Chinese Stocks Surge as Global Hedge Funds Pile In
Driven by optimism surrounding AI startup DeepSeek, global hedge funds have intensified their buying spree of Chinese equities. According to Goldman Sachs, Chinese stocks are now the "most notionally net bought market" on the bank's prime brokerage book worldwide.
The week ending February 7 witnessed the highest hedge fund purchasing activity in over four months. Hedge funds are attracted to DeepSeek's cost-effective AI model, which challenges the perception that China lags behind in AI development.
Positive sentiment is further fueled by Beijing's policy easing and the easing of trade tensions between the US and China. The MSCI China index has rallied for the past four consecutive weeks and has gained over 6% so far in February.
Billionaire investor David Tepper's Appaloosa LP has recently increased its holdings in Chinese internet giants Alibaba Group and JD.Com. Over 95% of the hedge fund buying last week was in individual stocks, particularly in consumer discretionary, information technology, and communication services.
Hedge fund allocation to Chinese equities now stands at 7.6% of Goldman Sachs' prime book exposure, ranking in the top 23rd percentile over the past five years.