DeepSeek revolutionises stock trading as China's retail investors embrace AI
If you cannot fight them, join them, is the mantra among Chinese retail investors who are embracing DeepSeek and other artificial intelligence (AI) tools, in sharp contrast with last year's government crackdown on computer-driven quantitative traders.
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Online crash courses have mushroomed and training rooms are packed with retail traders eager to beat the market using computer models, as the popularity of DeepSeek – itself backed by a quant fund – changed not only the market trajectory, but the perception of China's US$700 billion hedge fund industry.
The rapid adoption of DeepSeek in China's retail-dominated stock market is also prompting changes at brokerages and wealth managers, while creating new risks for investors in a market dominated and driven by small-time traders' cash flow.
'The future is the digital age, and AI will be vital,' Hong Yangjun told a packed room of individual investors learning to trade with AI on a weekend in February.
A woman walks by an electronic board displaying Chinese stock indices. Photo: AP Photo
Just as future warfare will be fought with drones and robots, the stock market will be a battleground between computers, the lecturer told the class in an office in downtown Shanghai.
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China's trajectory is complicated by a serious property crisis that's helping to drive deflation. The danger is that the trade war precipitates 'a race deeper into deflation,' says Tom Orlik, chief economist for Bloomberg Economics. Zichun Huang, China economist at Capital Economics, adds that 'we still think persistent overcapacity will keep China in deflation both this year and next.' There's still hope Trump might pivot away from tariffs. Headlines about several trillions of dollars of stock market losses, talk of a 'Trumpcession' and chatter that the so-called 'bond vigilantes' were displeased had Trump backing off. The same with China's stance going into the weekend trade talks in Geneva in mid-May, where Team Xi demanded a goodwill gesture on tariffs; Trump ultimately obliged by throttling back on import taxes from 145% to 30%. Asian 'economies now face the secondary shock of an influx of cheap Chinese imports, as China exports excess capacity amid subdued domestic demand and elevated trade tensions with the US and other developed markets,' says Alex Wolf, head of Asia investment strategy at JP Morgan Private Bank. 'This phenomenon is already negatively impacting local emerging market manufacturing and employment.' Wolf adds that 'as the Trump administration targets not just China but almost every trading partner with trade imbalances – whether due to trade deficits or tariff rate differentials – many EM [emerging market] economies could end up in the crosshairs. With both the direct impact of US tariffs and the indirect impact of a slowing China and weaker global trade, EM economies may face tougher challenges ahead.' Yet the detour in Trump's phraseology thickens the plot. Around 'Liberation Day' on April 2, Trump World argued the US is being 'looted, pillaged, raped and plundered by nations near and far.' Since then, Trump's White House has also talked of the 'importance of a sustainable, long-term and mutually beneficial economic and trade relationship.' All officials in Tokyo and Seoul can do is hope real progress was made behind closed doors in London this week. In the interim, though, Asia's 2025 is turning out monumentally different from what Asia expected. Follow William Pesek on X at @WilliamPesek
