The Chinese stock market is once again attracting global investors' attention, posting strong gains driven by optimism surrounding the technology sector and government support for innovation. In recent days, the MSCI China Index has risen 4.3% since the start of the National People's Congress, marking its best performance during this event since 2018. A surge in capital inflows into Chinese companies listed in Hong Kong has resulted in record trading volumes.
A growth story
According to Wind Information data, net stock purchases by mainland Chinese investors reached HKD 29.62 billion (USD 3.81 billion) yesterday, the highest level since the launch of the Shanghai Connect and Shenzhen Connect programs. Investors showed particular interest in tech giants such as Alibaba and Tencent, which are unavailable on mainland Chinese exchanges.
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Create account Try a demo Download mobile app Download mobile appThe recent rally in Chinese stocks is largely fueled by government commitments to intensify support for the technology sector. Beijing has announced increased spending on artificial intelligence and cutting-edge technologies, boosting investor confidence. Additionally, the decision to expand the budget deficit to 4% of GDP, including extended consumer subsidy programs, has provided another market stimulus.
Citi analysts noted yesterday that despite risks related to U.S. tariffs, Chinese technology stocks remain an attractive investment alternative. Consequently, Citigroup upgraded its rating on Chinese equities, particularly the Hang Seng China Enterprises Index, to "overweight", while downgrading the U.S. market to "neutral".
China - still undervalued?
Despite the recent surge, analysts argue that Chinese stocks remain relatively undervalued compared to Western markets. Investors are beginning to look for alternatives to the U.S. stock market, increasingly shifting their focus to Asia, particularly China and Hong Kong. Citi's assessment suggests that low valuations and policy shifts that could stimulate consumption make China an appealing market.
The AI narrative remains a strong driver of sentiment. Following the DeepSeek AI breakthrough, Tencent's Hunyuan model and Alibaba's QwQ-32B further reinforce China's technological leadership. Companies across technology, e-commerce (Alibaba), restaurant chains (Yum China), and tourism sectors are expected to benefit from China's economic recovery in the coming quarters. Investors increasingly view China as a viable alternative to other emerging markets. The key question remains whether the current bull market is the start of a long-term uptrend or merely a short-term reaction to government stimulus.
CHN.cash (D1 Chart Analysis)
Looking at the CHN.cash index, we see that it remains within an upward price channel, currently trading near its upper range. A positive sign is that the Wall Street correction has failed to dampen sentiment toward Chinese equities. The key question is whether a potential rebound in U.S. stocks will redirect capital away from China and back into American indices.
Nevertheless, given improving fundamentals supporting the Chinese bull market and the possibility of a Xi-Trump summit in June 2025, the index appears to be withstanding short-term pressure and firmly maintaining its upward trend.
Source: xStation5
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