Goldman Sachs interprets capital flows: Funds shift from "hard" to "soft", capital escapes from Taiwan and South Korean stock markets, hedge funds increase holdings in China
According to Goldman Sachs data, since the release of DeepSeek on January 27, there has been a capital outflow of $3 billion from emerging Asia outside of China, mainly from the South Korean and Taiwan markets (each $1 billion). At the same time, the trend of capital shifting from hard technology to soft technology has also intensified after the release of DeepSeek
DeepSeek is changing the trend of global capital flows.
According to Goldman Sachs data, since the release of DeepSeek on January 27, there has been a capital outflow of $3 billion from emerging Asia excluding China, mainly from the South Korean and Taiwan markets (each $1 billion). This reflects that investors are reassessing investment opportunities within the technology sector.
The Goldman Sachs report points out that over the past three months, the allocation of emerging markets and Asian mutual funds has gradually shifted from hard technology to soft technology. This trend became more pronounced after the important announcement from the AI company DeepSeek at the end of January.
At the same time, hedge funds have shown a subtle change in attitude towards Chinese stocks. According to Goldman Sachs Prime Services data, there was a moderate net buying of Chinese stocks (including onshore and offshore) in January, indicating a rebound in risk appetite. However, the long-short ratio has retreated from recent highs. The allocation to China in the global Prime book remains near a five-year low, with a net allocation ratio of 7.1% at the end of January.
From last week's weekly data, there was a net outflow of $1.7 billion in emerging Asian markets excluding Chinese A-shares, with the Taiwan market experiencing the largest outflow of $800 million. The outflows from India, South Korea, and ASEAN countries and regions were $400 million, $200 million, and $200 million, respectively.
Non-Asian emerging markets also faced capital pressure, with a net outflow of $200 million last week, mainly from Brazil ($100 million) and South Africa ($57 million).
In contrast, the capital flow between the mainland China and Hong Kong stock markets is relatively optimistic. After the Spring Festival, the southbound capital (mainland investors buying Hong Kong stocks) has slowed down, but last week still recorded a net inflow of $600 million, bringing the total inflow this year to $17 billion