Global hedge funds are increasingly buying Chinese stocks, with the pace accelerating significantly in early February, fuelled by the emergence of DeepSeek, a homegrown Chinese artificial intelligence startup, according to a report by Reuters.
The report cites a client note from Goldman Sachs referencing data up to 7 February as highlighting that Chinese equities, both onshore and offshore, are the “most notionally net bought market” on its prime brokerage book globally. The week of 3-7 February marked the strongest hedge fund buying activity in over four months, the report added.
The buying spree has been largely concentrated in single stocks, particularly within sectors such as consumer discretionary, information technology, industrials, and communication services.
Energy, utilities, and real estate stocks, meanwhile, saw outflows as hedge funds reallocated to higher-growth sectors in China.
The rise of DeepSeek, an innovative low-cost AI platform, has been a pivotal in reshaping global investor sentiment toward Chinese assets, with the startup’s success prompting a reevaluation of China’s role in the global AI landscape.
The sentiment has been further bolstered by Beijing’s policy-easing measures and relief over US President Donald Trump’s decision to impose a lower-than-expected 10% additional tariff on Chinese goods.
The MSCI China index has risen for four consecutive weeks since mid-January, gaining over 6% in February alone, outperforming major global markets.
Hedge funds allocations to Chinese equities now represents 7.6% of Goldman Sachs’ total prime book exposure, ranking in the 23rd percentile over the past five years, up from around the 10th percentile in January.
