China Tops Hedge Funds’ Shopping Lists So Far This Year, Goldman Says
Global hedge funds have been aggressively acquiring Chinese stocks throughout this year, with their purchasing activities accelerating in recent days. This trend has been attributed to the rise of homegrown artificial intelligence startup DeepSeek, which has ignited investor enthusiasm, according to insights from Goldman Sachs.
Both onshore and offshore Chinese equities have emerged as the “most notionally net bought market” on Goldman Sachs’ prime brokerage book globally. This insight is based on data collected until February 7.
The period between February 3 and 7 marked the most substantial buying activity by hedge funds in over four months, as highlighted by the bank.
Prime brokerage desks at banks, which lend to hedge funds, closely observe their trading behaviors. DeepSeek’s innovative low-cost AI model has served as a catalyst for the revaluation of Chinese assets. This development has attracted global investors, particularly those concerned about the peak valuation of U.S. stocks.
DeepSeek is altering the previous narrative that “China is irrelevant on AI and is losing the AI war,” noted a Hong Kong-based institutional sales director catering to hedge fund clients.
The positive sentiment has been further bolstered by Beijing’s policy-easing measures and a sense of relief as U.S. President Donald Trump’s latest 10% additional tariff on Chinese goods was less severe than initially threatened, according to analysts and investors.
The MSCI China index has been on an upward trend for four consecutive weeks since mid-January, with a gain of over 6% in February alone, surpassing the performance of major global markets.
Billionaire David Tepper’s Appaloosa LP has notably increased its investments in Chinese internet giants Alibaba Group and JD.Com during the fourth quarter, as indicated in a securities filing. These firms have now become some of the largest positions in his hedge fund.
Goldman Sachs reported that 95% of the purchasing last week was concentrated in single stocks, with particular emphasis on sectors such as consumer discretionary, information technology, industrials, and communication services.
Conversely, hedge funds divested from sectors including energy, utilities, and real estate during this period.
The allocation of hedge funds to Chinese equities has now reached 7.6% of Goldman Sachs’ total prime book exposure. This marks a significant position, ranking in the 23rd percentile over the past five years, up from about the 10th percentile in January.
