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A benchmark for Chinese technology stocks has risen more than 20 per cent in the past month, entering a bull market as investors pile into the country’s internet companies following DeepSeek’s artificial intelligence breakthrough.
The Hang Seng Tech index, which tracks the 30 largest tech groups listed in Hong Kong, is up 25 per cent from its 2025 low on January 13. It has outpaced the Nasdaq 100’s 4.4 per cent increase and a rise of less than 0.5 per cent for the “Magnificent Seven” US tech stocks on an equal-weighted basis in the past month.
The gains in Hong Kong reflect renewed foreign investor interest in China after DeepSeek, an AI model apparently developed with far less computing power than US counterparts, triggered a global reappraisal of Chinese tech companies.
“Only Chinese internet companies are globally competitive and comparable to the US Magnificent Seven,” said Bush Chu, investment manager for Chinese equities at Abrdn.
“That improvement in sentiment has driven some flows back to China. We are starting to see some outperformance and a rally in China in recent weeks because of that.”
The positive movement is a boon to China’s markets, which have been buffeted by concerns over US President Donald Trump’s tariffs, a mainland property slump and deflationary pressures in the Chinese economy. Mainland China’s broader CSI 300 index is up just 4 per cent in the past month.
DeepSeek stunned Silicon Valley in late January when it released a large language model (LLM) that it said was built on a bootstrapped budget, raising questions about the need for huge investment in AI.
The news led US tech stocks to a sharp drop on January 27. Nvidia set a record for the biggest one-day loss in market capitalisation, with $589bn wiped from its market value.
Conversely, Chinese tech shares boomed. Cloud computing and tech hardware companies that stand to benefit from AI innovations have led the recent rally.
They include internet giant Alibaba, consumer electronics group Xiaomi, search engine developer Baidu and electric-car maker BYD, which are up 45 per cent, 35 per cent, 15 per cent and 38 per cent, respectively, in the past month.
E-commerce platforms JD.com and Meituan have also advanced 24 per cent and 11 per cent, boosted by relatively strong consumption data from the lunar new year holiday and growing expectations of large-scale fiscal stimulus from Beijing this year.
The broader Hang Seng index is up 15 per cent in the same period. Data from the Stock Connect programme, which allows mainland traders to buy Hong Kong stocks, indicates heightened interest among Chinese investors, with average daily turnover in February up two-thirds from January and three times higher than February 2024.
Analysts said investors were boosted by the belief that Chinese development of LLMs was advancing and consumer-facing companies would rapidly adopt them.
“While DeepSeek is known for using unique methods to overcome hardware restrictions in China, we believe AI investment and LLMs’ advancement by leading China internet companies have been under-appreciated by investors,” Citi analysts wrote on February 3.
“The US is strong in terms of zero-to-one innovation,” said Chu of Abrdn, “but China is stronger in terms of one-to-100 innovation, in terms of widening access and adoption of tech.”
Additional reporting by Zijing Wu in Riyadh