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Global Hedge Funds Rush to Chinese Stocks Amid AI Boom and Policy Support
Surge in Hedge Fund Investments
Global hedge funds have been significantly increasing their purchases of Chinese stocks throughout 2024. The buying momentum accelerated in early February, largely driven by growing enthusiasm surrounding artificial intelligence startup DeepSeek, according to a report by Goldman Sachs.
Strongest Purchase in Over Four Months
Goldman Sachs’ prime brokerage data shows that Chinese equities, both onshore and offshore, have become the most net-bought market globally. Between February 3 and 7, hedge funds recorded their highest purchase levels in more than four months.
DeepSeek’s AI Breakthrough Sparks Optimism
DeepSeek’s success in developing a low-cost AI model has shifted investor sentiment. A Hong Kong-based institutional sales director noted that the startup is reversing the perception that China is lagging in AI development.
Additional Factors Supporting Sentiment
Investor confidence has also been buoyed by Beijing’s policy-easing measures and relief over the U.S. administration’s lower-than-expected 10% tariff on Chinese goods. These factors have contributed to a revaluation of Chinese assets among global investors.
Market Performance and Investor Moves
The MSCI China Index has been rising for four consecutive weeks since mid-January, gaining over 6% in February and outperforming major global markets.
Hedge fund billionaire David Tepper’s Appaloosa LP notably increased its stakes in Chinese tech giants Alibaba and JD.com in the fourth quarter, making them some of the fund’s largest holdings.
Sector Preferences Among Hedge Funds
Goldman Sachs reported that 95% of last week’s hedge fund purchases were in single stocks. The most favored sectors include:
- Consumer discretionary
- Information technology
- Industrials
- Communication services
Conversely, hedge funds have been reducing their exposure to:
- Energy
- Utilities
- Real estate
Growing Allocation to Chinese Equities
Hedge fund allocation to Chinese equities now stands at 7.6% of Goldman Sachs’ total prime book exposure. This marks a rise from the 10th percentile in January to the 23rd percentile over the past five years, indicating increased confidence in the Chinese market.
“Global Hedge Funds Rush to Chinese Stocks Amid AI Boom and Policy Support” “Global Hedge Funds Rush to Chinese Stocks Amid AI Boom and Policy Support”