China’s products go all over the world. (Photo: Freepik, Miawu)
While the Wall Street weakens, China’s stock markets open up. The Hang Seng Index has been beating the US indices by more than 20 percent since the beginning of the year. The catch -up in the Middle Kingdom could only be the beginning. Investors smell opportunities – but the risks remain considerable.
The kites awaken: China’s markets in high altitudes
The once celebrated American tech shares lose its shine: the Nasdaq index has fallen by around 10 percent since the beginning of the year. The situation is quite different in the Middle Kingdom: the Hang Seng Index increased a whopping 20 percent in the same period. “Chinese stocks experienced a positive change in mood, driven by the economic policy of the government and the nimbus effect of the breakthrough of Deepseek in the field of artificial intelligence,” analyzes John Lin, Chief Investment Officer-China Equities at Alliancebernstein.
China relies on innovation and technological progress – with resounding success. Companies such as Alibaba and Tencent or the smartphone manufacturer Xiaomi have a significant progress. The start-up Deepseek in particular causes a sensation with its new AI chatbot. In addition to the tech giants, automobile manufacturers such as BYD also benefit from the upswing.
Byd vs. Tesla: E-car revolution made in China
Elon Musk travels the production while BYD tightens the pace. The favorite of Warren Buffett impresses with a new quick charging system that makes the Tesla super charger look old: an electric car reaches 470 kilometers in just 5 minutes.
At the same time, 2 new models, the Limousine Han L and the SUV Tang L, roll on the streets with ultra-speed technology. The manufacturer is also expanding internationally – with 2 planned works in Europe, possibly even a third party in Germany. The change from the low-cost provider to the premium manufacturer is in full swing-and investors rely on the fact that BYD will take place as an innovation leader in the electric car segment in the future.
Tencent: The secret ruler of the digital world
Not only in the automotive industry, also in the digital sector, China sets accents. While western tech giants like Meta and Alphabet weaken, Tencent scores with double-digit growth rates. The game business in particular is booming: game hits like Honor of Kings catapulted the income by 23 percent in the 4th quarter. In addition, foreign business is growing by 15 percent.
With Wechat, which goes far beyond a messaging app and also integrates payments, shopping and social networks, Tencent holds the threads of the digital world firmly in hand. Participations in Epic Games and Activision Blizzard underline the global reach. Analysts see an indispensable position in the company for investors who focus on the strength of Chinese technology.
Risks: The thorns in the Chinese growth bouquet
But if you rely on China, you also have to keep an eye on the dangers. The battered real estate sector remains a problem, and geopolitical tensions with the West could slow down the export industry. In addition, the influence of Beijings should not be underestimated: the regulatory pressure on tech companies led to massive course over 2021, and a change in the course is possible at any time.
The Bank of America strategists also warn of a possible correction and move parallels to the 2015 boom-and-bust cycle. At that time, the courses exploded as quickly before a drastic setback followed. However, despite the massive rally, Chinese stocks are still cheaply rated compared to their US counterparts, which should support the stock markets in the medium term.
Shares, ETFs, funds: This is how you come into play
There are 3 entry -level routes for investors: individual shares, ETFs or actively managed funds. If you are keen to risk, you can invest directly in the champions of the Middle Empire:
- Alibaba (Cloud computing, e-commerce) and Tencent (Gaming, AI) remain long -term growth horses despite regulatory waves.
- Xiaomi Mix the car market with its first electric car-and could become the next BYD.
- Pinduoduo Alibaba has overtaken and dominates the rural regions with discount shopping.
But be careful: China’s stock exchanges are complex. A-shares (in Renminbi), B shares (in foreign currency) and H shares (in Hong Kong) are subject to different rules. So it is worth spreading.
Conclusion: China can be checked – but not without risk
China’s catch -up is impressive, but also risky. Cheap reviews, technological innovations and a green turn make the realm of the middle attractive – however, volatility remains high. Anyone who relies on ETFs sprinkles the risk, while individual shares offer targeted opportunities. Active-managed funds benefit from local know-how and avoid the cliffs of market access.
The following applies to investors who want to get involved: keep nerves and keep an eye on Beijings’s next move. China’s stock exchanges remain an exciting, but also risky playground – and only those who keep their balance could be the winner in the end.
Disclaimer:
No investment advice. No call to buy or sell securities.