Source: Brokerage China
Author: Chen Ming

Recent data disclosed by the Korea Securities Depository shows that in February, the monthly trading volume of Korean investors in A-shares and Hong Kong stocks reached 0.782 billion USD, nearly a 200% increase month-on-month. Additionally, data from Korea's largest brokerage firm indicates that from February 17 to 28, among the top 10 overseas stocks net bought by Korean investors, Chinese stocks accounted for 6 spots, primarily from leading companies in the Technology sector such as electric vehicles, AI, and chips.

Some brokerages point out that recently, foreign capital is gradually flowing back into the Chinese market, mainly consisting of short-term flexible foreign investments, with long-term stable foreign investments also possibly experiencing periodic inflows. Foreign participation in the Hong Kong Technology sector has been relatively high.

Wedbush Analyst Dan Ives states that investors are trying to bet on the Chinese technology market, which is a wise move. It is precisely because of the success in the AI field that global investors are optimistic about the Chinese market.

Koreans are 'shopping' for Chinese stocks.

On March 9, according to CCTV news, the overall performance of the Korean stock market has been mediocre recently. Since February, the increase in the Korean Composite Stock Price Index has been less than 2%, with an increasing number of Korean investors turning their attention to overseas markets, among which the Chinese market is receiving significant attention.

According to the latest data from the Korea Securities Depository, in February, the monthly trading volume of South Korean investors in A-shares and Hong Kong stocks reached 0.782 billion US dollars, nearly doubling month-over-month, not only setting a new high since August 2022 but also far exceeding the scale of investments made by South Korean investors in the European and Japanese stock markets during the same period.

Additionally, the latest data from South Korea's largest brokerage shows that from February 17 to 28, six out of the top ten overseas stocks that South Korean investors net bought were Chinese stocks, many of which are leading companies in the electric vehicle, AI, and chip technology sectors.

Analysts believe that amid the recent increase in global economic uncertainty, the Chinese technology sector continues to make breakthroughs through technological innovation. At the same time, many South Korean investors are bullish on China's economic stimulus policies following the Two Sessions and the support for industries such as robotics, semiconductors, and autonomous driving.

Since 2025, with strong performance from Chinese tech stocks, the China Index ETFs listed on the South Korean exchange have shown impressive gains. As of the end of February, there were 44 China Index ETFs listed on the South Korean exchange, among which the ETF fund with the largest increase achieved a return rate of 62.8% in the past month, contrasting sharply with the less than 10% return rate of US index ETFs, which further attracted South Korean investors' attention to Chinese concepts. Experts analyze that China's rapid development in high-tech fields has significantly boosted South Korean investors' confidence in the Chinese market, and it is expected that investment enthusiasm will continue.

Foreign capital is favoring tech stocks in Hong Kong.

According to the latest research from HAITONG SEC, foreign capital is gradually flowing back to the Chinese market, primarily consisting of short-term flexible foreign capital, while long-term stable foreign capital may be entering on a phase basis. Regarding A-shares, since the second quarter of 2023, northbound funds have rarely seen a massive outflow exceeding 200 billion yuan; recently, under the resonance of multiple bullish factors, from January 13 to February 21, northbound funds have estimated a total net inflow of nearly 20 billion yuan, indicating that the previously large outflow of northbound funds may have temporarily flowed back into A-shares.

On the Hong Kong stock front, since early 2024, similar to the situation facing A-shares, foreign capital has also been continuously flowing out of the Hong Kong stock market; however, the considerable inflow of southbound funds has largely offset this outflow. After the Spring Festival, the magnitude of foreign capital outflow from Hong Kong stocks may have temporarily narrowed, and there were instances of turning into a net inflow. From February 5 to February 18, foreign capital estimated to have flowed into Hong Kong stocks around 18 billion Hong Kong dollars. Structurally, the returning foreign capital appears to be primarily short-term flexible foreign capital, while stable foreign capital also saw a narrowing of outflows after the Spring Festival, with instances of turning into net inflows.

HAITONG SEC pointed out that the participation of foreign capital in the Hong Kong technology sector is relatively high, but there may be divergences regarding broad consumption and dividend sectors compared to southbound funds. Observing the capital allocation to Hong Kong stocks after the DeepSeek news gained significant traction post-Spring Festival, on one hand, from the industries attracting foreign capital inflow, software services and technology hardware are the main directions; among them, stable foreign capital has flowed into software and services of 6.5 billion Hong Kong dollars, flexible foreign capital has flowed into 27.2 billion Hong Kong dollars, and southbound funds have contributed around 12.5 billion Hong Kong dollars. On the other hand, regarding the industries from which foreign capital has flowed out, foreign capital mainly withdrew from broad consumption, banks, and autos; conversely, the scale of Hong Kong Stock Connect inflow into these sectors was substantial.

The aforementioned Brokerages pointed out that this round of spring market may have surpassed halfway, structurally, the AI+ empowered Technology Sector is the medium-term main line, with the concept of China's Magnificent 7 in Technology accelerating its rise. Meanwhile, there is support for both domestic and international demand in the mid-to-high-end manufacturing sector, and significant supply advantages, suggesting that prosperity is expected to continue. Additionally, in contrast to the Technology Sector, current Consumer, Biomedical, and Real Estate sectors remain undervalued and underweighted, indicating a significant expectation gap.

Since the launch of the new round of market on January 13, the SSE Science and Technology Innovation Board 50 Index has increased by over 16%, while the Hang Seng TECH Index has risen by 43%, significantly outperforming other major stock indices.

Chinese technology giants have a valuation advantage.

According to data from Bloomberg, despite the considerable increase, China's Magnificent 7 in Technology still lags behind the USA's Magnificent 7 in Technology. The average PE of China's Magnificent 7 is 32.3 times, while the valuation of NVIDIA, which is at the center of the global AI frenzy, is 37.6 times.

If history can serve as a reference, then the trading stimulated by DeepSeek still has a long way to go. Goldman Sachs stated that since OpenAI launched ChatGPT in November 2022, the US stock market has risen about 50%, with the market cap of the technology sector increasing by 13 trillion dollars.

UBS Group's global wealth management division stated that under improved fundamentals, encouraging shareholder returns, and macro policy support, Chinese technology stocks will continue to outperform the market. The bank prefers large-cap stocks, leading cloud platforms, and Semiconductor manufacturers. This Swiss Franc bank estimates that by 2028, the total market cap of China's AI industry will rise from the current 350 billion dollars to 480 billion dollars.

Barron's Weekly stated that although Chinese stocks have risen significantly, they remain cheap. The MSCI Chinese Index has a forward PE of 12 times for the next 12 months, while the S&P 500 has a forward PE of 22 times for the next 12 months. The market may continue to experience fluctuations due to tariff issues, but China has enough reserve tools and policy space to cope with uncertainties, which is also the biggest driving force behind the rise of Chinese stocks.

In addition, China's active investment in strategic sectors is yielding returns, as a majority of regions globally will utilize Chinese technology. Whether in New energy Fund, 5G, Autos, or DeepSeek, there is anticipated profit and valuation growth for China's technology companies' vast ecosystem.

Edward Cole, the head of multi-strategy stock business at Invesco, stated that he expects stock prices to bottom out and that innovation in China's AI will lead to new appreciation for Chinese stocks, driving an investment rebound. 'Chinese stocks are one of the most certain trades for 2025.' Wedbush Analyst Dan Ives noted that investors are trying to bet on the Chinese technology market, which is a wise move. It is precisely due to success in the AI field that global investors are optimistic about the Chinese market.

Since the beginning of the year, foreign institutions such as Goldman Sachs and Morgan Stanley have been intensively releasing Research Reports, expressing optimistic expectations for the Chinese economy and capital markets. The Morgan Stanley Research Report predicts that global investors' focus on Chinese Assets will continue for some time; Goldman Sachs predicts that in the next 10 years, the widespread adoption of AI is expected to drive overall earnings of Chinese stocks up by 2.5% annually, potentially attracting over $200 billion in inflows in the coming year; JPMorgan believes that the revaluation of Chinese tech stocks will continue, with an average annual ROI of 7.8% over the next 10 to 15 years.

Xinhua News Agency pointed out that the foreign capital's reassessment of the Chinese economy is not coincidental, but based on the internal logic of China's economic transformation and technological innovation. In recent years, China has entered a period of deep transformation for high-quality development. Although faced with challenges such as adjustments in the real estate market and insufficient effective demand, technological innovation and industrial upgrading continue to inject new momentum into economic growth. Breakthroughs in AI from DeepSeek have attracted global attention, companies such as BYD and Contemporary Amperex Technology are performing excellently in the new energy sector, Yushu Technology's robots are emerging prominently, and significant progress is being made in innovative biomedical research... Transitioning from "following" to "leading," China's technological innovation has achieved a leap from "Made in China" to "Created in China," increasingly highlighting its position in the global technology landscape.

The Research Report published by CITIC SEC on March 9 pointed out that currently, policy direction and goals are clear, domestic macro volatility is decreasing, and the market is transitioning to a smaller macro year, making it difficult for marginal changes in macro and policy to drive market direction and structure. The industry prosperity-driven approach is taking over the barbell strategy. In terms of response, edge-side AI and high energy density Battery are relatively exclusive industrial themes in the A-share market and are expected to welcome intensive catalysts in the second quarter; the clearing of traditional core assets in the A-share market is accelerating, and as the economy recovers, operational inflection points are expected to appear in succession. At the same time, it is anticipated that some leading enterprises planning to list in both markets will see their market activity kickstart as they list on the Hong Kong stock market.

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Editor/Jeffy