According to Scott Murdoch, investors worldwide are starting to reconsider their views on mainland China's stock markets after previously holding back for two years. This shift in perception is expected to lead to increased activity in the market, especially as equity issuance doubled in the first quarter compared to the previous year.
Factors such as reduced scrutiny on technology giants by the government and the emergence of innovative AI software developer DeepSeek are attracting both local and foreign investors, even amid concerns about trade tensions between China and the U.S. Chinese firms raised $16.8 billion through equity issuance in the first quarter, reflecting a 119% increase year-on-year.
Goldman Sachs' James Wang noted that investors' mindset towards China has evolved, with many now viewing it as a market for re-evaluation rather than one to avoid. This changing sentiment is evident in the increasing presence of long-only investors in the region.
In Hong Kong, the Hang Seng Index has gained 21% this year, outperforming international benchmarks. The index's 12-month price-to-earnings ratio stands at 10.5x, indicating favorable valuation levels compared to global peers. The MSCI China index's P/E ratio is at 11.7 times, lower than that of the U.S. and Indian markets.
Wang highlighted that China's stock market presents a 40% discount compared to other global markets, making it an attractive investment opportunity. The Chinese government's policies alongside DeepSeek's innovations have boosted the perceived value of Chinese stocks, further emphasizing the valuation gap.
A notable shift in the tech sector has contributed to this positive sentiment. Following a summit with President Xi Jinping and top tech leaders, it appears that the government's strict oversight of the sector is relaxing. DeepSeek's disruptive AI products and the government's support for private enterprise, particularly in technology, have influenced global investors' perceptions of China and its advancements in AI and quantum computing, as mentioned by Citigroup's Harish Raman.