stock market Photo:VCG

The DeepSeek craze continues to spread globally, driving a sharp rise in Chinese asset prices, including US-listed Chinese stocks. An analyst noted on Sunday that Chinese assets have entered a new phase, with capital flows out of US stocks and into A-shares and Hong Kong stocks becoming increasingly evident.

US stocks experienced a sell-off on Friday, with all three major indexes posting significant losses. The Dow Jones dropped 1.69 percent and the S&P 500 fell 1.71 percent, marking their largest single-day declines of the year. Over the past two sessions, the Dow lost nearly 1,200 points.

Meanwhile, the Nasdaq Golden Dragon China Index bucked the trend, rising 1.65 percent on Friday to close at 7,982.26 points. The index rose 1.57 percent over the past week, marking its sixth consecutive week of gains.

Alibaba closed at $143.75 on Friday, hitting a more than three-year high. Year-to-date, it has surged nearly 70 percent, bringing its market value to $341.9 billion.

What's even more notable is that Hong Kong stocks have entered a technical bull market. As of Friday's close, the Hang Seng Index had gained 19.64 percent year-to-date, while the Hang Seng Tech Index had surged 34.46 percent. The Hang Seng Tech Index nearly doubled since its low in February 2024.

Global capital markets are undergoing a major shift. US stocks are at record highs, with valuations showing clear signs of a bubble. The rise of DeepSeek has further increased the risk of a bubble bursting in some US tech stocks, Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Sunday.

Since the start of this year, international capital has begun flowing out of US stocks and into emerging markets. A-shares in the Chinese mainland and stocks in the Hong Kong Special Administrative Region, with their attractive valuations, have become key destinations for these funds, Yang said.

Global investment giants have been increasingly bullish on Chinese assets. In an analysis released on Thursday, Goldman Sachs said that the launch of DeepSeek-R1 and other Chinese AI models, seen as globally competitive and cost-effective, marked a turning point, reshaping the narrative around China's tech sector.

This development could accelerate the spread and adoption of AI technology, having a greater impact on global economic growth and stock markets, Goldman Sachs said, adding that improved growth prospects and the resulting boost in confidence are expected to drive a 15-20 percent increase in the fair value of Chinese stocks, potentially attracting more than $200 billion in capital inflows.

As a result, the US-based investment bank raised its target for the MSCI China Index to 85 points, implying a 16 percent upside, and for the CSI 300 Index to 4,700 points, suggesting a 19 percent gain over the next 12 months.

The emergence of DeepSeek has erased foreign investors' concerns about China potentially being blocked by the US in technological innovation, Yang said, noting that with the world's largest population and consumer market, China is poised to have a significant advantage in AI applications, presenting even more opportunities for the capital market.

A recent symposium on private enterprises in Beijing sent a strong signal for stabilizing the development of the private economy, once again becoming a key indicator for the capital market. On the new journey of the new era, the private economy has broad development prospects and immense potential, and it is the perfect time for private companies and entrepreneurs to fully demonstrate their prowess, the meeting stressed.

The year 2025 is seen as the year the investment community realizes China's leading position in global competition, media reports said, citing Deutsche Bank's latest report.

"We expect the 'valuation discount' of Chinese stocks to disappear, with profitability potentially exceeding expectations due to policy support for consumer spending and financial liberalization. The bull market for Hong Kong/A-shares began in 2024 and is expected to exceed previous highs in the medium term," Deutsche Bank said.