DeepSeek accelerates asset revaluation! Hedge funds flee India and flow into China

DeepSeek seems to be triggering a "major reshuffle" in the global capital markets.

Chinese AI company DeepSeek's significant breakthroughs in the field of artificial intelligence are catalyzing global investors to reassess the investment value of Chinese tech stocks, with large amounts of capital withdrawing from markets like India and flooding into the Chinese market, leading to a sustained bullish sentiment.

Data shows that over the past month, the total market capitalization of the stock markets inside and outside China has increased by more than $1.3 trillion, while the Indian market's market capitalization has shrunk by over $72 billion during the same period. Hedge funds are buying Chinese stocks at the fastest pace in months, and the MSCI China Index is expected to outperform the MSCI India Index for the third consecutive month, setting a record for the longest consecutive gains in two years. Goldman Sachs stated:

"In the past 10 weeks, China (including onshore and offshore markets) has seen net buying in 7 weeks, and year-to-date, China is the 'market with the largest nominal net buying volume.'"

Ken Wong, an Asian equity portfolio expert at Eastspring Investments, noted, "DeepSeek's success indicates that China indeed has companies that are important components of the entire AI ecosystem." His company has been increasing its holdings in Chinese internet stocks while reducing its positions in Indian small-cap stocks, which have valuations that are "far beyond" reasonable levels.

Candriam fund manager Vivek Dhawan also believes that, in the current environment, China is more attractive than India from a risk-return perspective. Amid concerns about macroeconomic slowdown and corporate profit decline, India is experiencing record cash outflows.

At the same time, valuation differences have further increased the attractiveness of the Chinese market. The expected price-to-earnings ratio of the MSCI China Index is only 11 times, while that of the MSCI India Index is about 21 times. Some of the largest actively managed Asian equity funds have generally reduced their allocations to Indian stocks in recent months while increasing their holdings in Chinese stocks. The Man Asia Ex-Japan Equity Fund has raised its holdings in China from 30% to 40% over the past year, while reducing its holdings in India from 21% to 18%.

Positive factors continue to emerge, with Alibaba's market capitalization increasing by $100 billion over the past five weeks, and the Hong Kong Hang Seng Tech Index entering a bull market...

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