Chinese Stocks Lure Hedge Funds, Fidelity as Bullish Case Builds

(Bloomberg) -- Chinese stocks are coming back into favor among global investors as the nation’s growing technological heft and expectations for additional stimulus help rekindle optimism.

Hedge funds snapped up the most Chinese equities in more than four months last week on a net basis, driven almost entirely by long buys, according to a trader note from Goldman Sachs Group Inc. Fidelity International says it’s overweight on the nation’s shares and has been adding them into its portfolios.

The investment firm turned “more bullish on the Chinese market,” said Taosha Wang, a portfolio manager at Fidelity in Hong Kong. In addition to the economic fundamentals and the return of “animal spirits,” there are also opportunities coming from “this new exciting AI tool” of DeepSeek, she said.

The MSCI China Index has risen about 14% from a January low and touched a three-month high Tuesday before reversing its intraday gains. That was after a gauge of Chinese tech shares listed in Hong Kong entered a bull market last week.

While growth in the world’s second-largest economy remains sluggish, there are a number of reasons for investors to be optimistic. The unveiling of the new DeepSeek artificial intelligence app last month has ignited a wave of optimism over the technological ability of the nation’s tech sector, spurring gains among tech megacaps such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

At the same time, there’s increasing confidence that policymakers will unveil new stimulus measures at the National People’s Congress next month, at least in part to offset the potential impact of higher US tariffs threatened by President Donald Trump.

Among other bulls, billionaire investor David Tepper boosted his stake in China-related stocks and exchange-traded funds last quarter, just before the release of the DeepSeek app helped spur a broader rally.

--With assistance from Joanne Wong.