The overly bulging US high-tech market and diversification into developing countries encourage family offices to return to Chinese stocks, which employ technology at a low cost.
The Covid crisis in 2020 revealed trends in two asset allocations among family offices. First, much greater interest in environmental, social and governance (ESG) investments emerged as families began to appreciate nature and began to think about medical issues that may have led to the transmission of the virus.
Second, liquidation of Chinese equity positions continued in connection with the source of the virus, the US geopolitical position with Beijing, and the abuse of Uyghur minorities in the Xinjiang region.
However, despite these effects, many families are beginning to rethink their Eastern allocations as technology sourced at Hangzhou and the Pearl River Delta startups gained traction at the global stage.
This also forms part of a more general trend in most non-US markets, in emerging markets and in environments where volatile US policies (the president’s announcement) are driving market uncertainty.
“The family office is coming back. From a diversification perspective, it makes sense strategically,” says William Chow, deputy chief executive of the Raffles Family Office in Hong Kong.
Not only does China’s valuation look more attractive than over-swelled US tech stocks, but DeepSeek’s “game changer” warns investors of the possibility of achieving the same results as high-end, more sophisticated chips at a much lower cost.
In most family offices, China’s quota accounts for less than 5%, saying it is “too underweight for the world’s second-largest economy.” He hopes investors will gradually return to China over the long term.
“Investors will not withdraw from China completely. In fact, China is just too big for everyone to ignore,” agrees Joseph Poon, group head of DBS Private Bank in Singapore. “The basics remain the same, and the stimulus measures implemented last year show the government’s willingness to strengthen its support for the economy, including cutting interest rates, helping local financial markets, and easing restrictions on home buying.”
Recent performance of the Chinese stock market has attracted inflows as multiples of futures revenue remain attractive 10-11 times, offering “effective diversification of client portfolios, particularly effective diversification for those who have made profits from US stock growth in recent years.”
According to Invesco strategists, Chinese stocks were certainly in “tears” at the beginning of 2025. As of February 15th, the MSCI China index has risen 13.9%, dramatically surpassing the MSCI USA Index’s 4.4% profit.
One of the first catalysts for the rally, which began at the end of 2024, was a key inspiration from policymakers in Beijing. However, it appears to have been driven more recently by advances in artificial intelligence (AI).
High-tech Titan of the Parade
This is supported by new belief in Chinese technology from Beijing authorities, and clearly demonstrated by the public settlement of President Xi Jinping and Jack Ma, founder of the Alibaba Group, which previously lost credibility after criticising government policies. This was part of a highly choreographed meeting with Chinese tech entrepreneurs.
“My sense is that Alibaba’s APIING’s recent news report on the possibility of partnering with AIPH in Alibaba’s APING has led to new interest in the family office and global investors in China, along with leading asset management companies.”
Ms. LAI will be one of the leading speakers of the upcoming PWM Wealth Management Summit Asia, which will be held in Singapore on March 13th, 2025.
She explains that as the Chinese market weakened shortly after Covid, interest in India grew based on strong economic growth and positive demographics.
“We were also interested in diversifying into other economies that benefit from the “China + 1” phenomenon. There, businesses diversify their investments and supply chains to mitigate the impacts associated with tariffs and political risks in Vietnam and other countries,” she adds.
However, “trend reversal” is on the card, and in addition to “realization” in which China’s valuation appears to be increasingly attractive to the market, it comes with “potential signs of green buds at consumption.” This was evidenced by strong household spending over the month’s New Year, bringing CPI back into aggressive territory with a 0.5% increase in January from the previous year.
Deepseek Drama
According to Raymond MA, Chief Investment Officer for Hong Kong and Mainland China at Invesco, tech-led Chinese companies could benefit from higher efficiency, cost savings, strong computing power and much lower barriers for various industries to use AI. He believes that all these benefits apparent in the dramatic Deepshek story will likely lead to a revaluation of Chinese stocks.
Moreover, BYD, an automaker increasingly supplying electric vehicles to European consumers at a more affordable price than its competitors, is causing a “paradigm shift.” Although Chinese stocks have been receiving an attractive reputation for several years, the emergence of these important catalysts is making a difference, according to Invesco, which could lead to “long runways.”
While Western investors in China and Asia as a whole tend to focus primarily on geopolitical considerations, it is linked to their own currency and interest rates, this could be about to change, says Poon of DBS.
“We look forward to the development of major Asian giants, where revenues can be derived from large domestic markets or revenues from companies with strong economic moats that can compete internationally,” he says.
Analysts say family offices are also important to have a closer look at the numbers when deciding whether to invest in China beyond trade war geopolitics.
“The US share of global trade has dropped significantly compared to 15 years ago. 90 out of the 190 countries around the world are now more than twice as many trade as China’s,” says Lye at St. James’ location. “This reduces China’s vulnerability to US tariffs.”
However, wealth managers also provide notes of caution and advice to see long-term trends.
DBS’ Poon says discerning investors are undoubtedly fascinated by the inexpensive valuations presented by Chinese technology, but “we need to see the Chinese government take decisive action on the real estate overhang.”
“The current market is still driving momentum and short-term volatility remains a factor,” Chow warns at Raffles. “As the fundamentals of these innovations become clearer, we can expect new interest from global investors, including family firms in China.”
