Foreign Investors Eye China's Stock Market Revival Amid AI Breakthroughs

Foreign investors are making a substantial comeback to China's stock markets after initially retreating three years ago, citing them as uninvestable. This renewed interest is fueled by technological advancements, including notable progress in artificial intelligence and semiconductor development, and a growing demand for diversified assets beyond U.S. markets.

The recent U.S.-China tariff truce and a favorable domestic monetary policy in China have further bolstered investor confidence. As a result, the Shanghai Composite index hit a decade high, and Hong Kong stocks reached four-year peaks. This shifting sentiment among global investors could further propel the market, which has predominantly been driven by domestic activity so far.

Despite these promising signs, challenges remain. China's broader economy exhibits signs of strain, as reflected in recent factory output and retail sales data. Moreover, foreign direct investment saw a notable decline in early 2025. Nevertheless, the allure of a revived Chinese market continues to draw foreign institutional interest, with a focus on the potential long-term competitiveness of China's financial landscape.

(With inputs from agencies.)