Chinese Stocks Surge 23.2% as AI Drives Tech Sector Growth

Deutsche Bank's Private Banking division's Chief Investment Office has released a research report highlighting the significant role of artificial intelligence (AI) technology and supportive policies in driving the Chinese stock market's upward trajectory. The report underscores that China's technology sector is undervalued compared to its U.S. counterpart, with a price-to-sales ratio that is 33% of the U.S. and a price-to-earnings ratio that is 83% of the U.S., presenting an attractive investment opportunity.

Deutsche Bank's analysis suggests that the Chinese stock market remains undervalued relative to other global markets. The report anticipates that long-term foreign capital inflows will continue to support market rebounds, with a positive outlook for the IT, discretionary consumer goods, and green energy sectors. The Hang Seng Tech Index has risen 23.2% this year, and the optimistic sentiment in the technology sector has spread to other industries. Since the beginning of the year, there has been a strong inflow of southbound funds, with a significant portion flowing into AI-related stocks. Foreign investment in the mainland Chinese stock market is also increasing.

The government's strategic focus on the technology sector has significantly boosted private sector confidence in AI investments. Recently, major technology companies have reported impressive earnings, and these companies plan to make large-scale investments in AI over the next few years. Deutsche Bank's Private Banking division's Chief Investment Office believes that the widespread application of AI can increase the profits of Chinese enterprises over the next five years and continuously drive up the valuation of Chinese stocks.

Deutsche Bank also noted that the IT sector has the potential for earnings growth and revaluation driven by AI applications and policy support. AI infrastructure providers and end-users are expected to benefit from AI innovations. The gaming industry in China is expected to quickly adopt AI technology for game development. Chinese smartphone manufacturers are rapidly adopting advanced technologies such as 5G and AI, enabling them to charge higher prices for new models.

Major foreign banks have also expressed optimism about Chinese assets. Positive stimulus policies are expected to provide a more relaxed investment environment, and the development and commercialization of AI could continue to drive the revaluation of Chinese assets. The widespread adoption of AI over the next 10 years could drive an annual increase of 2.5% in the overall earnings of Chinese listed companies, potentially attracting significant capital inflows within the next year. Global investor interest in Chinese assets is expected to continue in the near future.