In recent weeks, a notable surge in investment has been observed in the Hong Kong stock market, particularly within the technology sectorAs of February 18, the Hang Seng Tech Index saw an increase of 2%, closing at a new high of 5609.27 pointsThis marked a significant week for the index, which had already climbed 7.3% the previous week, surpassing the highs seen in October of the previous year and achieving its best closing in nearly three years.

Many technology stocks in Hong Kong have recently surpassed the peaks achieved during last year's market boomAccording to data from Wind, over ten constituent stocks of the Hang Seng Tech Index have broken their previous highsThis includes significant players such as Kingdee International, Alibaba Health, Alibaba Group, Kingsoft Corporation, Xiaomi Group, Tencent Holdings, SMIC, BYD Electronics, Sunny Optical Technology, Lenovo Group, and XPeng MotorsSome of these stocks have even reached their highest prices in several years, indicating a robust recovery and renewed investor confidence in the tech sector.

Furthermore, data from Morgan Stanley indicates a continuous net inflow of capital from the southbound trading channel, registering its 47th consecutive week of investment influx since early February 2024. During the period from February 6 to 12, a net inflow of $3.2 billion occurredBehind this movement is the technological breakthrough led by AI company DeepSeek, which has prompted a massive influx of global hedge funds into the Chinese stock market at the fastest rate seen in months, contributing to a combined market capitalization increase exceeding $1.3 trillion (around 9.43 trillion RMB) in both the onshore and offshore markets.

Numerous brokerage firms are suggesting that the momentum generated by DeepSeek may be driving a reassessment of the value of Chinese tech assets

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Huatai Securities recently published a report stating that companies such as Xiaomi, BYD, SMIC, Alibaba, Tencent, and Meituan are set to become core assets in China's tech landscapeOther firms like NetEase, Pinduoduo, ByteDance, Huawei, CATL, and JD.com are also recognized in discussions around the "Seven Sisters" of Chinese technology, each exhibiting strong characteristics of innovation and technology.

According to Haitong Securities, the current sentiment in the A-share market is notably active, with themes such as DeepSeek and humanoid robots catalyzing significant trading interest in the technology, media, and telecommunications (TMT) sectors, as well as machinery industriesDrawing a parallel to the "Magnificent Seven" concept in US stocks, the current surge in Chinese technology is likewise driven by key technology leaders, maintaining a high trading volumeAs the spring market unfolds, the AI wave has become the central theme, suggesting potential opportunities within the Chinese version of the "M7" concept; also, under steadily improving policies, sectors such as real estate, consumption, and pharmaceuticals, which hold a degree of expectation discrepancy, may present certain investment values.

How far can the re-evaluation of Chinese assets driven by DeepSeek extend?

CITIC Securities' analysis indicates that from a historical perspective, China is still in the early stages of the AI era and the broader reassessment of Chinese tech assetsThe journey from technological innovation to practical application, transitioning from reshaping expectations to creating tangible value, and moving from low-quality, localized competition to globalized, high-quality development presents a long road ahead for Chinese tech enterprisesCurrently, US major model companies maintain a significant lead, especially in cutting-edge fields such as multimodal systems, world models, and reinforcement learning.

"Every major technological breakthrough and its practical implementation opens avenues for systemic valuation increases," the CITIC Securities report elaborates

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Over the past few years, Chinese tech giants have generally been evaluated based on aggregate PE ratios, leading to their ongoing undervaluation due to losses stemming from new business development reflected as negative valuations in their total market capThe revaluation prompted by DeepSeek superficially appears to enhance the PE multiples for leading companies, yet it is fundamentally a transformation from negative to positive valuation for China’s AI assets.

Recent analysis from Zhonghang Securities suggests that in the short term, the market is likely to experience a primary upward wave, potentially reigniting the "KTE valuation" boom as one of the main threads in this market rallyMidterm strategies are emphasizing boosting consumer spending, expanding domestic demand, and leading technological innovation as key developmental tasks as targets for before 2025, with the domestic sector and self-sufficiency poised to become focal points in the market during this phaseThis provides a clear investment direction for the investor community.
In summary, both the Hong Kong stock market and Chinese tech assets find themselves in a pivotal development stageInvestors are advised to closely monitor market dynamics and industry development trends to seize potential investment opportunitiesConcurrently, Chinese tech companies must continue their efforts in technological innovation and market expansion to enhance their competitive edge and achieve sustainable growth.

(Note: This article does not constitute investment advice)

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