Last month, Chinese company DeepSeek released a powerful neural network that quickly gained popularity around the world. The success of the AI startup contributed to an influx of investors into the Chinese stock market, who are actively investing in shares of representatives of the technology sector, Bloomberg writes, citing information from informed experts.
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The report says that due to the redistribution of investors’ funds, the Chinese market has attracted a total of more than $1.3 trillion over the past month. At the same time, the Indian market has shrunk by more than $720 billion. At the same time, the MSCI China index has been ahead of its Indian counterpart for the third month in a row, which is the longest period of leadership in the past two years.
«”DeepSeek has shown that China does have companies that are a vital part of the overall AI ecosystem,” said Ken Wong, an analyst at Eastspring Investment. He added that his firm had been increasing its exposure to Chinese internet holdings in recent months while cutting exposure to Indian stocks that had “grown well above their valuation multiples.”
The rotation of investor capital marks a reversal from the “pivot” to India seen over the past few years. This trend was driven by rising infrastructure spending in India and the country’s potential as an alternative manufacturing hub to China. China appears to be regaining its investment appeal through a fundamental reassessment of its investment capabilities, particularly in technology.
Vivek Dhawan, manager of Candriam fund, believes that the events surrounding DeepSeek will likely help lift China’s economy and the country’s markets, providing a lasting boost. “When you put all the pieces together, in the current environment, China becomes more attractive from a risk-reward perspective than India,” Dhawan said.