In the ever-evolving tapestry of global geopolitics and economic dynamics, the recent Munich Security Conference has emerged as a critical juncture that illuminates various global pathwaysThe 61st Munich Security Conference, held from February 14 to 16, 2025, cast a spotlight on the multifaceted security challenges that accompany the unfolding of a multipolar worldAs tensions between major Western powers, notably the United States and Europe, reached a boiling point, the conference revealed stark disagreements on many fronts, particularly regarding domestic policies and foreign strategies, highlighting the intricate nature of transatlantic relations.

China's role in this increasingly complex landscape has garnered significant attention, especially with its resounding assertion that the tendency towards global multipolarity is irreversibleWang Yi articulated China's perspective on multipolarity through four key points: promoting equality among nations, respecting international legal frameworks, practicing multilateralism, and sustaining an open and win-win approach to global economics.

At this critical historical juncture, Wall Street investment banks are casting an inquisitive eye towards China, prompting the international capital community to reevaluate China's position in the global marketThe pressing question now arises: is China a stable anchor for global supply chains, or is it a new variable in the intense race for technological supremacy?

The unmistakable trend of global multipolarity is escalating

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As the dawn of 2025 broke, significant developments emerged, particularly the advent of DeepSeek, a transformative efficiency revolution introduced through large-scale modelsAgainst the backdrop of these advancements, the reevaluation of Chinese assets is taking shape, representing a recalibration of global capital's perspective on China's economy and the “new and old power conversion.”

As February unfolded, there was a noticeable shift in the global capital markets, coinciding with the Lunar New Year celebrationsAsset dynamics in China experienced subtle but significant transformations, suggesting that the international capital markets are reconsidering their approach toward Chinese assets.

A look back at recent market performances unveils the novel logic behind Chinese assets, influenced heavily by the DeepSeek eventThis phenomenon underscores the sustainability of technological disruptions, which in turn is contingent upon ecological evolutionThe global financial markets remain tightly wound, with investors maneuvering carefully to avoid emotional disturbances that can cloud narrative accuracy, and seeking to unearth the understated “true alpha” opportunities.

On February 13, global markets witnessed uneven movements, with A-shares dipping slightly — the ChiNext index recorded a minor decline of 0.71%. Conversely, US stocks saw an upward trend, including a 1.50% rise in the NASDAQ compositeThe off-shore RMB/USD exchange rate stood at 7.2777, while the yield on 10-year US Treasury bonds was reported at 4.535%. These fluctuations prompted critical questioning within the markets: is the undervaluation of Chinese assets a cyclical issue, or is it attributed to narrative distortion?

The following day, the People’s Bank of China released positive financial data for January, marking a turnaround

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A-shares surged overall, with the ChiNext index climbing 1.80%. While US stock movements remained mixed, the yield on 10-year treasuries dropped to 4.477%. Concurrently, a rare co-movement of the US dollar index and gold prices retreating indicated that global liquidity and risk preferences are undergoing a recalibrationShifts in the Federal Reserve's policy expectations and international capital flows, alongside an uptick in emerging market allure, catalyze the reallocation of international capital towards China.

Since the beginning of 2025, the Chinese market has embarked on a profound journey of valuation restoration: the A-shares have begun to rally, especially in the technology sector; the off-shore RMB has stabilized, with tentative signs of capital inflow; Hong Kong’s tech giants have seen strengths, exemplified by Alibaba's share price rebounding over 13% within a week and accumulating a rise exceeding 40% from its low, significantly outpacing the Hong Kong Hang Seng index's modest 5% increase during the same period.

Simultaneously, the latest January CPI data released by the Federal Reserve showed a year-over-year increase of 3%, with core CPI up by 3.3%, both surpassing market expectations and sharply cooling the year’s interest rate cut prospects — the implied number of rate cuts anticipated by futures adjusted from 1.4 to 1.1. This context has led to adjustments in global capital allocation logic, as high-interest environments push capital towards undervalued, high-growth markets, with Chinese assets firmly positioned within this strategic window.

As pointed out by Ma Lei, Chief Investment Officer for Invesco in Mainland China and Hong Kong, the advancements in artificial intelligence are bolstering the outlook for China's economy and corporate earnings, making current valuations enticing for entry into the Chinese equity market

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Influential Wall Street investment banks have issued reports recently, conveying optimism regarding the long-term growth potential of the Chinese market, forecasting that 2025 may mark a significant revaluation year for Chinese assets.

The Logic of Revaluation: Policy Dividends and Structural Opportunities

"Hong Kong's international competitiveness is on the rise," declared Qi Bin, Deputy Director of the Hong Kong Liaison Office, at a recent forum on the capital market in Hong KongHe noted that in the latest edition of the Global Financial Centers Index, Hong Kong made a strong comeback to reclaim the title of Asia's top financial hub and ranked within the global top threeMarket performance has also been impressive, with concerted efforts from the central authority in macro-control coupled with a series of policies driving new growthThe Hang Seng Index has reversed a three-year downward trend, showing an 18% increase in 2024. The IPO market has revitalized, with 71 new public offerings throughout the year, raising a total of 87.5 billion HKD, positioning it as the fourth largest globally.

Qi Bin emphasized that the degree of development in a financial market significantly impacts sustainable economic development and resilienceIn some ways, it determines the rise and fall of the economy itself.

This reinforces Hong Kong’s status as an international financial center, with noticeably heightened market activity and attractiveness

Hong Kong is viewed as a vanguard for global capital trends, signaling a restored confidence in Chinese assets among international investors, particularly in the tech sector.

Evidence supporting this trend can be seen in the renewed interest in Chinese tech assets following the DeepSeek incidentThe Hang Seng Tech Index ETF experienced a peak intra-year increase of 19.75%. Major foreign institutions such as Goldman Sachs, Deutsche Bank, Bank of America, and BlackRock have all expressed optimistic outlooks regarding Chinese assets and the A-share market, reinforcing that the revaluation of Chinese assets is not a trend to be overlooked.

Nevertheless, Noel Dixon, Senior Macro Strategist at State Street Global Markets, noted three distinct characteristics from institutional investor behavior in January.

First, despite ongoing tariff disruptions, the State Street institutional investor risk appetite indicator rose to 0.36 in January, with an increase of five basis points in stock allocation primarily driven by inflows characterized by cash holdings.

Second, stock allocations primarily concentrated in the United States

Institutional investors realigned positions, increasing exposure to European venture capital, including the UK, but stocks in Asia and Japan saw reduced allocations as of JanuaryConcerns surrounding China's fundamentals and anticipated tariff outcomes might explain these investment shifts.

Third, persistent negativity among institutional investors towards Asia-Pacific bonds continues to lingerData for the 20th indicated a pronounced selling trend, particularly in Indonesia, which saw flows reaching an all-time lowThis weakness in fixed-income products is a global phenomenon, not confined to the Asia-Pacific region.

In Ma Lei's view, the commencement of the Year of the Snake has been promising for the Chinese stock marketDeepSeek's ability to achieve competitive performance comparable to top international counterparts, yet at remarkably low costs, has stimulated positive market sentiments.

Many now look to DeepSeek as a possible catalyst for the revaluation of the Chinese stock market. “We believe DeepSeek can yield numerous advantages, such as lowering thresholds for AI's inter-industry applications while achieving higher efficienciesThis will benefit many listed companies in China and ultimately drive a reevaluation of Chinese stocks,” Ma Lei stated.

In this context, the liquidity landscape within global capital markets is shifting deeply, particularly against the backdrop of the Federal Reserve's prolonged tightening policies

The growing perception of “valuation disparities” in the Chinese market is becoming more pronouncedThe core narrative for reevaluating Chinese assets revolves around “policy-driven certainty” and “explosive industry upgrades.”

On the policy front, the central economic working conference clearly outlined a fiscal policy tone aiming for "appropriate strength, improving quality, and increasing efficiency," which includes enhancing the quota for local government special bonds and optimizing tax structures to incentivize business investments and consumer spendingConcurrently, the central bank is intensively focusing on targeted support for tech and green industriesIn 2024, the central bank's dual reserve requirement ratio cuts totaled one percentage point, providing over 20 trillion yuan in long-term liquidity; along with the establishment of a 500 billion yuan technological innovation relending fund and expanded support for carbon reduction initiatives, this sets the stage for continuing financial prowess.

Concerning industry trends, Apple's partnership with Alibaba—specifically, Apple’s choice of Alibaba to develop AI functionalities for the iPhone in the Chinese market—is perceived as a new signal of Sino-American tech collaborationThe acceleration of global expansion by leading firms like Alibaba Cloud, Huawei, and Baidu is enhancing the value within industrial chainsFurther milestones in new energy and smart manufacturing are evident, with CATL’s global market share continuing to increase and BYD's electric vehicle exports doubling year-on-yearChina's high-end manufacturing is not only reshaping global supply chains but is also surging to the forefront of global green finance, having ascended to the top spot in the global green bond market amid an increasing focus on ESG (Environmental, Social, and Governance) investments.

Investment Strategy: Seeking Alpha amid Divergence

As the market desires, following a prolonged valuation slump, Chinese tech stocks are entering a period of valuation recovery.

This recovery is driven not only by a warm-up in market sentiment but is also deeply rooted in supportive domestic policies, accelerated industrial upgrades, and a reshaped international competitive landscape

Nevertheless, the implications of the Federal Reserve's tightening policy and geopolitical uncertainties remain pivotal variables influencing market volatilities.

Within this environment of “seeking certainty amid uncertainty,” one market analyst suggests that investors should latch onto two principal threads: first, the core sectors receiving policy support—particularly those linked to artificial intelligence, chips, new energy, and the digital economy as heavily supported by the government; second, the fundamental performance and profit models of enterprises, since investment logic ultimately revolves around the verification of corporate profitability, technological barriers, and market competitiveness.

At present, the capital markets' understanding of sectors such as artificial intelligence, large models, domestic chip production, digital currencies, and clean energy is transitioning from “concept-driven” to “industry realization.”

Market divergence presents both “risks and opportunities” concurrentlyEspecially in such differentiated landscapes, investors who can keep pace with rhythms, identifying quality companies will oftentimes capture “true alpha” more readilyOf course, this will necessitate employing diverse strategies to lower uncertainties, such as allocating some capital to bet on leading enterprises, while directing additional funds towards fast-growing small and medium tech companies yet to be fully valued, alongside allowing some flexibility for market hot trends.

However promising a market scenario may seem, it will inevitably face turbulence, with the Fed's monetary policy being especially sensitive to shifts that may influence global market risk appetites

The intense technological rivalry among major powers may also inflict short-term disruptions on supply chains and trade networks.

The valuation restoration of Chinese assets is essentially a “narrative reconstruction marathon.” Short-term fluctuations reflect the market’s natural reaction to uncertainties, while long-term value ultimately hinges on the success of economic transformation and upgradesInvestors must be vigilant, capturing the resonance between policy and industry while excavating the undervalued “true alpha” amid market divergence.

The valuation reshaping precipitated by DeepSeek represents not merely a technical evolution; rather, it exemplifies the shift of China's innovation system from “discrete breakthroughs” towards “systematic evolution.” Analysts suggest that if a cohesive commercial ecosystem can be established over the next three years (including an API platform and industry integration), along with self-sufficient computational capability (domestic chip ecosystems) and patient capital commitment (long-term investments from guiding funds), this technological disruption could pave the way for a “long-term bull driven by innovation” in A-sharesConversely, should the ecosystem lag behind technological leaps, the market may regress to seasonality in thematic trading cyclesInvestors should closely monitor indicators such as enterprise-level AI penetration rates, domestic computational cost trajectories, and the sustainability of international capital inflows.

As winds begin to stir from subtle beginnings, and waves swell from small ripples, the global capital market's focus on Chinese assets is actively shifting from macroeconomic policies to assessing the competitiveness of industry leaders, seizing opportunities for industrial upgrades, and enhancing global agency

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