.
On Friday, Chinese markets performed strongly, with the Shanghai Composite Index (SHCOMP) rising by 1%, the CSI 300 gaining 1.3%, and the Hang Seng Index (HSI) increasing by 1.2%. This surge was driven by a wave of positive momentum in technology companies fueled by advancements in artificial intelligence.
Hong Kong shares experienced a remarkable 4.5% increase for the week, marking the best weekly performance since early October. Key contributors to this bullish trend included electric vehicle (EV), AI, and robotics stocks, all amid escalating trade tensions between the U.S. and China.
During Friday’s trading, the HSI saw significant gains in the automotive sector, with Geely rising by 8%, Li Auto increasing by 6.5%, and BYD gaining 5%. The HSTECH index rebounded nearly 2%, entering technical bull market territory and now up 22% from its January lows. Notable tech players also saw gains, with Alibaba shares climbing 1.5% and Tencent increasing by approximately 2%.
Goldman Sachs analyst Hailey He elaborated on the firm’s “cautiously optimistic” stance regarding the Chinese market. As China emerges from a week-long Lunar New Year holiday, market sentiment around Chinese assets has improved significantly, reflected in the bullish movements in both equities and fixed income.
Factors such as a tariff reprieve, heightened enthusiasm for AI driven by DeepSeek, and favorable liquidity conditions have all contributed to this positive trend. Chinese equities experienced a notable rebound this week, fueled by optimism surrounding AI technologies. The Hang Seng Index (HSI) tech sector, a key indicator of foreign investor confidence, surged 23% from its January lows.
Goldman Sachs’ Asia internet research team remains bullish on the prospects for further advancements in AI and enhanced cost efficiencies. Notably, the cost of Doubao, China’s leading AI chatbot, is 85% cheaper than the industry average, illustrating significant potential for cost-effective solutions.
In stock recommendations, Tencent stands out as well-positioned to introduce consumer-facing AI applications, capitalizing on its Weixin super-app’s social and transactional capabilities. Goldman Sachs also maintains a positive outlook on Alibaba, China’s largest public cloud hyperscaler, and data center providers like GDS and VNET, which are expected to benefit from the ongoing demand for public cloud services and AI computing amid multi-year growth in AI adoption.
In a related comment, Sat Duhra, a portfolio manager at Janus Henderson Investors in Singapore, noted, “This is a sector that has been overlooked, but like other purely domestic sectors, there are bright spots.” He emphasized that the recent DeepSeek announcement serves as a timely reminder of how industrial policies, such as Made in China 2025, are driving many sectors toward world-class status.
Deutsche Bank analyst Peter Milliken has informed clients that he believes 2025 will be the year the investment community recognizes China’s competitive edge over the rest of the world.
Milliken stated, “Investors will need to pivot sharply to China in the medium term and may struggle to access its stocks without driving prices up.” This perspective comes amid a growing bullish sentiment surrounding Chinese tech stocks, a stark contrast to the bearish outlook that has plagued shares for several years as China’s economy faced challenges like a property downturn, deflation, and demographic shifts.
However, analysts caution that any escalation in the ongoing trade war between the U.S. and China could quickly disrupt this bullish momentum. This is why Goldman Sachs’ Hailey He remains “cautiously optimistic” about the future of Chinese equities. As the global investment landscape shifts, attention to China’s robust growth potential is expected to intensify.
