INVESTORS in Asia are increasingly focused on one key topic: Chinese stocks. The recent tech boom in China, driven by the DeepSeek phenomenon, and the country’s ongoing economic restructuring, has captured the attention of many.
There is good reason for this recent surge in interest. Investors globally are reassessing their portfolios amid the uncertainties of US markets, and Chinese stocks present a compelling case for consideration. They present strong earnings growth potential, rapid advancements in technology, supportive government policies and a recovering economy.
Chinese stocks have not had the best of times; interest dipped in the post-Covid years, as lockdowns in major cities disrupted economic activity in 2022 and in 2023. At end-2024, the stock market was still stalling with stops and starts.
But this year presents a markedly different geopolitical landscape under Trump 2.0, significantly impacting the financial markets. Year to date, the US stock market has experienced a downturn, with the Nasdaq and S&P 500 dropping 7.76 and 3.35 per cent, respectively, as at Mar 21, 2025. In contrast, the Nasdaq Golden Dragon China Index (tracking US-listed Chinese companies) has risen 16.9 per cent year to date.
This is because Beijing’s rhetoric has increasingly centred on growth. It has set a 5 per cent growth target for 2025 and is ramping up state support for strategic sectors such as artificial intelligence and semiconductors, while also fostering partnerships with private companies to drive this growth. This approach is in stark to Chinese President Xi Jinping’s earlier crackdown on figures such as Jack Ma in 2021.
Meanwhile, the US is grappling with heightened uncertainty caused by tariffs and layoffs, particularly in the tech sector, and renewed trade conflicts between the US and China.
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In this climate, my office has been inundated with questions about whether China is a “sleeping dragon”, whether it is too late to enter the markets there, and whether it might be risky to do so, given trade tensions.
In this climate, Chinese companies are expected to face aggressive trade policies. US President Donald Trump’s stricter regulatory stance and foreign policy approach may heighten the risk of delisting for Chinese companies on US exchanges, further eroding investor confidence and shaping market sentiment. Besides policies, investors are also attentive to Trump’s rhetoric which could foster a negative perception of Chinese investments and trigger sell-offs in Chinese stocks, irrespective of their underlying fundamentals.
But in this dynamic time, I believe that those willing to navigate the global markets, inflationary pressures, rising interest rates and geopolitical uncertainties, could find opportunities in Chinese stocks – particularly in tech and equities.
China’s economy, tech sector and equities
I will first address the tech sector, which is at the top of everyone’s mind and is linked to China’s economic performance.
From a macroeconomic perspective, the Chinese economy seems to have turned a corner. Recent data indicates that money supply, bank loans and total social financing are turning positive, signalling a true recovery.
Additionally, the narrowing drop in real estate investment and the gradual recovery of consumer confidence suggest that the foundations of the economy are strengthening. This positive momentum is bolstered by Beijing’s commitment to ramp up fiscal spending, with larger doses of stimulus and earlier disbursements aimed at invigorating growth.
In this environment, China’s technology sector has experienced rapid developments. The DeepSeek “shock” only served to awaken investor interest to the tech landscape where US tech giants have historically dominated.
DeepSeek, which is touted to offer performance that rivals ChatGPT, reportedly needs fewer advanced computer chips and uses much less energy. Its sudden emergence showed that while Chinese tech companies may have once lagged behind their US counterparts, they are quickly closing the gap. Growth is not stopping as companies are continuing to invest heavily in innovation and infrastructure.
Thus, compared to the Magnificent Seven in the US, Chinese tech stocks remain undervalued and have far-reaching room to grow. Besides, looking at the forward price-to-earnings (PE) ratio, it is relatively inexpensive to enter the Chinese market now, especially compared to buying US tech stocks. A quick look at the projections tells a story.
And so, despite a sell-off in US markets over the past week, Chinese tech companies still offer a better bargain and position investors to capture a larger share of the burgeoning tech market in China.
But investors should not think along the lines of pure tech play when it comes to Chinese stocks. The Chinese government is also taking proactive steps to deregulate the economy, aiming to level the playing field for private firms and offer more support to entrepreneurs. These measures are expected to foster innovation and drive economic growth, further enhancing the attractiveness of Chinese equities.
As these companies continue to innovate and expand, the potential for substantial returns becomes increasingly appealing. In a world where US stocks face the headwinds of political uncertainty and economic fluctuations, the relative stability and growth prospects of Chinese stocks could serve as a beacon for investors.
Navigating volatility, investing strategically
Even with the market uncertainty, experts do not anticipate a recession in the US. While tariff uncertainties might raise concerns, Trump has indicated a willingness to eliminate tariffs if favourable agreements can be reached with other nations.
This potential for negotiation suggests that investors should remain engaged in the US market to avoid missing any potential rebound. The current market dip could also be a good chance to buy US stocks at a lower price. However, investors could consider increasing allocations into bonds, as they can mitigate overall portfolio risk while providing stability as equities grow over time.
When it comes to China, invest strategically. While the potential returns over the next six to 12 months appear promising at first, the landscape remains volatile. Investors should be prepared for sharp drawdowns and price swings, as market sentiment can shift rapidly in response to international developments.
It is advisable to refrain from deploying all of one’s capital at once. A staggered investment approach, allocating smaller amounts over a period of three months or more, can help average out costs and reduce the impact of market volatility. This strategy allows for a more measured entry into the market, potentially enhancing long-term returns.
The writer is head of wealth advisory, OCBC