Foreign giants 'team up' to go deep into Chinese assets

As the AI wave sweeps the globe, China's technology track, especially the AI industry chain, has become a core breakthrough point for foreign capital allocation in Chinese assets. Multiple overseas institutions have significantly increased their holdings of Chinese tech stocks, and even launched dedicated derivatives, comprehensively increasing exposure to high-quality Chinese tech leaders. A foreign institution representative stated that in the global AI development landscape, China's role is becoming increasingly important, 'Chinese tech stocks are currently benefiting from both the global AI spillover and the rise of domestic AI, yet they are still at a significant discount. We believe this round of repricing has only just begun.'

◎ Reporter Wang Peng

British quant firm Aspect Capital plans to further expand its investment in China; French quantitative hedge fund CFM opens its new Shanghai office; J.P. Morgan Asset Management's Chinese and international teams engage in high-frequency 'two-way' collaboration... Since the beginning of this year, top overseas asset managers and quant giants have been deepening their presence in the Chinese market as a group.

Catalyzed by the AI wave, China's technology track has become a key area for foreign allocation: UK-based Liontrust Fund has doubled its position ratio in Chinese assets within the year; US well-known leveraged and inverse ETF issuer ProShares plans to launch a 2x leveraged ETF for a single A-share company, marking that Chinese tech leaders have entered the ranks of global core assets.

Amid the multiple resonances of earnings recovery, policy support, and unique advantages of the AI industry, multiple foreign institutions believe that the Chinese stock market is providing rare allocation opportunities for global investors.

Foreign Giants Deepen Roots in Chinese Market

In May this year, British quant giant Aspect Capital stated that it plans to further expand its investment in China, including expanding its local team, upgrading office space, and continuing to deepen its Chinese market layout. Founded in 1997, Aspect Capital is known as one of the 'Big Three Quants' along with AHL and Winton, with global assets under management of nearly $10 billion.

In the same month, French quantitative hedge fund CFM officially opened its new office in Shanghai's Citigroup Tower.

After completing full ownership and rebranding in 2023, J.P. Morgan Asset Management has been operating as a wholly-owned entity for three years. Wang Qionghui, CEO of J.P. Morgan Asset Management China, recently stated that since achieving wholly-owned operations, the synergy with the global headquarters has improved significantly. 'Over the past year, nearly 300 overseas colleagues from J.P. Morgan Asset Management visited China for exchanges, while dozens of Chinese colleagues went abroad for exchanges. This "two-way flow" not only conveys the voice of the Chinese market to the world but also empowers the Chinese market with global experience,' Wang said.

Wang Qionghui stated that overseas colleagues who came to China for research gained an intuitive understanding of the vitality of China's economy and tech industry, and also deeply recognized the uniqueness and value of the Chinese market.

Key Focus on China's Tech Track

As the AI wave sweeps the globe, China's technology track, especially the AI industry chain, has become a core breakthrough point for foreign capital allocation in Chinese assets. Multiple overseas institutions have significantly increased their holdings of Chinese tech stocks, and even launched dedicated derivatives, comprehensively increasing exposure to high-quality Chinese tech leaders.

UK asset manager Liontrust Asset Management's flagship product, the Liontrust Global Technology Fund, has significantly increased its allocation to Chinese assets this year. The latest data shows that as of June this year, the fund's allocation to Chinese assets reached 11%, doubling from the end of last year.

Specifically, the fund built positions in Chinese tech stocks such as Alibaba, AMEC, and Eoptolink, while reducing holdings in some US tech stocks that had previously risen sharply. Fund managers Claire Pleydell-Bouverie and Storm Uru recently explained their rebalancing logic, stating that Agentic AI, as a 'killer application,' is expected to significantly improve the return on investment for Chinese internet companies. In addition, the market may underestimate the pace of localization of China's chip manufacturing equipment supply chain.

It is worth mentioning that ProShares recently filed registration documents with the U.S. Securities and Exchange Commission, planning to launch an ETF product that tracks 2x the daily performance of Zhongji Innolight. If listed, it will become the world's first daily 2x leveraged ETF targeting a single A-share optical module company.

A seasoned foreign fund manager said that China has produced world-class AI hardware leaders. ProShares' plan to launch a 2x long ETF targeting Zhongji Innolight indicates that Zhongji Innolight has become a widely recognized leader in the optical communication field by the global market.

Timothy Wen, Head of Asian Thematic Equity Investments at Neuberger Berman, stated that in the global AI development landscape, China plays an increasingly important role, with optical communication being a typical example—some Chinese leading enterprises have long been deeply integrated into the procurement systems of global top cloud service providers, occupying a core and irreplaceable position in the optical module supply chain.

'Chinese tech stocks are currently benefiting from both the global AI spillover and the rise of domestic AI, yet they are still at a significant discount. We believe this round of repricing has only just begun,' said Timothy Wen.

Bullish on Long-term Investment Opportunities in Chinese Stock Market

As the fundamentals of A-shares continue to recover, earnings growth steadily improves, coupled with China's AI industry showing unique development advantages, multiple foreign investment banks and asset management institutions are unanimously bullish on the long-term investment value of Chinese stocks.

Du Meng, Deputy General Manager and Chief Investment Officer of J.P. Morgan Asset Management (China), believes that as listed companies' earnings begin to recover, Chinese equity assets will become significantly more attractive to global investors, with ample room for horizontal valuation repair.

Meng Lei, China Equity Strategy Analyst at UBS Securities, stated that under a baseline scenario, the earnings growth of A-share listed companies is expected to rise from 3.9% last year to 11% this year. 'In the medium term, the introduction of supportive policies, the steady advancement of "anti-involution," and the increase in overseas revenue share will all benefit the improvement of profit margins for A-share listed companies,' Meng said.

AllianceBernstein Fund stated that China's systematic corporate-level reforms can be summarized as a dual-track strategy of 'constraints + incentives': on the constraint side, curbing 'involution-style' competition, suppressing inefficient capital expenditure at the source; on the incentive side, through a combination of performance guidance and regulatory inquiries, actively promoting companies to enhance shareholder returns.

As these measures are gradually implemented, positive results have begun to emerge. AllianceBernstein Fund believes that if this benign trend continues, the investability of the A-share market is expected to see systematic improvement. Specifically: the increase in dividends and buybacks, combined with the steady progress of 'anti-involution,' will directly boost shareholder returns and corporate earnings, providing strong support for stock prices; using repurchased shares for cancellation and restricting blind expansion of asset scale will help improve asset turnover and overall operational efficiency; the introduction of market value management assessment mechanisms will also effectively align the interests of management and shareholders, further solidifying the foundation for the long-term healthy development of the A-share market.

(Editor: Xu Nannan)

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