Chinese stocks find favour on DeepSeek trade as Citigroup downgrades US equities
Citigroup recommended that its clients cool off on US
stocks while investing more in Chinese equities, a call that suggests an unravelling of the trade on American exceptionalism that buoyed the 'Magnificent Seven' US technology stocks over the past two years.
Advertisement
The bank downgraded US stocks for the first time since October 2023 to neutral from overweight, it said in a note on Tuesday. Meanwhile, it raised Chinese stocks to overweight based on breakthroughs in artificial intelligence (AI), policy tailwinds and attractive valuations, Dirk Willer, global head of macro research and asset allocation, said in the note. HSBC Holdings also downgraded US stocks to neutral.
'The news flow from the US economy is likely to undershoot the rest of the world in coming months, and at least tactically, US exceptionalism is therefore unlikely to roar back,' the report said.
US stocks tumbled overnight, with the Nasdaq 100 plunging almost 4 per cent and wiping out US$1.1 trillion in value in the biggest loss since 2022. Other Wall Street firms including Goldman Sachs and Morgan Stanley raised their price targets for key gauges of Chinese stocks last month following the ascent of AI start-up
DeepSeek
Diversification from US equities has become conspicuous in the weeks after President Donald Trump's tariff policies against US trade partners raised the risk of a hard landing for the economy. Instead, investors are piling into stocks in China and Europe, which had been underperformers amid a frenzy over US tech stocks since early 2023.
Advertisement
'A key driver of this outperformance is the improving relative fundamentals of markets outside the US,' said Gary Dugan, CEO of The Global CIO Office. 'In China, the government has a technological and cost advantage over many of its competitors in key growth industries. We expect the recent outperformance of European and Asian equity markets relative to the US to continue. A period of outperformance is only just starting to reverse years of underperformance.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Asia Times
2 hours ago
- Asia Times
American protectionism hands China the future
Subscribe now with a one-month trial for only $1, then enjoy the first year at an exclusive rate of just $99. Deal with China is not yet done Scott Foster analyzes the latest developments in US-China trade talks, highlighting Donald Trump's exaggerated claims of victory despite an unfinished deal. While a tentative framework was reached in London, China appears to have gained leverage. Ukraine in strategic crisis as ceasefire hopes fade James Davis analyzes the intensifying aerial war between Russia and Ukraine, highlighting Ukraine's drone attacks on Russian airfields. Meanwhile, Zelensky is intensifying lobbying in Washington, attempting to politically box in Trump by portraying him as soft on Russia. SPD's peace manifesto signal fracture in German security policy Diego Faßnacht analyzes a growing intra-party revolt within Germany's center-left SPD, where over 100 prominent figures have released a policy manifesto demanding a diplomatic reset with Russia and a sharp turn away from NATO's militarization path.
South China Morning Post
5 hours ago
- South China Morning Post
China's yuan fixing rate hits 2-month high as US dollar drops
China's central bank set the yuan's daily fixing against the US dollar at its strongest level in more than two months, as the greenback tumbled to a multi-year low amid expectations for more interest rate cuts from the Federal Reserve later this year. On Friday, the People's Bank of China set the yuan's midpoint rate – also known as the daily fixing rate – at 7.1772 per US dollar, its strongest showing since late March. The move came as the US dollar index plummeted to 97.61 on Thursday - a three-year low - after the May producer price index came in below market expectations, prompting traders to price in more interest rate cuts by the Federal Reserve. Confidence in the currency has also wavered after US President Donald Trump announced plans to set unilateral tariff rates for America's trading partners, saying countries could 'take it or leave it'. Amid concerns over US tariff policy and the sustainability of its debt levels, the country's currency has been under pressure for months, lending relative strength to the yuan. While an agreement 'in principle' between China and the US after two days of trade talks in London this week appeared to signal a truce, some analysts remained cautious.
Asia Times
7 hours ago
- Asia Times
Why Trump won't kill AUKUS
The Pentagon has announced it will review the massive AUKUS agreement between the United States, United Kingdom and Australia to ensure it's aligned with US President Donald Trump's 'America first' agenda. The US Under Secretary of Defense for Policy Elbridge Colby is reportedly going to oversee the review. The announcement has raised concerns in Australia, but every government is entitled to review policies made by its predecessors to consider whether there is a particular purpose. The UK has launched a parliamentary inquiry into AUKUS too, so it's not actually unreasonable for the US to do the same. There is a degree of nervousness in Australia as to what the implications are because Australia understandably has the biggest stake in this. But we need to consider what Colby has articulated in the past. In his book, 'The Strategy of Denial: American Defence in the Nature of Great Power Conflict', he made the case the US could 'prepare to win a war with China it cannot afford to lose – in order to deter it from happening.' So, with a deterrent mindset, he sees the need for the US to muscle up militarily. He's spoken about the alliance with Australia in very positive terms on a couple of occasions. And he has called himself an 'AUKUS agnostic', though he has expressed deep concern about the ability of the submarine industrial base in the US to manufacture the ships quickly enough. And that leads to the fear that the US Navy would not have enough submarines for itself if Washington is also sending them to Australia. As part of the deal, Australia would eventually be able to contribute to accelerating the production line. That involves Australian companies contributing to the manufacture of certain widgets and components that are needed to build the subs. Australia has already made a nearly A$800 million (US$500 million) down payment on expanding the US industrial capacity as part of the deal to ensure we get some subs in a reasonable time frame. There have also been significant legislative and industrial reforms in the US, Australia and UK to help facilitate Australian defence-related industries unplug the bottleneck of submarine production. There is no question that there is a need to speed up production. But we are already seeing significant signs of an uptick in the production rate, thanks in part to the Australian down payment. And it's anticipated that the rate will significantly increase in the next 12–18 months. Even still, projects like this often slide in terms of timelines. The leaders of the three nations announced details of the submarine deal in San Diego in 2023. Photo: Etienne Laurent / EPA via The Conversation I'm reasonably optimistic that, on balance, the Trump administration will come down on the side of proceeding with the deal. There are a few key reasons for this: 1) We're several years down the track already. 2) We have more than 100 Australian sailors already operating in the US system. 3) Industrially, we're on the cusp of making a significant additional contribution to the US submarine production line. And finally, most people don't fully appreciate that the submarine base just outside Perth is an incredibly consequential piece of real estate for US security calculations. Colby has made very clear the US needs to muscle up to push back and deter China's potential aggression in the region. In that equation, submarines are crucial, as is a substantial submarine base in the Indian Ocean. China is acutely mindful of what we call the 'Malacca dilemma.' Overwhelmingly, China's trade of goods and fossil fuels comes through the Malacca Strait between Malaysia and Indonesia's island of Sumatra. The Chinese know this supply line could be disrupted in a war. And the submarines operating out of Perth contribute to this fear. This is a crucial deterrent effect the US and its allies have been seeking to maintain. And it has largely endured. Given that nobody can predict the future, we all want to prevent a war over Taiwan and we all want to maintain the status quo. As such, the considered view has been that Australia will continue to support the US to bolster its deterrent effect to prevent such a scenario. As part of the US review of the deal, we could see talk of a potential slowdown in the delivery rate of the submarines. The Trump administration could also put additional pressure on Australia to deliver more for the US. This includes the amount Australia spends on defence, a subject of considerable debate in Canberra. Taking Australia's overall interests into account, the Albanese government may well decide increasing defense spending is an appropriate thing to do. There's a delicate dance to be had here between the Trump administration, the Australian government, and in particular, their respective defence departments, about how to achieve the most effective outcome. It's highly likely that whatever decision the US government makes will be portrayed as the Trump administration 'doing a deal'. In the grand scheme of things, that's not a bad thing. This is what countries do. We talk a lot about the Trump administration's transactional approach to international relations. But it's actually not that different from previous US administrations with which Canberra has had to deal. So I'm reasonably sanguine about the AUKUS review and any possible negotiations over it. I believe the Trump administration will come to the conclusion it does not want to spike the Australia relationship. Australia has been on the US side since federation. Given this, the US government will likely make sure this deal goes ahead. The Trump administration may try to squeeze more concessions out of Australia as part of 'the art of the deal,' but it won't sink the pact. However, many people will undoubtedly say this is the moment Australia should break with AUKUS. But then what? What would Australia do instead to ensure its security in this world of heightened great power competition in which Australia's interests are increasingly challenged? Walking away now would leave Australia more vulnerable than ever. I think that would be a great mistake. John Blaxland is professor, Strategic and Defense Studies Center, Australian National University This article is republished from The Conversation under a Creative Commons license. Read the original article.
