Priyanka Tiwari
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After two years of cautious distance, global investors are increasingly re-engaging with mainland China's stock markets. According to market bankers, this renewed interest is fueling activity, especially as equity issuance in China surged to $16.8 billion in Q1 2025, more than double the same period last year.
Shifting Investor Sentiment and Rising Confidence
“There’s been a fundamental shift in investor psychology,” said James Wang, Head of Asia ex-Japan Equity Capital Markets at Goldman Sachs. “What was once considered ‘uninvestable’ is now seen as a re-rating opportunity.” He noted that long-only investors are returning in greater numbers, signaling sustained interest.
Hang Seng and MSCI China Offer Attractive Valuations
- The Hang Seng Index has gained 21% year-to-date, outperforming other major global indices.
- The MSCI China Index trades at a 12-month P/E of 11.7, significantly lower than:
- MSCI U.S. at 20.3
- S&P 500 at 20.5
- Indian markets (18–19.99 average)
Wang emphasized that Chinese stocks are now priced 40% lower than global counterparts, with growing government support and innovation (like DeepSeek) offering downside protection for investors.
Technology Sector Rebound and DeepSeek’s Disruption
A recent summit led by President Xi Jinping signaled a shift in tone towards the tech sector, widely interpreted as easing of the regulatory clampdown that began in 2020.
Adding momentum is DeepSeek, a Chinese AI company that entered the global spotlight in January by launching advanced AI tools at a fraction of the cost of global competitors. Its rise has reshaped investor expectations, especially in AI, quantum computing, and microelectronics.
“This time feels different,” said Harish Raman, Citigroup’s Asia Head of ECM Execution. “Investors now see this as a constructive move backed by policy and innovation.”
IPO Market Revival in Hong Kong
Chinese firms helped drive Hong Kong’s IPO activity to $1.47 billion in Q1 2025, up from $612.7 million a year ago, according to LSEG. Most upcoming listings are expected to be secondary listings of mainland companies, using Hong Kong to raise fresh capital.
Notably, battery giant CATL has filed for a Hong Kong listing expected to raise at least $5 billion, per Reuters.
Supportive Policies and Outlook for 2025
According to Victoria Lloyd, consultant at MinterEllison, sustained support from both mainland Chinese and Hong Kong regulators is encouraging more high-end Chinese firms to list in Hong Kong. With global geopolitical uncertainty and a constructive regulatory environment, she believes the recent trading surge is likely to continue.
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