As the leisurely atmosphere of the Lunar New Year holiday fades, a sense of urgency fills the air as the capital markets transition once again into what many refer to as the “brick-moving” mode of work and investmentThe recent holiday season showcased a remarkable volatility in domestic capital markets, reflecting a landscape where expectations seemed to flip dramatically several times.
In this tumultuous environment, the emergence of a new domestic model known as Deep Seek has significantly shaken the foundations laid by AI chips which have dominated the sector for the past two yearsIn the United States, Nvidia, the leading AI company, reflected this upheaval by experiencing a staggering 20% decline over just seven trading days following the holiday.
This volatility brings to the forefront the idea that artificial intelligence remains the star of the market—its relevance and impact on various sectors can hardly be overstatedAs of February 3, Nvidia not only set records for financial downturns in U.S. history, but it also catalyzed significant increases in Hong Kong's markets, particularly for domestic companies like SMIC, whose stock rose by 18%, marking a historic peak.
What makes Deep Seek a focal point in this evolving narrative is its competitive edge in terms of capabilities, cost efficiency, and opennessCoupled with the previous investments by ByteDance in AI infrastructure competing with foreign giants, the rapid development of domestic AI models indicates that we are possibly witnessing only the beginning of an expansive rise in China's AI sector, projected for the year 2025.
The iterative enhancements in AI capabilities promise a cascade of industrial upgrades, touching all facets of the supply chain—from upstream hardware to algorithms and data resources in the midstream, culminating in downstream applications and commercialization opportunitiesEach stride made by Deep Seek encourages other enterprises to ramp up their research and development expenditures in an effort to meet or even surpass the performance standards set by this emerging player.
This push not only enhances overall industry performance but also breaks the traditional monopoly held by a select few tech giants in the AI domain, thereby affording more opportunities for growth to Chinese enterprises
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With such a robust foundation, the field of AI is poised for immense growth, nurturing a groundbreaking wave in technology that could create vast commercial value.
Currently, AI stands at the forefront of technological advancements and boasts considerable market potentialWith the majority of its capabilities still unfolding, the future looks promising and expansiveObservers predict that the A-share market, particularly in the AI sector, is likely to encounter a renewed surge of growth this year, making it worthwhile for investors to track related financial products such as AI ETFs and robotic technology funds.
Aside from AI, the festive spirit during the holiday period spurred significant gains in Chinese technology stocks listed in Hong Kong, boosting investor moraleDespite a slightly modest forecast of 33.4% for corporate performances in 2024, there is optimism surrounding gradual recovery in earnings catalyzed by positive consumption data from sectors such as film and tourism, which exceeded expectations during the holiday season.
Examining trade policies reveals that earlier concerns surrounding tariffs have begun to dissipateRecent adjustments in the U.S. tariff approach toward China were less severe than many investors had predictedHaving been anticipated for an extended period, the market has already somewhat priced in these changes, leaning towards sentiment that further drops in the market will be limited as negativity surrounding these tariffs has largely been addressedFurthermore, the announcement of a long-term capital influx plan from multiple departments implies substantial investments into A-shares in the coming years.
Market conditions, therefore, appear relatively favorableBoth the A-share and Hong Kong markets are currently undergoing an extended valuation expansion period, having already exhibited corrections for over three monthsThis presents an opportune moment for investors to consider index funds that can effectively capture market beta, further validating the case for broad-based indexes.
The relationship between soybeans and gold, referred to colloquially as “Golden Beans,” has also been noteworthy during the holiday period
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Despite significant volatility in U.S. soybean prices, the sector generally trended upwards, with particular notable jumps recorded around January 29 and February 3, where daily price increases topped 1%.
On the gold front, entering 2024, the metal has transcended previous highsJanuary alone recorded a 6.6% increase in prices—the best performance for January in nearly a decadeVarious factors are contributing to this bullish trend, including market worries about stagnation in the U.S. economy, which stemmed from lower than expected Q4 GDP data and concerns regarding persistent inflationThis environment is historically favorable for rising gold prices, often regarded as a safe-haven asset amid economic uncertainty.
Furthermore, external pressures, such as potential new trade tariffs on gold, have led to increased demand within markets, pushing prices higherAs major central banks continue to increase their gold reserves, this demand solidifies gold’s status as a dependable inflation hedge—supporting ongoing price increases.
In light of this, gold is regaining attention as a crucial asset for diversification in investment portfolios, with recommended allocation percentages typically ranging from 5% to 20% based on individual risk toleranceObserving historical trends, the days following the Lunar New Year often yield profitable opportunitiesAnalysis from Citic Securities suggests that since 2013, the period following the New Year until the National People’s Congress has typically resulted in strong market performances, with a notable 75% of years reporting gains.
Looking specifically at the performance of the CSI 300 index over the past decade, the opening trading day following the holiday has usually been lackluster, yet the trend improves in the following weeksThe first week has historically shown gains in 7 out of the last 10 years, while the first month produced similar outcomes, averaging a 2.50% increase in price
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