Investors pivot to selective China bets in technology as property growth fades: DBS Bank
The sentiment among investors that China is a “single bet” is giving way to picking individual winners, with technology displacing property as the engine of growth, according to DBS Bank (Hong Kong). “Instead of looking at China as one big thing, there are selective sectors that we think will benefit from this trend,” Dennis Lam, managing director and head of research at the bank, said during a…
DBS Bank notes a shift in investor mindset towards selective China investments, with technology replacing property as the engine of growth. Dennis Lam, the bank's managing director and head of research, explained that instead of viewing China as a single entity, certain sectors like artificial intelligence, advanced manufacturing, and innovative drugs are expected to drive the economy by 2040.
DBS evaluated listed Chinese companies and identified its top 10 picks, which include top electric vehicle battery maker Contemporary Amperex Technology (CATL), drug developer BeOne Medicines, e-commerce giant Alibaba Group Holding, chip foundry Semiconductor Manufacturing International Corp, and precision automation maker Inovance.
However, no carmakers made the list, as the EV sector is undergoing a shake-out following a surge in new entrants. The bank anticipates China's equity market to deepen and become more sophisticated in the coming decades, forecasting the CSI 300 Index to reach 9,500 by 2040. Currently, China's stock market capitalization accounts for 78% of its GDP, compared to 219% in the US, and DBS projects this ratio to increase to 96% by 2040.
As Chinese President Xi Jinping visits the US for high-stakes talks with US President Trump, AI is expected to be a key focus. Global investors are closely monitoring the summit for potential easing of capital flows. At present, foreign holdings in China's A-share market stand at less than 4%, significantly lower than the 30% in Japan, South Korea, and nearly 50% in Taiwan.
While Hong Kong and mainland Chinese stock markets have trailed regional peers due to limited exposure to the global AI supply chain, Lam believes the sentiment towards China being "uninvestable" has softened. He encourages global funds to reassess the market through the lens of sustainable advancements in AI, robotics, and advanced manufacturing, noting that while some investors have returned, the capital flow story remains largely untapped.
Written by urgent.news from SCMP Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
