DeepSeek sparks buying spree of Chinese equities

 

DeepSeek Photo: VCG

While the artificial intelligent (AI) model developed by Chinese tech start-up DeepSeek has stunned the tech world, the company's breakthrough - a demonstration of China's innovation strength - has also triggered a buying spree among global financial institutions and hedge funds of Chinese equities.

To date, the benchmark Hang Seng Tech index has entered a bull market, rising more than 30 percent in the past month. Also in just the past month, China's onshore and offshore equity markets have added more than $1.3 trillion in total value, according to a Bloomberg report. 

The sweeping momentum highlights how the recent AI-driven development has been serving as a catalyst for global capitals to broadly reappraise Chinese assets, which have been largely undervalued in the past few years, analysts said, while expecting that foreign investors' confidence on Chinese equities will be further lifted up in the long-term along with tech-fueled industrial upgrade, more economic supportive measures as well as a robust economic growth streak.

According to the Bloomberg report on Sunday, hedge funds have been "piling into Chinese equities at the fastest pace in months," while another emerging market, India, in contrast is suffering a record exodus of cash, with market valuation shrinking by more than $720 billion in the past month. 

The MSCI China Index is on track to outperform its Indian counterpart for a third-straight month, the longest such streak in two years, the report said.

The bullish sentiment has led to an extended Chinese tech stock rally across the board. 

As of Friday's closing, Nasdaq-listed Chinese tech stocks have gained by approximately 24 percent since the beginning of the year, news website 21jingji.com reported. In A-share market, the price of AI-related equities in the Shanghai and Shenzhen bourses also skyrocketed, with a batch of them surging by over 50 percent since trading reopened in early February.

"DeepSeek's surging popularity has offered a window of investment opportunities for foreign capitals, which has once again placed the limelight into Chinese tech industries and the broader Chinese assets," Wang Peng, an associate research fellow at the Beijing Academy of Social Sciences, told the Global Times on Sunday. 

Integrating with real economy 

China's leading social media platform WeChat confirmed with the Global Times on Sunday that it is conducting small-scale testing to integrate DeepSeek's R1 large model. It added that multiple Tencent products, including Tencent Cloud's AI code assistant, are exploring integration with DeepSeek to offer users a richer experience and enhanced services.

In addition, multiple Chinese sectors, ranging from automakers, internet companies and industrial manufacturers to information service providers, have been integrating DeepSeek's large language models (LLMs) for enhanced AI capabilities. 

Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Sunday that this adaption signals a "critical historical phase" for China's AI models. 

There used to be some pessimist narratives surrounding China's homegrown tech innovations, but the stunning debut of DeepSeek marked a "watershed," an equity fund manager based in Shenzhen, South China's Guangdong Province, who prefers not to be identified, told the Global Times on Sunday. 

Analysts said the DeepSeek-triggered Chinese equities rally would not be a short-term speculative frenzy, but instead will be a "strategic repositioning" and a "long-term" bullish run" that not only takes into account the country's cutting-edge technologies, but also a package of pro-growth policies and sound economic fundamentals. 

Kuang Zheng, chief investment officer for HSBC Global Private Banking and Wealth in China, said that DeepSeek's success could serve as a catalyst for further technological innovation among China's private enterprises, potentially leading to more groundbreaking advancements in the tech sector and boosting investor confidence in the Chinese stock market, according to a Beijing Daily report. 

Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times over the weekend that he believes that Chinese companies' significant advantages in the AI software sector will give it a competitive edge in AI applications. And with the world's largest consumer market, China is poised to drive the global industrial shift from hardware infrastructure to software services. 

"Chinese tech sectors like AI, big data, and internet technologies are set to profoundly transform the country's asset structure. This transformation will optimize and drive growth in traditional industries, offering an extended boost to the Chinese real economy," Dong said, noting that is one of the primary reasons that Chinese assets have been captivating foreign investors in recent days.

A number of foreign financial institutions and equity funds have issued upbeat calls on Chinese equities since late January. 

"It would seem that we are less than halfway through the rally" driven by DeepSeek, UBS strategists including James Wang wrote in a note released in February, according to a Bloomberg report in February 12. 

Ample liquidity and lower interest rates should help AI-related names to further re-rate, they added.

"We think 2025 is the year the investing world realizes China is outcompeting the rest of the world," Deutsche Bank said in a February report entitled "China Eats the World" that went viral on Chinese social media platforms, according to a report by the South China Morning Post in early February.

JPMorgan strategists including Rajiv Batra noted that fund flows into Chinese internet names have been positive this year, with a surge following the DeepSeek shock, according to the Bloomberg report on February 12. "We see a window of opportunity in Asia over the coming months, with another tactical rally in China driving upside," they were quoted as saying in the report.

Leading US bank Goldman Sachs forecast potential gains of 14 percent year-on-year for the MSCI China index by the end of 2025 in its base case, while up to 28 percent in its bull case outlook, according to a research report published by Goldman Sachs in early February.

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AI Action Summit kicks off in Paris with aim of harnessing potential while improving governance

A man looks at his mobile phone as he walks past flags during Artificial Intelligence Action Summit at the Grand Palais in Paris on February 10, 2025. Photo: VCG

As the 2025 AI Action Summit begins in Paris, discussions surrounding AI are set against a backdrop of geopolitical tensions and high stakes for the future of global AI governance.

With the aim of addressing how to harness artificial intelligence's (AI) potential while enhancing AI governance, political and industry leaders from more than 100 countries gathered at the Grand Palais in Paris, France for the two-day AI Action Summit, which kicked off on Monday. 

The summit focuses on five major themes: Public Interest AI, Future of Work, Innovation and Culture, Trust in AI, and Global AI Governance. 

Chinese Vice Premier of the State Council Zhang Guoqing, US Vice President JD Vance, Canadian Prime Minister Justin Trudeau and European Commission President Ursula von der Leyen are among dignitaries attending the summit.

Indian Prime Minister Narendra Modi on Monday left for France to co-chair the AI Action Summit on Tuesday, along with French President Emmanuel Macron, India TV reported on Monday.

On the first day of the Summit, workshops and panels on a wide range of topics are scheduled, including "harnessing AI for the future of work", "privacy, cybersecurity and information integrity," "towards safe and trustworthy AI," and "reinforcing efficient, effective and inclusive global AI governance," according to the organizer's official website.

The Summit of Heads of State and Government will take place on Tuesday with a plenary session to be held at the Grand Palais with international participants to discuss the key common actions to take on AI. 

The first and second editions of the summit were held in UK in 2023 and South Korea in 2024, and were both named AI Safety Summit. Compared with previous editions of the summit, the title of the third edition has evolved beyond focusing merely on safety and on a more comprehensive action sphere, so that more attention has and should be given to the global development of AI, Zhu Rongsheng, an assistant researcher at the Center for Strategic and Security Studies, Tsinghua University, told the Global Times on Monday.

As US President Donald Trump tears up his predecessor's AI guardrails to promote US competitiveness, pressure has built on the European Union to pursue a lighter-touch approach to AI to help keep European firms in the tech race, Reuters reported on Monday. Some EU leaders including the summit's host, French President Macron, also hope flexibility will be applied to the bloc's new AI Act to help homegrown startups, said the report.


DeepSeek buzz

An article published on Monday by Associated Press titled "Trump's AI ambition and China's DeepSeek overshadow an AI summit in Paris," which claimed that geopolitics of AI would be in focus in the summit. 

Addressing concerns over China's DeepSeek, Macron said in a televised interview on public television channel France 2 that France has no plan to ban it at the moment. "I do not think that it's appropriate to ban a technology because of its country of origin," Macron said, adding that France does not share the US approach of restricting technologies due to its nationality while accepting others.

Indian media platform Policy Circle wrote on Monday that the AI Action Summit is particularly important for India, given recent developments in China. India cannot afford to lag behind and must take lessons from China's AI advancements, particularly in cost-effective model training, it said.    

China is embracing the AI transformation and is working hard to advance AI, said Chinese Foreign Ministry spokesperson Guo Jiakun on Monday, in response to extensive attention and heated discussion in the world over DeepSeek, noting that we have helped developing countries enhance capacity building, advocating that AI technologies should be open sourced and there should be greater accessibility to AI services so that the benefits of AI can be shared by all countries. 

However, Guo emphasized that we are against drawing lines along ideological difference, overstretching the concept of national security, or politicizing trade and tech issues. 


Different approach

The AP report said that "organizers are working on getting countries to sign a joint political declaration gathering commitments for more ethical, democratic and environmentally sustainable AI," adding that it is unclear whether the US would agree to such a measure. 

The US position might undermine any joint communique, said Nick Reiners, senior geotechnology analyst at the Eurasia Group. "Trump is against the very idea of global governance," Reiners said, per AP report.

French President Macron rejected an outright ban on Chinese AI, emphasizing careful evaluation based on sovereignty rather than origin. France will closely examine non-European technologies, ensuring they do not compromise security or sovereignty in critical sectors, Macron was quoted by Indian news outlet FirstPost as saying. Macron's stance reflects a desire to avoid isolationist policies like those seen in the US, promoting a more nuanced view of global technology, the report said. 

China's and Europe's starting points are to limit the disruptive impact of AI on human rules, while the US is focused on limiting challenges from China, which is a different approach, Wang Yiwei, a professor at the School of International Relations at Renmin University of China, told the Global Times on Monday. 

Zhu Rongsheng said that fierce competition between powers could undermine global cooperation, and as the US continues its zero-sum mentality in its pursuit of a bigger share of the market, cooperation would be very challenging in global efforts to jointly develop AI.

DeepSeek provides an opportunity to a broader range of countries and regions and advanced AI can be obtained with relatively low cost, and the model of open-source AI, with proper safeguards, is a practical approach on AI capacity building for good and for all, Zeng Yi, Professor of AI at Chinese Academy of Sciences and member of the United Nations AI Advisory Body, told the Global Times.

The world is big and inclusive enough to have more countries contributing fundamental and pioneering research, as well as industrial applications of AI for global public good, Zeng said.  

The integration of AI with industries can unleash tremendous productivity, providing the foundational support and effective empowerment necessary for the liberation of productive forces. In an ideal scenario, this would drive a global effort toward this direction. Otherwise, it could exacerbate the wealth gap, lead to AI exploitation, create new technological oligarchs and power elites, and undermine the general safety and development of countries, widening the gap between countries and between different groups within a country, leading to a new intelligence divide, Shen Yi, a professor at Fudan University, told the Global Times. 

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Fund-of-Funds to fuel local firms

Fund RM1BIL set aside to invest in innovative highi-growth start-ups, says PM 

Fund of Funds (FOF) Explained: How It Works, Pro & Cons, Example

KUALA LUMPUR: A sum of RM1bil for the “National Fund-of-Funds” will be set up to invest in innovative high-growth Malaysian companies, says Datuk Seri Anwar Ibrahim.

“I am pleased to share that Khazanah Nasional Bhd will launch a ‘National Fund-of-Funds’ with an initial RM1bil allocation,” the Prime Minister said when delivering his keynote address at the launch of the inaugural KL20 Summit here yesterday.

He said the setting up of the fund represented the government’s continued commitment to assisting local companies such as those run by bumiputra entrepreneurs, as well as startups and small and medium enterprises (SMEs), in line with Budget 2024 allocations.

ALSO READ: Policy advisory panel to focus on growth and economy

He said the government acknowledged the growing importance of startups in driving technological advancements in the country.

As such, he said the KL20 Summit provided an ideal launchpad for innovative ideas.

“KL20 does not simply represent a single-event summit but marks a clear break from the past, which is a comprehensive effort to catalyse the technology ecosystem,” he said

He added that KL20 would fit strategically into the central governing economic philosophy of the Madani Economic Framework, which is underscored by the principle that economic growth and compatible distribution are in harmony with market forces.

ALSO READ: Elevating the country to be a leading startup destination

“The government is also aiming to centralise investment agencies such as Malaysia Venture Capital Management Bhd (Mavcap) and Penjana Kapital under Khazanah Nasional,” he said.

Anwar also announced the signing of agreements involving 25 entities from various sectors of the startup ecosystem to help create cutting-edge technology ventures in Malaysia.

Among them was the Asean Investment Initiative between Khazanah Nasional, Kumpulan Wang Persaraan (KWAP) and Blue Chip Venture Capital that will invest RM3bil in the South-East Asian and Malaysian ecosystems.

ALSO READ: KL20 Summit 2024 to attract high-quality investments - PM

He also said that 12 international venture capital firms would be setting up offices in Kuala Lumpur, which will help Malaysian startups be discovered and nurtured to be globally successful.

On semiconductors, he said the nation’s substantial hold on the backend had made it conducive to pursue high-value front-end work, primarily in the integrated circuit (IC) design category.

“I am pleased to announce the largest IC Design Park in South-East Asia, which will house world-class anchor tenants and collaborate with global companies such as Arm.

“This is done with the backing of the Selangor Information Technology and Digital Economy Corporation (Sidec), with the Selangor state government, and this is proof that momentum is already being built on the ground,” he said.

ALSO READ: Making the Malaysian startup pitch

He added that the country was positioning itself as one of the leaders in semiconductors, clean energy, agritech and Islamic fintech.

To make Malaysia a true gateway to major economies, Anwar said a city-to-city connection between Kuala Lumpur and Hangzhou would be established so that capital, talent and market access would no longer be a barrier.

Earlier in his speech, Economy Minister Rafizi Ramli said the goal of the KL20 Action Plan was to bring the top 20 startups in the world into the country.

This, he said, would be done through the immediate introduction of several measures.

He said the move was aimed at accelerating the critical areas of a startup ecosystem here.

“The ambition is for Malaysia to be the choice destination for early-stage and growth capital and to be the centre for world-class entrepreneurs and skilled talent,” said Rafizi.

He added that it was also the goal for the nation to be the home for leading startups in the world.

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China’s contribution to the global economy

 

Growth engine: An employee works on steel castings in a factory in Hangzhou, China. The country’s contribution to worldwide economic growth is approximately 30%. — AFP

IN today’s world, China occupies a pivotal position in the global economy, showcasing a unique combination of rapid economic growth, innovative strategies and global influence.

The country has evolved from a regional power to a global economic leader, making significant contributions to international affairs and economic development.

Through active participation in international organisations, development of extensive trade networks and investments in global infrastructure projects, China exerts a profound impact on the world economic system.

At the World Economic Forum in Davos, Chinese Premier Li Qiang articulated the key aspects of China’s economic policy and strategy.

He noted that China demonstrates sustained progress in economic development and exerts a significant influence on the global economy, serving as a vital engine of global development.

China’s contribution to global economic growth is approximately 30%, underscoring its central role in the world economic system. Li also highlighted that China achieved an economic revival with an expected gross domestic product growth of 5.2% in 2023, surpassing the initial target of 5%.

Furthermore, Li pointed out that China is the only country covering all industrial sectors classified by the United Nations, and its added value in industry accounts for about 30% of the global level.

This testifies to China’s leading position in the global industry and its ability to stimulate worldwide productivity.

China’s active participation in international organisations underscores its commitment to multilateral cooperation and global responsibility.

The recent reelection of China to the United Nations Human Rights Council for the 2024-2026 term at the 78th session of the UN General Assembly marks a significant milestone, affirming its influence and commitments in international affairs.

This is the sixth time China has been a member of this crucial body, demonstrating its active role in advancing global dialogue and cooperation in the field of human rights.

Furthermore, the Belt and Road Initiative, which celebrated its 10th anniversary in 2023, stands as one of China’s most ambitious projects in global economic development.

The third forum of international cooperation under this initiative achieved 458 significant outcomes.

Chinese financial institutions allocated 780 billion yuan to finance projects associated with the initiative, facilitating the creation of close economic ties with numerous countries.

Chinese and foreign enterprises reached business cooperation agreements worth US$97.2bil, emphasising China’s role as a global economic partner and a bridge between various world regions.

China’s transportation infrastructure plays a critical role in its economic dominance. The country has established air connections with over 100 countries and regions worldwide, fostering stronger global connections and increasing trade.

The total tonnage of the fleet owned by Chinese shipowners amounts to 249.2 million gross tonnes, reflecting the scale of its maritime power.

These achievements, combined with leadership in cargo and container throughput at ports, underscore China’s strategic role in global logistics and trade.

China’s industry also exerts a significant influence on the global economy.

The country leads in many sectors, maintaining the world’s top position in industrial added value for the past 14 years.

This achievement is particularly notable given that China is the only country covering all industrial sectors classified by the United Nations.

With over 200 major industrial clusters, China boasts a large and diverse industrial system that contributes to the global distribution of production factors and enhances worldwide productivity.

The China-initiated South-South Cooperation Assistance Fund, with a capital of US$4bil, serves as a key tool in supporting international development and strengthening global partnerships.

Additionally, Chinese financial institutions are preparing to launch a special fund of US$10bil aimed at implementing initiatives for global development, highlighting China’s strategic role in worldwide economic progress.

Evidence of China’s growing economic power is also seen in the significant increase in foreign investments.

From January to September 2023, 41,947 enterprises with foreign investments were established in China, representing a 32.1% increase compared to the previous year.

This reflects the attractiveness of the Chinese market to international investors and its ability to draw capital from various corners of the world.

In conclusion, China’s contribution to the global economy is multifaceted and substantial. From active participation in international organiaations and global initiatives, to leadership in the industrial and financial sectors, China demonstrates its role as a global economic leader.

Social and humanitarian efforts, along with contributions to peacekeeping missions, further underscore its commitment to cooperation and sustainable development.

The reflections of these achievements in the speeches of leaders like Li Qiang underscore China’s strategic vision and contribution to shaping the future of the global economy. — China Daily/ANN

By Azerbaijan-based journalist Seymur Mammadov is a special commentator for China Daily. The views expressed here are the writer’s own.

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How China’s slowdown may spill over to Malaysia

China’s slowdown is a key risk for the world economy, commodities and energy markets as well as the semiconductor industry. — Bloomberg

CHINA’S stuttering economic recovery post-Covid-19 pandemic reopening has stirred concerns that a protracted deep economic slowdown will have global repercussions, given its interconnectedness with each and every economy in this globalised world and transmission to both emerging and developed countries through different channels.

A slowing China economy is a bane for the world economy. While the global economy continues to gradually recover in 2023, the growth remains weak and low by historical standards, and the balance of risk remains tilted to the downside. It is not out of the woods yet.

Global manufacturing and services activities are losing momentum. Global trade, especially exports, remain in the doldrums, weighed down by weak consumer and business spending amid a continued inventory adjustment in the semiconductor sector.

Prices of commodities and energy have also softened. Global monetary tightening has started to weigh down on activity, credit demand, households and firms’ financial burden, putting pressure on the real estate market.

A slew of disappointing economic data for two consecutive months (June and July) from China indicated that the world’s second-largest economy (17.8% of the world’s gross domestic product or GDP) is indeed losing steam.

Falling exports, weak consumer spending, slowing growth in fixed investment and continued concerns about the property sector have dampened the recovery.

The emergence of deflation concerns adds to the complexity of China’s flagging recovery.

The Chinese government has provided a range of strategic measures aimed at targeting specific sectors.

These range from consumption (spending on new energy vehicles, home appliances, electronics, catering and tourism) to the property sector (reducing down-payment ratios for first-time homebuyers, lowering mortgage rates and easing purchase restrictions for buying a second house) and tax relief measures to support small businesses, tech startups and rural households.

China’s slowdown is a key risk for the world economy, commodities and energy markets as well as the semiconductor industry.

Prior to the Covid-19 pandemic, China was the world’s most important source of international travellers, accounting for 20% of total spending in international tourism (US$255bil overseas and making 166 million overseas trips in 2019).

We consider three channels through which China’s slowdown can have spillover effects on Malaysia via direct and indirect transmissions: trade and commodity prices, services and financial markets.

Overall, the estimated impact of a 1% decline in China’s GDP growth could impact about 0.5% points on Malaysia’s economic growth.

Trade is the most important channel as China has been Malaysia’s largest trading partner since 2009, with a total trade share of 16.8% (exports share: 13.1%; imports share: 21.2%) in the first half of 2023 (1H23).

Spillovers from slower China demand and commodity prices are negative for Malaysia, a net commodity exporter.

After recording seven successive years of increases in exports to China since 2017, Malaysia’s exports to China declined by 8.8% in 1H23.

In sectors such as tourism, China’s tourists are one of the major foreign tourists in Malaysia. In the first five months of 2023, Chinese tourists totalled 403,121 persons or 5.4% of total international tourists in Malaysia, and was only 12.9% of 3.1 million persons in 2019.

According to the Malaysia Inbound Tourism Association, though the number of Chinese tour groups coming to Malaysia has increased in July and August to between 800 and 1,000 for the summer vacation, the number of tourists per group is smaller between 10 and 20 persons.

While direct financial links between China and Malaysia are limited, there will be indirect spillovers through spikes in global financial volatility as investors worry that China’s deep economic slowdown would temper global growth, and also has spillovers to the US economy.

Will China foreign direct investment (FDI) inflows into Malaysia slow?

Capital movements will be influenced by the inter-linking of factors such as economic growth and investment prospects in the host country (Malaysia).

These include stable political conditions and good economic and financial management as well as conducive investment policies.

The US-China trade war and rising trends of geoeconomic fragmentation have witnessed FDI flows among geopolitically aligned economies that are closer geographically as well as geopolitical preferences.

Throughout the period 2015-2022, China’s gross FDI inflows into Malaysia averaged RM7.5bil per year. Even during the Covid-19 pandemic, China’s economic slowdown did not deter the inflows of FDI into Malaysia (RM7.8bil in 2020; RM8.1bil in 2021; and RM9.8bil in 2022).

In 1H23, China’s gross FDI inflows increased by 25.2% to RM2.1bil though it is likely that the full-year FDI will be below the average FDI inflows of RM8.6bil per year in 2020 to 2022.

China was the largest foreign investor in Malaysia’s manufacturing sector in 2016 to 2022 before dropping to second position in 2022 and the fourth position in 2021.

There was a contrasting picture when it comes to China’s approved investment in the manufacturing sector, which saw two consecutive years of decline (2022: 42.5% to RM9.6bil and 2021: 6.5% to RM16.6bil) and declining further by 17.8% to RM4.3bil in the first quarter of 2023.

We believe that Malaysia will remain one of the preferred investment destinations to China, given both countries’ strong established friendship and bilateral ties in trade and investment as well as people-to-people movements.

Malaysia needs to enhance its investment climate with progressive policies to rival regional peers to offer the country as a China Plus One destination for China and foreign companies.

Malaysia can offer investments to build a chip-testing and packaging factory, advanced manufacturing technologies such as robotics and automation, manufacturing electric vehicle supply chain, petrochemicals, renewable energy, agriculture and food processing.

China can offer the technology, innovation and technical know-how as well as talent that deepen the country’s industry integration with global supply chains and also links Malaysia and China to South-East Asia.

China can invest in Malaysian manufacturing companies to help them adopt advanced manufacturing technologies and further improve their competitiveness.

The RM170bil prospective investments (comprising RM69.7bil from 19 memoranda of understanding and RM100.3bil from the round-table meeting) concluded during the prime minister’s visit to China are set to provide a massive investment boost to our economy for years to come.

Among these are China’s Rongsheng Petrochemical Holdings, which will invest RM80bil to build a petrochemical park in Pengerang, Johor; and investment from Geely, with an initial investment of RM2bil in the Tanjung Malim Automotive Valley, which will gradually increase to RM23bil in the future.

 LEE HENG GUIE is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.

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