China stocks getting back into investors’ good books

Subscribe to enjoy similar stories. Chinese equities have been out of favor among many investors for the past few years. However, the tide appears to be turning, driven by strong corporate profits, enthusiasm over artificial intelligence and an apparent easing of regulatory pressure from Beijing.

“China is back on the radar, at least in terms of investor interest," Goldman Sachs strategists wrote in a note. Investor interest and engagement in Chinese equities are “arguably at the highest" since the market’s historic peak in early 2021, they said. Hong Kong’s benchmark Hang Seng Index, home to many Chinese firms, has risen 17% so far this year, outperforming most major emerging markets.

In contrast, onshore indexes have lagged, with the benchmark Shanghai Composite Index up just 0.5%. Analysts attribute this to foreign investors favoring offshore Chinese shares, though they see potential for A-shares to catch up. The MSCI China Index, which tracks large- and mid-cap stocks across A- and H-share markets, has gained 16% so far in 2025.

One major catalyst has been the emergence of a homegrown AI startup DeepSeek, which has impressed the tech industry with a large language model it claims rivals OpenAI’s ChatGPT while using less advanced chips. “DeepSeek has been a game-changer on many fronts," said Pruksa Iamthongthong, deputy head of Asia-Pacific equities at Aberdeen Investments. The company’s cost-efficient model has galvanized China’s tech and internet sectors, fueling investment and new product releases, she added.

China’s improving economic outlook has also bolstered sentiment. The prolonged property market slump and disappointment over policy response has long dampened investor confidence. However, recent data suggests