The recent Munich Security Conference has raised questions about the global order and may mark a pivotal moment in the world’s geopolitical landscapeRunning from February 14 to 16, 2025, the 61st Munich Security Conference placed a spotlight on the challenges posed by a multipolar worldThe relationship between the US and Europe showcased evident discrepancies across various pressing issues, particularly regarding internal policies and foreign strategies, highlighting the intricacies of the transatlantic relationship.

As the session unfolded, the role of China emerged as a critical talking pointWang Yi articulated China’s perspective on multipolarity, underscoring four fundamental tenets: equal treatment among nations, respect for international rule of law, commitment to multilateralism, and a focus on openness and mutual benefits.

For Wall Street investment banks, the shift toward a reassessment of China’s role in the global economy could prove significantAs international capital begins to reconsider its engagement with the Chinese market, critical questions ariseIs China merely the stable anchor of the global supply chain, or does it represent a new variable in the arena of technological competition? This thought process highlights an urgent need for a paradigm shift in how investors view the emerging landscape of global trade and technology development.

The increasing trend toward global multipolarity is unmistakableBeginning in early 2025, the launch of DeepSeek has sparked an efficiency revolution in major models, prompting a reevaluation of China’s asset valuationsThis reassessment reflects not only a repricing of capital in light of China’s economic transition but also indicates international markets weighing new investment opportunities amid a multipolar framework.

Entering February, as the year of the Snake unfolds, shifts in global capital markets are becoming apparentIn mid-February, Chinese assets reached a defining moment within the international financial arena

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Reflecting on recent market activities, the underlying logic behind China's assets, especially in the wake of the DeepSeek event, is gradually crystallizingThe sustainability of technological impacts hinges on ecological evolutionGlobal financial markets remain in a state of flux—investors are striving to navigate emotional turbulence stemming from narrative biases, as they attempt to uncover the “true alpha” that remains undervalued.

On February 13, stock movements varied worldwideChinese stocks dipped slightly, with the ChiNext Index falling by 0.71%, settling at 2,176.16 pointsConversely, the tech-heavy Nasdaq in the US rebounded by 1.5%, closing at 19,945.64. Chinese offshore yuan traded at 7.2777 against the dollar, while the yield on 10-year US Treasury bonds stood at 4.535%, and international gold prices reached $2,956.52 per ounceIn the backdrop of these figures, the market began contemplating whether the undervaluation of Chinese assets is a cyclical challenge or a result of narrative distortions.

The following day, the People's Bank of China released January’s financial data, which was met with positive momentum in Chinese stocks, as the ChiNext Index rose by 1.8%. In the US, stock performance was mixed, yet the yield on 10-year Treasury bonds decreased to 4.477%. Simultaneously, both the US dollar index and gold prices witnessed a rare synchronous dip, signaling a potential recalibration of global liquidity and risk appetitesAnticipations regarding Federal Reserve policy shifts, coupled with changes in global capital flows and the rising appeal of emerging markets, are driving international investors to reposition, making Chinese assets a focal point in their portfolios.

Since the start of 2025, China has been witnessing a remarkable asset valuation reconstructionThe A-shares market is showing signs of recovery, particularly led by technology stocksThe offshore yuan has stabilized, indicating emerging signs of capital inflow

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Hong Kong stocks, particularly tech giants, have shown strength with Alibaba’s stock rebounding over 13% in the past week, achieving a cumulative rebound exceeding 40%, significantly outperforming the Hang Seng Index’s 5% increase within the same timeframe, acting as a barometer for valuation readjustment.

Amid these developments, the latest Consumer Price Index (CPI) data released by the Federal Reserve noted a 3% year-on-year increase in January, with a core CPI increase of 3.3%, both surpassing market expectationsAs a result, predictions for interest rate cuts within the year had markedly cooled—reducing the implied expectations for a Fed rate cut in 2025 from an anticipated 1.4 times to 1.1 timesThis backdrop necessitates an adjustment in global capital allocation logic, as high interest rate environments compel capital to seek undervalued, high-growth markets, with Chinese assets lying within this strategic window.

Ma Lei, Chief Investment Officer for Invesco in mainland China and Hong Kong, notes that the advancements in AI are enhancing the economic and profitability outlook for Chinese enterprises, making the current valuations an attractive entry point for investments in the Chinese stock marketRecently, numerous Wall Street investment banks have released optimistic reports regarding the long-term growth potential in China’s market, predicting that 2025 might emerge as a "revaluation year" for Chinese assets.

In this context, the revaluation logic can be distilled into two crucial pathways: the benefits of policy adjustments and opportunities embedded within structural reformsDuring a discourse at a recent Hong Kong financial markets forum, Qi Bin, Deputy Director of the Hong Kong Liaison Office, highlighted the increased international competitiveness of Hong Kong, which regained its stature as Asia’s top financial center according to the latest Global Financial Center Index, ranking third globallyUnder the central government’s proactive macroeconomic strategies, the Hong Kong stock market reversed downward trends seen in previous years, with the Hang Seng Index surging 18% in 2024. The initial public offering (IPO) market revived vibrantly, with a total of 71 new IPOs raising a combined HKD 87.5 billion, ranking fourth globally.

Qi emphasized that the maturity of a financial system determines the sustainable development and resilience of the economy, which substantially influences the rise and decline of its economic landscape.

This implies that Hong Kong’s position as an international financial hub is becoming increasingly consolidated, with notable enhancements in the vibrancy and allure of its capital markets

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Hong Kong serves as a barometer for global capital trends, suggesting a renewed confidence amongst international capital in Chinese assets—particularly in technology sectors that are gaining recognition and investor interest.

Recent trends show international capital favoring a reassessment of Chinese technology assetsIn the aftermath of the DeepSeek event, global investors are re-evaluating opportunities in Chinese tech, with the Hang Seng Tech Index ETF witnessing considerable growth of up to 19.75% this yearFurthermore, major financial institutions, including Goldman Sachs, Deutsche Bank, Bank of America, and BlackRock, have all voiced their optimism for investments in Chinese assets and the A-share market, perceiving the revaluation of Chinese assets as an undeniable trend.

However, Noel Dixon, a senior macro strategist at State Street Global Markets, highlighted three notable behaviors among institutional investors in JanuaryFirst, despite ongoing tariff disruptions, the risk appetite indicator for institutional investors rose to 0.36. Stock allocations increased by five basis points, primarily driven by inflows from cash holdingsSecond, stock allocations were predominantly focused on the United States, with institutional investors readjusting their portfolios to increase exposure to European risk investments, including the UK, but with a decrease in allocations to Asia and Japan as of January—concerns about the Chinese economy’s fundamentals and the outlook on tariffs likely influenced these shiftsLastly, persistent pessimism regarding Asia-Pacific bonds continues to be observed, with notable selling patterns, particularly in Indonesia, which hit the lowest decile of cash flows as of January 20.

Ma Lei is optimistic that the Chinese stock market will see a promising start to the year of the Snake, driven by DeepSeek’s impressive capabilities that rival top-tier overseas AI counterparts at minimal costs, stimulating positive market sentiment

However, the pertinent question on investors’ minds is whether DeepSeek can indeed act as a catalyst for the revaluation of Chinese stocksHe affirmatively states, “DeepSeek brings a multitude of favorable factors, including lowering the barriers to AI adoption across various sectors while achieving heightened efficiency, promising benefits for many listed companies in China, ultimately supporting a revaluation of Chinese stocks.”

In the context of persistent tightening measures from the Federal Reserve, a profound transformation is underway in global capital market liquidity patternsThe phenomenon of “valuation basements” in the Chinese market is becoming increasingly evidentThe core narrative surrounding the revaluation of Chinese assets revolves around two pivotal themes: the certainty driven by policy and the explosive nature of industrial advancementIn terms of policy, the Central Economic Work Conference has explicitly stated an approach centered on maintaining “moderate intensity and enhancing quality and efficiency” in fiscal policies, including increased quotas for local government special bonds and optimized tax structures aimed at stimulating corporate investment and consumptionConcurrently, the central bank continues to ramp up support for technology and green industries, instituting two cuts in reserve requirements for the year, amounting to a total of one percentage point, providing over 20 trillion yuan in long-term liquidity.

On the industrial front, the collaboration between Apple and Alibaba is perceived as a new sign of technological cooperation, with Alibaba Cloud, Huawei, Baidu, and other industry leaders accelerating their global steps, thus enhancing the value of industrial chainsAdditionally, breakthroughs in new energy and intelligent manufacturing are notable, with CATL continuing to increase its global market share, and BYD’s electric vehicle exports doubling year-on-year as China’s high-end manufacturing redefines global supply chain structures

Amid the ESG investment trend, China’s green bond market has risen to the forefront, establishing itself as a new focus for international capital.

As diversification reigns, investors are encouraged to search for alpha amidst separation in the marketAfter a prolonged period of valuation stagnation, Chinese tech stocks are entering a favorable window for a valuation recovery.

This recovery is not solely driven by a revival in market sentiment, but is also rooted in domestic policy support, accelerated industrial upgrades, and a restructured international competitive landscapeNonetheless, the Federal Reserve’s tightening policies and geopolitical uncertainties remain pivotal variables affecting market volatility.

In navigating this environment of seeking certainty within uncertainty, seasoned market experts suggest that investors should prioritize two main focus areas: first, identifying pivotal sectors bolstered by policy support, such as AI, chips, new energy, and the digital economy; and second, scrutinizing companies’ fundamentals and profitability modelsUltimately, the investment rationale needs to revert to verifying companies’ profitability, technical advantages, and competitive market positions.

Currently, investor perception in capital markets surrounding track records of AI, major modeling, domestic chips, digital currency, and clean energy is shifting from “concept-driven” frameworks to “industry-embedded” realities.

Market differentiation is a dual-edged sword, creating both risks and opportunitiesIn such an environment of bifurcation, those discerning quality companies can often capitalize on “true alpha.” However, this necessitates the implementation of diversified strategies to mitigate risks—allocating capital across established leaders, alongside identifying rapidly growing but underpriced tech small to mid-caps, while leaving room for emerging market trends.

Finally, even the most anticipated market events will encounter obstacles, particularly given that any small shifts in the Federal Reserve’s policies could significantly influence global market risk appetites

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