China equity issuance doubles as tech race draws back global investors
Global investors are starting to take a renewed interest in mainland China’s stock markets after a period of hesitation. This shift in sentiment is expected to drive increased activity in a market where equity issuance has doubled in the first quarter compared to the previous year.
One of the factors driving this renewed interest is the easing government scrutiny of technology giants and the emergence of disruptive AI software developer DeepSeek. Despite concerns about Sino-U.S. trade tensions, overseas investors are being drawn to the potential opportunities in the Chinese market.
According to LSEG data, total equity issuance from Chinese firms in the first quarter reached $16.8 billion, a 119% increase from the previous year. This surge in equity issuance reflects the growing confidence in the Chinese market among investors.
James Wang, head of Asia ex-Japan Equity Capital Markets at Goldman Sachs, noted that there has been a significant shift in the psychology of investors towards China. Many investors who previously viewed China as uninvestable are now reconsidering their stance and seeing it as a re-rating process.
In Hong Kong, the Hang Seng Index has outperformed international peers, with a 21% increase in value this year. The index is trading at a 12-month price-to-earnings ratio of 10.5x, making it an attractive option for investors.
Compared to other markets, Chinese stocks are offering global investors significant value, with stock valuations at a 40% discount. The various micro policies implemented by the Chinese government and the emergence of DeepSeek have further reinforced the perceived value of Chinese stocks.
A key shift in the market dynamics is the easing government scrutiny of the tech sector, as evidenced by a summit led by President Xi Jinping with top tech leaders. DeepSeek’s entry into the market with cost-effective AI products has also been a game-changer, prompting a fundamental shift in how global investors perceive China’s technology sector.
As the year progresses, Hong Kong is likely to see more Chinese companies turning to the financial hub for capital raising through IPOs. Major listings in Hong Kong are expected to be secondary listings of mainland Chinese firms, with companies like battery maker CATL already filing for a Hong Kong listing to raise at least $5 billion.
Overall, the recent surge in trading activities in the Hong Kong securities market is seen as sustainable, supported by strong regulatory backing and the uncertainties surrounding other global markets. This positive outlook is expected to drive continued interest and investment in Chinese stocks.
(Source: Reuters, Edited by Christopher Cushing)
