When Bonnie Chan Yiting was in Davos six weeks ago for the annual Confab World Economic Forum (WeF), the Swiss ski resort was confusing with a revolutionary application that is little known artificial intelligence (A) start-up has released half the world in China.
Headquartered in Hangzhou Deepseek He published his namesake application on January 20th, providing his cheap large language model (llm) for free the same day wef started.
Within two days, Deepseek overcome Open Chatgpt As the most interesting free app at the IOS App Store in the United States. On Wall Street and elsewhere, Deepsek caused a re -evaluation of Chinese stocks, releasing a torrent of money on the second largest capital market in the world.
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“In the last two weeks, the world [has been] Waking up to [the realisation] That the estimate they have attached to the top bin of American stocks in the last two years may have been a revision, especially with the arrival of Deepseek, “Chan, CEO of Hong Kong and Clinking, said at a conference In Kuala Lumpur on February 17, recounting the buzz in Davos.
HKEX CEO Bonnie Chan speaks at the SCMP China conference in Kuala Lumpur 17. February. Photo: Nora Tam Alt = HKEX CEO of Bonnie Chan speaks at the SCMP China Conference in Kuala Lumpur, February 17th. Photo: Nora Tam>
Nvidia, a dominant manufacturer of chips powers AI applications, lost $ 600 billion in US dollars on January 27. When his shares were Parly 17 percentAs investors realized that LLMs could develop by a fraction of costs in terms of high calculation. Since then, supplies have withdrawn by another 4 percent, reinforcing the re -evaluation of American technological shares.
“As soon as you realize that the same [leading edge] technology [such as in AI] It can be created with much less cost, people start to wonder if the assessment assigned to that stock is reasonable, “Chan said.” I hope it is with that examination, [investors] It will understand the attraction of stocks in this region. “
Goldman Sachs was one of the first global investment banks to re -estimated Chinese shares last month. He revised the 12-month goal for the MSCI China Index, which includes the shares listed on the coastal IU abroad, up to 13 percent to 85, and for the CSI 300 index of the largest Chinese shares denomated by Juan for 2.2 to 4,700. This implied a 16 percent return, or 19 percent, from the levels of that time. If these goals were to come to fruition, it would bring new ones in the amount of $ 200 billion, she added.
The Hang Seng Index, a reference monitoring of Hong Kong in the US stock market in the amount of $ 6 trillion, where Chinese companies make up three -quarters of values, this year they have become the best successful measurement of capital capital at globally, progressing 21 percent. The Chinese Technology Behemota Terk index in the city – from Alibaba Group Holding to Tencent Holdings – Galoped on the bull market last month. Alibaba has a post. Chinese markets on the coast have also stabilized and investors have inserted technological names.
Optimism quickly spread to the rest of the market after Jack Ma yunThe co -founder of Alibaba, who has largely disappeared from a public view after breaking the technological sector, appeared at a meeting of Chinese business leaders with President XI Jinping last month. The gathering was largely interpreted as the official end of the regulatory clamp and the confirmation of the government support for the private sector.
“Green Shoots is now visible, especially in the technological sector, where companies like Deepseek emphasize the competitiveness and attractive assessment of China,” said Gary Dugan, CEO Global Cio Office, Outsourcing Investment Provider. “Economists are becoming safer. Bank loans also picked up, supporting small and medium -sized enterprises.”
More global investment banks joined the choir. Deutsche Bank welcomed Deepseek’s rise like China “A moment of sputnik“, alluding to the launch of the first satellite in the world from 1957 by the former Soviet Union, who caught the West for distrust and raised the profile of the former communist country.
Societe General went to mark Alibaba, Tencent, Xiaomi,, Byd,, International Corporation for the Production of the Semicitarians,, Jd.com and Nestaze As the “seven titanium” of the Chinese market market, comparing them to the “magnificent seven” Wall Street: Nvidia, Apple, Amazon, Microsoft, Google Parent Alphabet, Meta platforms of Facebook owners and Tesla.
Deepseek, whose greatest shareholder is his founder Liang Weenfeng, is one of another subgroup not -the talented technological behemotes called “Fantastic four“, which also includes Bytettance, Dji Dji and manufacturer of humanoid robots Unit.
As a result, re -evaluation is underway. The 35 % increase this year in the Hang Seng Seng Tech Index, which follows the 30 most respected stocks in Hong Kong, increased the price of a meter more to 25.3 times from 21.8 at the beginning of the year, according to Bloomberg. Alibaba jumped 70 percent in the range, catapultating supplies to a three-year maximum and an estimate of 16.2 times with a earnings of 9.3, while Tencent is valued at 27.3 times, recovering from a low 18.9 after a 28 percent gathering.
Despite significant gains, seven titaniums are still following the magnificent seven, which trade on average more than 32.3 times, while Nvidia, chips chips at the center of the global AI Frenzy, was estimated at 37.6 times, Bloomberg’s data showed.
If history is a guide, the deepseek-deaped trade should go further. The US shares increased about 50 percent, and the technology sector itself has acquired $ 13 trillion market capitalization since Openi started Chatgpt in November 2022, according to Goldman Sachs.
The US Bank expects that the jaz for evaluation between Chinese and American technological shares will be further narrowed, noting that Deepseek’s breakthrough could increase the corporate earnings by 2.5 percent per year in the next decade through the gain of productivity, saving the costs and possibilities of fresh revenue.
“The latest technology breakthroughs are more micro-micro-focused innovations and favors estimates as well as earnings, which could give recovery more permanent strength than those purely guided by politics and expectations,” Goldman said analysts in the last month.
Chinese investors are continental on shopping, Fertilization of $ 35.9 billion This year, stated in Hong Kong in some of the most aggressive shopping on records, as the re -evaluation of the largest technological companies in the country helps to encourage market rally in the world.
Onshore traders spent 152.8 billion HK ($ 19.7 billion) on shares in February through the Connect shares program, adding 125.6 billion HK invested in January, according to the Hong Kongo Stock Exchange. In January 2021, the inflows raised a record record of $ 310.6 billion.
Chinese technological shares would continue to surpass the basis, encouraging the return of shareholders and the support of macro policies, according to the UBS Global Wealth Management Unit, which is preferred by large cap companies, the leading cloud platform and semiconductor manufacturers. Switzerland Bank estimates that the combined market value of AI industry in China will increase to $ 480 billion in $ 2028. With $ 350 billion now.
Still, not everyone is convinced. Whether the rally could be held, it depended on the entry of LLMSA’s recovery of Chinese consumption consumption, according to Wang Kai, a strategist at the US investment company Morningstar.
“I’m not sure if it’s sustainable,” he said. “A lot of technological names are growing because of the enthusiasm because of the LLMs grown in the house. But this does not necessarily have to turn into more revenue. Expression will only be sustainable if these LLMs directly benefit or generate revenue for these companies.”
Nomura Holdings said that Chinese macro pictures were cloudy, noting that the appearance of low -budget, but very effective AI app would probably disrupt jobs and lead to greater unemployment. At the same time, geopolitical tensions were probably left up in the coming months due to the Tariff War Tit-For-TAT between the US and China and increased pressure in the US on the technology front, according to the Japanese broker.
For Alex Au, founder and Chief investment director Alphalex Capital Management in Hong Kong, any withdrawal would mean a chance to buy DIP.
“Investors realized that China was still able to develop her own technology with very limited resources,” he said. “This means that China can continue to innovate and possibly lead the world in technology, along with the US. It will have a significant impact, especially in terms of trust, on foreign investors.”
Chinese deflation, another major concern among investors, would no longer be an obstacle to shares, thanks to technological innovation, according to Morgan Stanley. The Wall Street Bank noted that heavy heavyweight companies could bring larger profit margins and a return ratio to the capital even in a deflamation environment based on Japan’s experience, it is said.
In addition to Deepseek’s breakthrough, China had many advantages such as a huge set of engineers, data, a well-established ecosystem of the social network and e-commerce, as well as the potential support of the Government, the US Bank said. It increased the goal at the end of the year for the MSCI China index for 22 to 77 and for the Hang Seng Index for 24 to 24 000.
The consequences of the increase of Deepseek go beyond the stock market. Following Hype around AI start-up, Beijing is orchestrated High roles meeting with leading Chinese entrepreneurs on February 17, in which President Xi promised to support the private sector to set the participants who included the magic of Alibaba.
The symposium revived the confidence of investors and removed one of the last remaining blankets on Chinese sections: the attitude of the attitude of the private sector policy. Technical companies were undergoing years of curbs that followed the Last-minute Scuttling of Alibaba Affiliate Ant Ant Ant Group in the amount of US $ 39 billion in November 2019.
“The macro influence of Deepseek on the capital market is probably stronger than the decrease in interest rates and incentives of the policies of the announced last year,” said Zhang Zhiwei, the main economist at Pinpoint Asset Management in Hong Kong. “This can change the way the Government looks at the role of private companies in the economy. Finally, innovation is a key initiator of productivity.”
Continuous policy measures can support the rally caused by deep. In the Government’s Work Report submitted by the annual legislative ownership Congress of the National People Kina has committed herself to improve the development of Ai this week, supporting the wider adoption of LLM and integrating technology for promoting industrial innovations.
“This time, we expect that the shares gains that Deepseek has launched to indicate the beginning of the multi -year revaluation of Chinese shares,” said Edith Qian, an analyst from CGS International in Hong Kong.
