After two years of caution, global investors are revisiting China’s stock markets, fueling a surge in equity issuance and optimism about the country’s investment landscape. The shift comes as government scrutiny of tech giants eases and artificial intelligence disruptor DeepSeek captures international attention, creating new opportunities even as geopolitical tensions persist.
Total equity issuance by Chinese firms more than doubled in the first quarter of 2025, reaching $16.8 billion—an increase of 119% from the previous year, according to LSEG data. The renewed investor interest marks a stark contrast from the skepticism that had kept many sidelined in recent years.
“The psychology of investors has changed. From many believing China was not investible, many now think this is a re-rating process,” said James Wang, head of Asia ex-Japan Equity Capital Markets at Goldman Sachs. While risk remains, investors are increasingly seeking opportunities, with institutional investors playing a growing role.
Hong Kong’s Hang Seng Index has surged 21% this year, outperforming major global benchmarks. The MSCI China Index is trading at a 12-month price-to-earnings ratio of 11.7x, significantly lower than the MSCI U.S. at 20.3x and the S&P 500 at 20.5x, underscoring China’s relative value in the global market.
DeepSeek’s emergence in the AI sector has been a game-changer. The company’s launch of AI products at a fraction of competitors’ costs shook global markets in January and signaled China’s commitment to technological leadership. President Xi Jinping’s recent summit with top tech executives reinforced the perception that regulatory pressures on the sector are easing.
“The emergence of DeepSeek has prompted a fundamental shift in the way global investors are looking at China,” said Harish Raman, Citigroup’s Asia head of ECM execution and solutions. He noted a growing confidence in Chinese private enterprises, particularly in AI, quantum computing, semiconductors, and microelectronics.
This optimism has extended to Hong Kong, where IPO activity surged to $1.47 billion in the first quarter, up from $612.7 million a year earlier. Major upcoming listings include battery maker CATL, which is expected to raise at least $5 billion. With continued regulatory support and shifting market dynamics, the rally in Chinese equities may prove more than a temporary rebound.
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