The recent advancements in artificial intelligence by DeepSeek have sparked a newfound confidence among investors in Chinese stocksSince hitting a low point in January, stock markets in mainland China and offshore have soared, witnessing an impressive increase of over 26%. This significant rise can be attributed to DeepSeek's innovative technology, particularly its R1 model, which disrupts the historical dominance of the United States in the AI landscape by offering superior performance at lower costsThis breakthrough has invigorated China's tech industry, contributing to a notable rally in Chinese tech stocksThe MSCI China Index has surged nearly 18% this year, turning it into a star performer in the global capital markets.

In stark contrast, India's stock market continues to languish in a prolonged slumpThe MSCI India Index has recorded a decline exceeding 7%, undergoing significant corrections recentlyExperts suggest that funds are migrating from India to China for multiple reasonsFrom a macroeconomic perspective, the slowdown in India's economic growth has directly influenced the performance of its stock marketA deceleration in economic growth translates to constrained profit margins for companies, resulting in bleak short-term earnings expectations; this has eroded investor confidence in the Indian stock market.

With the rise of DeepSeek and expectations of stimulus measures for the Chinese economy, investors are actively rebalancing their portfolios, directing capital away from the Indian stock market and into Chinese stocksA survey conducted by Nomura revealed that over 50% of the funds surveyed had reduced their investments in India by the end of January, while simultaneously increasing allocations towards Chinese and Hong Kong stocksThis statistic clearly illustrates the strategic adjustments made by investors in light of the changing market dynamics.

Further corroborating this trend, another survey indicated that by the end of January, 33% of large global emerging market funds had increased their holdings in Chinese and Hong Kong stocks, a rise from 26% in December of the previous year

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Concurrently, the number of global emerging market funds adopting a bearish stance on Indian stocks grew by 6%. These figures underscore the growing confidence of investors in the Chinese market, a sentiment significantly bolstered by DeepSeek's technological advancements and the anticipated economic policy measures coming from China, while simultaneously reflecting a waning faith in the Indian market.

The exceptional performance of DeepSeek’s R1 model has notably stimulated Chinese tech stocksIt has challenged the existing AI ecosystem dominated by the United States, garnering global attention due to its remarkable capabilities and reduced costsThis technological breakthrough not only enhances the competitive edge of Chinese tech firms in the international arena but also injects new growth momentum into Chinese technology stocksThe Hang Seng Tech Index has reached its highest levels in nearly three years, illustrating the market's strong endorsement of China's technology sector.

Conversely, India's stock market is experiencing a loss of investor confidence due to declining economic growth and stock market correctionsThe slowdown in India's economic performance has led to sluggish earnings growth for companies, creating a lack of upward momentum in its stock marketRecent significant market corrections have further heightened investor anxietyIn response, many investors are fleeing the Indian stock market in search of more promising investment opportunities, with China emerging as their preferred destination.

Several fund managers' actions also reinforce the trend of capital moving from India to ChinaFor instance, Nicole Wong, a portfolio manager at Manulife, noted that she liquidated her positions in India in January to increase her stakes in Chinese and Hong Kong stocks, particularly focusing on the tech sector

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