Bloomberg reported that DeepSeek’s artificial intelligence breakthrough is driving a rotation of stock funds back into China from India. The phenomenon has seen over $1.3 trillion in value added to Chinese equities in the past month, while Indian markets have shrunk by more than $720 billion.
The shift marks an about-face from previous years when investors turned to India due to its potential as a manufacturing hub and infrastructure spending. However, China is regaining its appeal after a fundamental reevaluation of its investability, particularly in tech. Beijing’s efforts to boost the economy through AI have been welcomed by investors, with entrepreneurs like Alibaba Group Holding Ltd.’s co-founder Jack Ma being invited to meet top leaders.
Analysts attribute the rotation to DeepSeek-related developments and China’s more attractive valuation differential, trading at 11 times forward earnings estimates compared to India’s 21 times. Most active Asian equity funds have been reducing exposure to Indian equities and adding Chinese stocks in recent months.
While there is skepticism among some traders who point to crowded trading and high valuations as cautionary factors, many see the positives piling up for China. The MSCI China Index has outperformed its Indian counterpart for two consecutive months, with Alibaba adding $100 billion in market value over the past five weeks. Fund managers believe that DeepSeek’s success is a well-timed catalyst, making it essential to take advantage of this momentum.
China’s AI technology gains are expected to provide an extended boost to the economy and markets. With policy likely to shift toward consumption and encourage savings deployment, further stimulus announcements remain important for investors.
Source: https://finance.yahoo.com/news/deepseek-drives-1-3-trillion-000000107.html