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June 5, 2025
DeepSeek Fuels Chinese Tech Stock Rally
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- June 27, 2025
As we step into 2025, the excitement surrounding DeepSeek has rapidly swept across the entire tech sector, creating waves that resonate through various financial markets. The aftermath of the 2025 Spring Festival brought a remarkable resurgence in China's A-shares, where, on the very first trading day post-holiday, DeepSeek led a successful rally in tech stocks. A significant number of stocks hit their daily trading limits, igniting a rekindled enthusiasm among investors.
Meanwhile, the Hong Kong market witnessed the Hang Seng Tech Index soar, achieving an impressive increase of nearly 27% from January 2 through February 19, and peaking at a three-year high on February 18. This robust performance reflects not just local investor confidence but also attracts the attention of overseas investors who have begun to reassess the viability of Chinese tech stocks, in light of the recent developments initiated by DeepSeek.
According to reports from the Daily Economic News, American analysts noted that the average cumulative increase of the “Ten Sisters of Technology” in China—comprising giants like Alibaba, Tencent, Meituan, Xiaomi, BYD, JD.com, NetEase, Baidu, Geely, and SMIC—reached an impressive 28.14% since the start of the year. This remarkable figure stands in stark contrast to the performance of the “Magnificent Seven” in the US tech space—Apple, Microsoft, Alphabet, Tesla, Meta, Nvidia, and Amazon—which collectively saw a modest increase of only 1.52% during the same timeframe.
On February 19, Wang Ying, the Chief China Equity Strategist at Morgan Stanley, highlighted a significant shift in global investors' focus regarding Chinese technology and AI sectors. He pointed out that, historically, there has been limited interest from international investors in these areas. However, the unveiling of DeepSeek's cost-effective large language model (LLM) has demonstrated substantial advancements in China's AI capabilities, matching the performance of leading global models while being significantly more affordable.
Wang also emphasized that, as of January 31, 2025, global long-term investors still maintain a significantly lower allocation to Chinese tech-related sectors. But as DeepSeek injects fresh momentum into the market, a reevaluation of the A-shares investment landscape seems imminent. The dynamic shifts in sentiments are palpable, as evidenced by market movements following DeepSeek’s contributions.
In terms of market performance, both the MSCI China Index and the Hang Seng Index hit rock bottom on January 13, immediately following the release of DeepSeek’s R1 model. Since then, a strong rebound has ensued, with the Hang Seng Index climbing 12% between January 13 and February 7. Notably, the Hang Seng Tech Index surged by 22%, reinforcing its position as the engine driving this climb. The MSCI China Index grew by 13%, with the IT sector within the MSCI China framework elevating by a staggering 24%. This emergent trend showcases the powerful resurgence of China's tech industry on the global stage. In the A-shares market, the Shanghai Composite Index and the CSI 1000 IT sector saw rises of 5% and 18% respectively, further invigorating activity across the broader A-shares market.
Forecasts from Morgan Stanley suggest that by the end of 2025, the MSCI China Index could reach 77 points, a significant elevation from the previously anticipated 63 points. This adjustment hints at a potential increase of 4% from the closing price on February 19.
As early as February, the MSCI China Index had entered the territory of a technical bull market, signaling growing optimism regarding Chinese tech stocks. Furthermore, Morgan Stanley raised its end-of-year target for the Hang Seng China Enterprises Index from 6,970 to 8,600 points and revised the target for the Hang Seng Index from 19,400 to 24,000 points, while maintaining its forecast for the CSI 300 Index at 4,200 points. These adjustments vividly reflect the firm confidence Morgan Stanley holds toward the Chinese equity market, especially within the tech sector.
In their research notes, Morgan Stanley strategists indicated that a structural transformation has occurred in the Chinese stock market—especially within offshore markets. This change encompasses not only the technological innovation capabilities and market competitiveness of enterprises but also reshapes global investors’ perceptions and investment attitudes toward Chinese tech stocks. “This inspires our confidence that the recent recovery of the MSCI China Index will be sustained, especially more so than during the rebound we observed in September of the previous year,” they noted. This view is robustly supported by market data and prevailing industry trends, offering investors clear guidance for future investment trajectories. Moving forward, as companies like DeepSeek continue to innovate and the market evolves, the Chinese tech sector is poised to lead the way in global capital markets, presenting lucrative opportunities and returns for investors.
(Disclaimer: The content of this article is for informational purposes only and does not constitute investment advice. Investors should proceed with caution and be aware of the risks involved.)
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