Big Shift! Foreign giants increase holdings; multiple Chinese concept stocks were added to in Q4 last year

The latest disclosed US 13F filings show that in the fourth quarter of last year, multiple Chinese concept stocks such as Alibaba, NIO, and XPeng Motors received increased holdings from several global asset management giants. According to foreign institutional sources, global investors’ interest in Chinese stocks is shifting from “tactical allocation” to “strategic reassessment.” China’s innovative forces, represented by hard technology and new productive forces, are accelerating their rise, and a number of globally competitive companies have become essential investment targets for global capital participating in a new wave of technological transformation.

Multiple Chinese Concept Stocks Were Increased in Holdings in Q4 Last Year

The latest US 13F filings reveal that several Chinese concept stocks saw increased holdings from global asset managers in the fourth quarter of last year. For example, UBS increased its holdings of Alibaba by 2.2823 million shares in Q4, a 27.08% increase. By the end of the quarter, UBS’s holdings of Alibaba stock had risen to 10.71 million shares. Citigroup increased its holdings of Alibaba by 663,800 shares in Q4, a 30.44% increase.

Additionally, Morgan Stanley, AMF Pension Company, LPL Financial, and Bank of New York Mellon also increased their holdings of Alibaba to varying degrees in Q4.

In the fourth quarter, JPMorgan reversed its previous action from Q3, when it reduced holdings in three Chinese new car-making forces, and increased holdings in all three—NIO, XPeng, and Li Auto. Specifically, JPMorgan increased its NIO holdings by 9.2477 million shares to 12.6949 million shares, a 268% increase, reaching a new high since it first held the stock in Q1 2019. JPMorgan also increased its holdings of XPeng by 712,900 shares and Li Auto by 266,900 shares.

In Q4, Morgan Stanley increased its holdings of XPeng by 762,800 shares, a 15% increase; and Li Auto by 914,900 shares, a 46% increase. Goldman Sachs increased its holdings of NIO by 5.2615 million shares, a 58% increase, marking three consecutive quarters of increased holdings.

The world’s largest asset manager, BlackRock, also increased its holdings of Chinese new car companies in Q4. Specifically, BlackRock increased its NIO holdings by 3.3759 million shares, a 153% increase; and XPeng by 779,800 shares, a 37% increase.

Global Investors’ Interest in Chinese Stocks Continues to Grow

Wellington Management macro strategist Johnny Yu stated that in recent years, global investors’ interest in Chinese stocks has continued to grow, expanding from traditional emerging market funds to global long-only funds and hedge funds. Notably, valuations in major developed markets are generally at historic highs, with limited upside potential. Chinese stocks are less affected by many global macro factors and can provide effective hedging support for core global holdings.

“Currently, returns in global equity markets are increasingly concentrated in a few high-growth sectors such as artificial intelligence, semiconductors, biotechnology, and robotics. These high-quality companies are often only densely present in the US and China. Under this trend, ignoring allocation to the Chinese market could mean missing out on important investment opportunities that will influence future economic and social transformations,” Yu said.

Chen Yu, head of research at Allianz Funds, told Shanghai Securities News that Chinese stocks are entering a major rerating cycle, driven in part by the improvement in technological competitiveness, which boosts investor confidence in China’s economic prospects.

“When the market believes that a company or industry can continue to participate in and lead the global wave of technological innovation, it is willing to assign higher valuation premiums to reflect its broader future growth potential and more certain profit outlook. Therefore, high-quality technological assets represented by hard technology and new productive forces naturally become the most core asset classes in this rerating cycle,” Chen said.

A foreign public fund manager in Shanghai told Shanghai Securities News that the fundamental reason why Chinese assets are favored by global investors is that they are nurturing a batch of innovative companies with strong technological capabilities and long-term commercial value. These companies have broken away from reliance on traditional growth paths and represent the future direction of China’s economy. For global capital, allocating to Chinese assets is a deep participation in the new wave of technological transformation and productivity enhancement.