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China Tech Stocks: Is It Time to Jump In?

  • ellaintan
  • Mar 10
  • 3 min read



The Rally: What’s Driving the Surge in Chinese Tech Stocks?


After years of underperformance, Chinese tech stocks listed in Hong Kong are roaring back. The Hang Seng Tech Index has surged over 30% year to date as of early March 2025, fueled by a mix of AI breakthroughs, improving sentiment, and policy support. The key question is whether this is a sustainable rally or just another temporary spike.


One of the biggest catalysts was the launch of DeepSeek’s AI model in January, which rivaled ChatGPT in performance but at a fraction of the cost. This reinforced the perception of China’s ability to innovate despite US tech restrictions. Investors also took note when President Xi met with tech leaders, including Alibaba’s Jack Ma, an event widely seen as marking the end of the regulatory clampdown that had plagued the sector.


Another factor is the relatively low valuations of the industry. Chinese tech stocks are trading at a steep discount, with PE ratios in the 11 to 15 times range compared to the S&P 500’s 26 times. Even with fresh US tariffs on March 4, investors shrugged them off, sending the sector even higher


Opportunities


  1. AI and Semiconductor Growth China is doubling down on semiconductor independence. SMIC has seen a surge in demand as companies move away from Western chips

  2. E-commerce and Cloud Computing Alibaba, Tencent, and Baidu are aggressively investing in AI. Alibaba alone is putting RMB 380 billion into cloud and AI development over the next three years

  3. EV Expansion Companies like BYD are integrating AI into smart driving, pushing China further ahead in the global EV race

  4. Policy Support The National People’s Congress has made it clear that tech innovation is a priority, with targets to increase the digital economy’s share of GDP and expand R&D investment

  5. Foreign Inflows With Hong Kong stocks trading at historically low multiples, institutional investors are starting to trickle back in


Risks to Watch


  1. Geopolitical Tensions The US just imposed fresh tariffs, and further restrictions on chip exports could hurt China’s AI ambitions

  2. Regulatory Uncertainty While the crackdown appears to be over, investors still remember the pain from past government interventions

  3. Sluggish Consumption China’s economic recovery remains uneven, which could weigh on internet and e-commerce giants

  4. AI Monetization Challenges While AI is a huge theme, it is unclear how soon companies can translate innovation into real earnings growth


Stocks to Watch: High Conviction Picks


Based on recent reports, the names below stand out as potential winners in the sector’s resurgence

  • Tencent (700 HK) AI driven advertising and cloud expansion could fuel earnings growth

  • Alibaba (9988 HK) E-commerce recovery and cloud momentum make this a strong re-rating candidate

  • Baidu (9888 HK) Leading the AI push with integration into search and cloud services

  • SMIC (981 HK) At the heart of China’s semiconductor push, crucial for self-sufficiency

  • BYD (1211 HK) Rapidly expanding EV market share, leveraging AI for smart driving

  • Xiaomi (1810 HK) AI powered consumer electronics and expansion into the NEV space

  • Lion OCBC Hang Seng Tech ETF (HST SP) A convenient way to gain broad based exposure to the sector


Should Investors Jump In Now?

It is tempting to chase the rally but timing is crucial. While valuations are compelling and policy support is evident, macro risks remain. The ideal approach is gradual accumulation, buying into pullbacks rather than going all in at current levels.


One key test will be the March earnings season. If major players like Tencent on March 19 and Alibaba post strong numbers and offer positive guidance, the rally could have more legs. On the flip side, if earnings disappoint, we could see a sharp correction offering a better entry point


For those looking for a mix of growth and stability, a barbell strategy combining high growth tech names with defensive yield plays could help manage volatility.


Final Thoughts


China’s tech stocks are making a big comeback and while risks remain, the potential rewards are hard to ignore. DeepSeek’s AI breakthrough, policy tailwinds, and relatively low valuations make this a sector worth watching closely.


Investors who can stomach short term uncertainty may find strong opportunities in this evolving landscape. As always, staying selective and managing risk will be key to navigating this dynamic market.


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