In early 2024, China was experiencing a slow post-pandemic economic recovery due to weak consumer spending, persistent concerns about the real estate sector, and the aftermath of a regulatory crackdown on its tech industry. This downturn was mirrored in equity markets, with stock listings in Hong Kong dwindling amidst regulatory scrutiny. Additionally, the Hang Seng Index recorded its fourth consecutive year of losses during this period.
Contrasting sharply with the previous year’s outlook, sentiment has shifted positively. During Hong Kong’s Mega Event Week, which included various conferences and events like the Art Basel fair and the Rugby Sevens tournament, financial leaders from Hong Kong, mainland China, Europe, the United States, and other regions expressed confidence in a recovery for China and Hong Kong. The Hang Seng Index has risen nearly 20% for the year, significantly outperforming the S&P 500 and Japan’s Nikkei 225. Chinese companies such as Alibaba, Xiaomi, and BYD have experienced substantial gains. Wall Street analysts have increased their targets on Chinese stocks, attributing this to favorable policy signals from Beijing and potential new innovations following the emergence of DeepSeek.
At the HSBC Global Investment Summit in Hong Kong, Jenny Johnson, CEO of Franklin Templeton, expressed optimism about investing in China’s economy. Frederic Neumann, chief Asia economist at HSBC, noted that there is a renewed sense of optimism and interest in China.
Bonnie Chan, CEO of Hong Kong Exchanges and Clearing, highlighted the renewed interest from international investors in Chinese stocks at an HSBC event. Over the past year, perceptions of Chinese stocks have improved, leading to increased investments in Hong Kong and China. The Hong Kong stock exchange is drawing significant IPOs from Chinese companies, with Tesla supplier CATL recently receiving approval to raise $5 billion through an IPO, marking the largest listing since 2021.
China’s stock market rally can be traced back to the release of DeepSeek’s AI model, which significantly impacted U.S. tech stocks while boosting Chinese tech stocks. Kevin Sneader, President of Asia-Pacific ex-Japan at Goldman Sachs, described DeepSeek’s impact as a confidence booster. Liang Wenfeng, founder of DeepSeek, participated in a symposium with President Xi Jinping alongside other tech leaders, signaling Beijing’s willingness to support the private sector.
Yimei Li, CEO of China Asset Management, noted the renewed recognition of China’s tech sector’s innovative capacity. Clara Chan, CEO of the Hong Kong Investment Corporation, pointed out the increasing attention international investors are paying to China’s tech sector, with many considering Hong Kong as a strategic investment platform.
While there is optimism about China’s consumption potential, questions remain about Beijing’s willingness to stimulate other areas of the economy. In recent months, officials have promised measures to boost domestic consumption, which has been sluggish post-COVID-19. Economist Keyu Jin highlighted China’s low consumption as a percentage of GDP, indicating areas in need of development, particularly in rural regions.
Financial firms appear to be taking a long-term view, with Ali Dibadj, CEO of Janus Henderson Investors, emphasizing China’s significant potential due to its large population and history of innovation. Frederic Neumann of HSBC suggested that while immediate miracles aren’t expected, a gradual shift in China’s approach to consumption is anticipated. However, some, like former Morgan Stanley Asia chairman Stephen Roach, remain skeptical about Beijing’s promises.
In contrast, the U.S. market faces challenges, with tariffs, inflation, and weak consumer sentiment affecting equities. American tech stocks are underperforming, with the “Magnificent Seven” facing annual declines. Uncertainties surrounding U.S. tariffs, exacerbated by recent actions from the Trump administration, have further dampened investor confidence.
HSBC chairman Mark Tucker remarked on the changing global economic landscape, suggesting that the era of globalization as previously known may be ending.
