China stocks shield investors from AI turbulence ahead of key meeting
Investors are turning to Chinese equities as they trim exposure to AI trades in the US, betting that policy support could underpin gains.
Chinese stocks are emerging as a potential refuge for global investors seeking to steer clear of volatility tied to artificial intelligence trades, as policy support remains firm and signs of reflation begin to surface, according to global investment banks.
A proprietary sentiment gauge tracking China’s yuan-denominated shares had improved over the past two weeks, Morgan Stanley said. The measure, compiled by the US bank from 12 indicators including turnover, margin balances and foreign passive fund inflows, pointed to a steady rebuilding of positions.
That contrasts sharply with the US, where investors have trimmed exposure to AI names despite better-than-expected results from Nvidia.
UBS Group saw scope for a 20 per cent gain in Chinese stocks, betting that rising commodity prices and Beijing’s “anti-involution” campaign to curb excess capacity in some green industries would help lift the economy out of a three-year deflationary cycle.
A return to inflation would support both valuation expansion and corporate earnings, it said.
The disconnect between Chinese and US stock markets has become more conspicuous this year. The Shanghai Composite Index has risen about 4 per cent in 2026, compared with a 0.9 per cent gain for the S&P 500, while the Nasdaq 100 has slipped roughly 1 per cent.
Morgan Stanley attributed the outperformance to rising policy expectations ahead of next week’s annual legislative meeting, position rebuilding after the Chinese New Year holiday, and a pause in selling by state-backed investors, it said in a report on Thursday.