In recent market analyses, experts emphasize that investment opportunities within China’s stock market are increasingly centered on artificial intelligence (AI) despite ongoing economic challenges. Leonid Mironov, a portfolio manager at Gavekal, pointed out that AI represents “the cleanest and most obvious theme right now.” In light of this perspective, Mironov revealed that over half of the holdings in his newly approved China stock fund are connected to semiconductors, self-sufficiency in Chinese technology, and high-tech manufacturing. In contrast, consumer and healthcare sectors make up only 6% of the fund’s portfolio.
April data signals concerning trends, as China recorded its weakest retail sales growth since the culmination of the Covid-19 pandemic. Despite this, Liqian Ren, director of modern alpha at WisdomTree, underscored the resilience of the technology sector, stating, “The tech play is still going to continue.” However, she noted that while earnings from AI ecosystem companies are performing well, they are insufficient to bolster the broader Chinese macro environment, describing the economic landscape as “really, really uneven.”
The market ecosystem has witnessed a notable rotation in tech stocks over the last couple of months, according to Aaron Costello, head of Asia investment strategy at Cambridge Associates. He suggested that the categorization of Chinese tech as “tech-leading” has become obsolete, shifting focus towards a narrower subset that includes semiconductors, hard technology, software, and hyperscalers. Stocks related to hardware primarily trade on the mainland’s A shares rather than on the Hong Kong stock exchange.
As evidence of the shifting focus, the CSI 300 index, which comprises the largest firms in Shanghai and Shenzhen, is up over 4.5% this year. Conversely, the Hang Seng Index in Hong Kong remains stagnant. Mironov’s strategy incorporates leading tech giants such as Tencent and Alibaba, alongside hardware firms including Shanghai-listed Anji Microelectronics. He believes that the existing policies have significantly benefitted smaller and mid-cap companies, a sentiment he feels is underappreciated by many investors.
Regarding AI model companies like Zhipu and MiniMax, both of which are traded in Hong Kong, Mironov remains cautious. He is waiting for signs of a more sustainable business model and increased customer loyalty before making any commitments. This cautious approach contrasts with Morgan Stanley’s position, which has taken an overweight stance on Zhipu, MiniMax, and Alibaba. The investment firm is also optimistic about Shanghai-listed chip maker Cambricon, setting a price target of 2,000 yuan (approximately $294) for the stock.
As investors navigate this complex landscape, the emphasis on AI-related stocks amid broader economic uncertainties continues to shape the discourse in Chinese markets.
