Global Investors Say Go Long on China
Trump’s tariff war and murky economic policies are sending chills down the spine of the market. All three major U.S. stock indices closed at significantly lows on Monday, with the S&P 500 index falling 8.7% from its historical peak on February 19, wiping out a cumulative $4 trillion in market value, while the Nasdaq index dropped nearly 14% from its recent high.
Amid the collective landslide, Tesla’s stock price has dropped over 53% from its peak last December, with its market value evaporating by approximately $800 billion — equivalent to Poland’s annual GDP.
The direct trigger for such a market reaction appears to be Trump’s ambivalence about the possibility of an economic recession in the US. When asked about US economic outlook during a Fox interview released on Monday, Trump said “There is a period of transition, because what we’re doing is very big…” He added, “If you look at China, they have a 100-year perspective. We have a quarter. We go by quarters.”
The market did look at China. So far this year, the Nasdaq Golden Dragon China Index has rebounded more than 20% from its low point. In February, Morgan Stanley projected that the MSCI China Index could reach 77 by the end of 2025, a target 22% higher than its earlier estimate. Goldman Sachs expects Chinese stocks to attract US$200 billion in inflows and rise by as much as 19% over the next 12 months.
Meanwhile, Citigroup Inc. downgraded U.S. equities from “overweight” to “neutral” and upgraded China to “overweight,” recommending that global investors increase their allocation to Chinese stocks.
Foreign capital is quietly flowing into China.
According to the Institute of International Finance (IIF), a combined inflow of more than $10 billion into both Chinese equities and bonds this January reflects confidence of foreign investors as it marks the first simultaneous increase in both asset classes since last August.
Regional players have showed special interest. The Korea Securities Depository reveals that in February, South Korean investors’ total monthly trading volume in A-shares and Hong Kong stocks reached US$782 million, a month-on-month increase of nearly 200%. This figure far exceeds their investment scale in European and Japanese equities during the same period.
Where is all the foreign capital heading? To Chinese tech stocks.
The optimism in China’s tech sector is buttressed by a myriad of convictions: First, China’s capacity for continuous technological advancements, evidenced by DeepSeek and Manus, which was launched just last week. Manus is the world’s first fully autonomous AI agent with the ability to handle complex, real-world tasks. Bloomberg even titled its coverage: “China’s Manus Follows DeepSeek in Challenging US AI Lead.”
Second, the profitability of Chinese tech companies-since the start of the year to February 13, the year-to-date cumulative gains of major Chinese tech companies were as follows: Alibaba 39.56%, BYD ADR 34.71%, Xiaomi ADR 30.88%, Pinduoduo 22.52%, NetEase 22.34%, JD.com 10.71%, and Tencent ADR 8.07%.
Ray Dalio, the billionaire founder of the world’s largest hedge fund, Bridgewater Associates, once said, “The time to buy is when everyone hates the market and it’s cheap, which is now the case in Chinese equities.”
What Ray Dalio was referring to is this conspicuous gap: even though China’s GDP is already 72% of that of the U.S. The market capitalization of A-shares is only 20-25% of the U.S. stock market. Even when including Hong Kong-listed stocks and U.S.-listed Chinese companies, the total market cap is still just 40% of the U.S. market. While the price-to-earnings (P/E) ratio of U.S. stocks ranges from 20-30 times, the P/E ratio of A-shares is only 12-13 times.
Billionaire investor David Tepper, president and founder of Appaloosa Management, stated in September that he would buy “everything” related to China. In the fourth quarter of 2024, he increased his firm’s holdings in companies like JD.com, Alibaba Group Holding, and PDD Holdings.
Ruchir Sharma, chairman of Rockefeller International, echoes this sentiment, saying that “China is very much ‘investable,’ at the right price.” He added，“China now has more than 250 companies with a market cap of over $1bn and a free cash-flow yield of more than 10 per cent; the US has fewer than 150. Of those 250-odd China stocks, all but about 20 are in sectors other than tech, led by industrial and consumer discretionary businesses, so the opportunities are not just in the internet and AI.”
It would be naive to conclude that winter is coming for the US during this “transitional period”, which can fairly be used to describe both China and the US. Across the Pacific, China is gearing up to move up the value chain, shifting from an economy driven by infrastructure and manufacturing exports to one powered by high-tech development-it won’t happen without an ordeal. When both countries are going through their respective throes, global investors will always be watching, measuring and preparing for their next moves as this game of thrones continues. Our advice? Not a bad time to double down on China.
Editor: huyueyue
