Global Hedge Funds Surge into Chinese Stocks Amidst AI Momentum
Global hedge funds have been aggressively accumulating Chinese stocks throughout much of the year, with their buying intensifying in the past week, according to Goldman Sachs.
Chinese equities, both onshore and offshore, represent the "most notionally net bought market" on Goldman Sachs' prime brokerage book globally, based on data up to February 7. The week of February 3-7 witnessed the largest hedge fund purchases in over four months.
DeepSeek, a homegrown AI startup, has emerged as a catalyst for the surge in interest, reversing the perception of China's irrelevance in the field.
Other factors supporting the buying spree include Beijing's easing measures and relief over the lower-than-expected 10% tariff hike by the U.S. The MSCI China index has rallied for four consecutive weeks since mid-January and gained over 6% in February, outperforming global markets.
Prominent hedge fund manager David Tepper increased his stakes in Alibaba Group and JD.Com during Q4, making them his fund's top holdings.
Goldman Sachs noted that 95% of the hedge fund buying last week targeted individual stocks, primarily in consumer discretionary, IT, industrials, and communication services. Energy, utilities, and real estate were sold off.
Hedge funds' allocation to Chinese equities now stands at 7.6% of Goldman Sachs' total prime book exposure, ranking in the top 23rd percentile over the past five years.