[SINGAPORE] Chinese stocks have see-sawed since late last year, as investors reacted to factors ranging from government stimulus, artificial intelligence (AI) and US President Donald Trump’s trade tariffs.
The Asian giant’s companies had experienced a lengthy bear market in the past few years, with investors flocking to US markets. Last October, Hong Kong’s Hang Seng Index also plummeted sharply after investors’ hopes of a long-awaited rebound were left unfulfilled following a disappointing stimulus announcement from Beijing.
The script has flipped in the second quarter of 2025. While the US faces renewed trade uncertainty and market volatility over tariffs, Chinese equities are staging a resurgence, led by what some analysts are now calling the “Terrific 10”: tech and consumer giants listed mostly in Hong Kong that are witnessing a revival in investor sentiment. This group includes companies such as Alibaba, Tencent and BYD.
The US and China reaching a consensus on a trade framework on Jun 10 also gave a boost to Chinese stocks, although some gains were pared after Trump said that he would unveil unilateral tariff rates within two weeks.
The S&P 500, much of it driven by the “Magnificent Seven” technology giants, has risen just over 2 per cent in the year to date as at Jun 12. On the other hand, Hong Kong’s Hang Seng Tech Index, which tracks the 30 largest technology companies listed in Hong Kong (including seven of the Terrific 10), has surged around 22.4 per cent in the same period.
In the last couple of months, global banks HSBC, Morgan Stanley, Citibank and Goldman Sachs have all upgraded Chinese equities to overweight, many citing the attractive valuations among technology stocks and strategic government support for the tech sector.
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Much of the rally’s momentum has also been carried by AI-led optimism, reminiscent of the AI boom in the US in 2024 that led to the strong performance of the Magnificent Seven stocks.
To some, China’s technological potential is no longer perceived as based on merely capitalising on “one to n” capabilities – that is, reproducing existing innovations at scale. Instead the country has showcased its capabilities to create “zero to one” innovation from the ground up.
“DeepSeek’s advancements underscore the immense potential of China’s AI ecosystem,” said Terence Lim, equities portfolio manager at Eastspring Investments Singapore, in a report. “Many companies are not only innovating rapidly, but also trading at much more attractive valuations compared to their US counterparts.”
Morgan Stanley upgraded its outlook on China to overweight, based on how the earnings of MSCI China companies beat estimates after four straight years of quarterly misses. While the fallout from Trump’s latest tariffs is likely to quell global growth significantly, strong corporate earnings may mean that the Terrific 10 remain resilient in the coming months.
We bucket the 10 into three categories – Internet giants, e-commerce and consumer goods, and electric vehicles (EVs) – and discuss upcoming trends to watch.
Internet giants: Tencent, NetEase, Baidu, SMIC
China’s Internet tech companies have moved quickly to capitalise on the “DeepSeek effect”. Tencent, for instance, has incorporated DeepSeek’s R1 model into its “AI Search” functions within its Weixin app, as well as rolled out an upgraded iteration of its proprietary Hunyuan-T1 model.
The digital ecosystem giant, which operates WeChat and its mainland equivalent Weixin, has seen its share price surge 22.6 per cent since the beginning of the year.
Also in this bucket is China’s largest semiconductor foundry Semiconductor Manufacturing International Corp (SMIC), which has surged more than 40 per cent in the year to date as at Jun 12, driven by the AI hype and a government push for self-sufficiency in chip production. However, potential chip tariffs from the US may slow its runaway share price.
Others include gaming operator NetEase, and search engine provider Baidu, both of which have yet to truly achieve lasting growth through AI adoption. While each has expanded into adjacent areas – music streaming in NetEase’s case, and autonomous driving for Baidu – neither has managed to step out of the shadow of dominant rivals such as Tencent and Alibaba. Yet, relatively cheap earnings multiples compared with China’s other tech giants may support the positive outlook for them.
E-commerce and consumer goods: Alibaba, JD, Meituan, Xiaomi
Standing tallest among the AI-driven resurgence of Chinese stocks is Alibaba, the e-commerce giant founded by Jack Ma. In addition to its main e-commerce platforms Taobao and Tmall, Alibaba has also emerged as a leader in the cloud computing space.
Its Nasdaq-listed shares have soared on the company’s commitments to boost AI spending and the unveiling of its open-source AI model Qwen 2.5 in early March. Analysts also see the company as having quietly buried the hatchet with Beijing after regulatory crackdowns since 2020, aligning with broader state efforts to stimulate domestic consumption.
Meituan, however, has analysts feeling mixed. The food delivery giant has seen strong fundamental growth in the past year, with total revenue growing 22 per cent to 338 billion yuan (S$60.3 billion).
Yet, as at Jun 12, the stock has lost around 6.4 per cent in the year to date, underperforming the 22.4 per cent rise in the Hang Seng Tech Index over the same period. Still, planned expansions of its overseas meal delivery service Keeta in the Middle East and Hong Kong, as well as plans to integrate AI into its work processes, could see the Hong Kong-listed stock rebound.
Xiaomi, meanwhile, has drawn attention with a 90 per cent earnings growth in the fourth quarter of 2024, its fastest since 2021. The smartphone maker has been actively repositioning itself as a broader Internet of Things ecosystem player, with growing bets on smart devices and AI integration. But it is the company’s aggressive push into EVs that has sparked the most interest.
Electric vehicles: BYD, Geely, Xiaomi
China’s EV crown remains with BYD, the Warren Buffett-backed automaker that is quickly emerging as a global competitor to market leader Tesla. The company sold more than four million new energy vehicles in 2024, overtaking Tesla in global EV sales revenue. BYD has ramped up AI-assisted driving features and continues to expand overseas into Europe, South-east Asia and South America.
Trailing BYD’s market dominance is a crowded pool of automakers competing for second place, including Geely and the aforementioned Xiaomi.
Geely sold a respectable 2.18 million vehicles in 2024, pushing sales revenue up 34 per cent from the previous year and beating profit estimates. Meanwhile, Xiaomi’s US$5.5 billion fundraising in March for EV investments has cemented its commitment to take on BYD and Tesla in the EV game. The company plans to open its second EV factory in Beijing in mid-2025, raising its sales target to 350,000 vehicles in 2025.
Caution beneath the hype
However, continued strong performance of Chinese tech stocks is not a given. While the Terrific 10 may reflect genuine innovation and recovery – especially in AI, EVs, and digital platforms – confidence in a sustained turnaround hinges on policy clarity and macro stability.
Morgan Stanley chief China economist Robin Xing said that recent memories of regulatory crackdowns, structural deleveraging and deflationary pressures have left a deep imprint on investors, while the recent tariffs may cause further downside for Chinese equities.
However, the prospect of lower tariffs following trade negotiations may prompt Beijing to take a more gradual path to fiscal stimulus, he wrote.
