Portfolio manager explains how the Hang Seng TECH index has grown over 50 per cent YTD
The NASDAQ 100 is far from the best-performing major technology index in 2025. At a little over 18 per cent year-to-date, that index — which is often a stand-in for US tech despite including other sectors — falls behind the S&P 500 Information Technology index at over 23 per cent YTD. Both, however, pale in comparison to the Hang Seng TECH index, the Hong Kong listed index of Chinese tech equities that has grown by just over 50 per cent year to date.
Alexander Smahtin, Portfolio Manager at Global X Canada, broke down why we’ve seen this remarkable run in Chinese tech. He outlined what domestic and international factors have driven this appreciation while also highlighting areas of risk that advisors need to be aware of. He connected this run to wider trends in both Chinese equities as a whole and global tech stocks, outlining how advisors can navigate this emerging market moment.
“At the tail end of last year the government of China essentially initiated a huge stimulus package. That reinvigorated a lot of foreign investors, and also backed up the stance that the Chinese state wants to rectify the slump that China's been in for the past couple of years. That kicked off a pretty stellar bull run from there,” Smahtin says. “Early in 2025 that was followed by the DeepSeek breakthrough that put China’s prowess in the AI space front and centre.”
The DeepSeek moment, coupled with a more market-friendly stance from the Chinese government, gave new reassurance to Chinese domestic investors who moved heavily into Chinese tech stocks. Foreign investors, Smahtin notes, have also begun to move back into Chinese tech, with a significant move into the space by hedge funds. The domestic surge has been followed by foreign capital which has helped spur the Hang Seng TECH index so much higher this year.
Comparing that index to the NASDAQ 100, Smahtin notes that the Hang Seng TECH is more concentrated to only 30 names, with more of a tilt towards internet and consumer tech names than the semiconductors and hardware companies on the NASDAQ. He notes a series of nuances around H shares listed on the Hong Kong Stock Exchange, which differ from A shares and can come with more sensitivity to Chinese regulatory tone.
The role of the Chinese state is one that investors always have to consider when investing in that country. Past bull runs in China, even in Chinese tech, have been curtailed by state intervention. Investors can feel like they have been burned before and Smahtin acknowledges that factor as a headwind for Chinese tech. He notes other areas of risk, notably a somewhat lacklustre Chinese economy and the potential for further economic challenges ahead. That said, he argues that the prospect of tech exposure at better relative valuations makes Chinese tech worth considering.
Smahtin notes that the S&P 500 IT index is trading at a 12-month forward P/E ratio of around 29.2. The Hang Seng TECH index is sitting closer to 21.3. While that might seem somewhat elevated relative to value, those kind of multiples for the tech sector in the middle of a bull market represent more attractive valuations. Moreover, Smahtin believes that foreign capital seeking cheaper access to tech and the AI theme may see Chinese tech as a means of achieving that goal.
The rally in Chinese tech has, so far, not extended into other sectors of the Chinese equity market. Smahtin notes that those economic headwinds are more acutely felt in other Chinese sectors, and the hangover from the country’s real estate bust is still not completely dealt with. He sees avenues for wider growth, possibly through infrastructure expansion to support Chinese AI or additional fiscal stimulus by the Chinese government.
For much of the past three years, AI has dominated the global tech sector and the names most closely associated with AI have lived on US stock exchanges. Smahtin notes that as China’s run also starts to capture some of the positive investment sentiment around AI, there could be space for that AI narrative to widen out geographically. Investors are clearly hungry for AI and tech, and this index might be another way for investors to gain that access. For advisors now considering the space, Smahtin believes a clear discussion around headwinds, tailwinds, and expectations can benefit.
“I think you just have to lay it out in a pretty objective sense of, here are the pros and cons. We've talked a fair bit about the pros and the potential tailwinds. We've mentioned the headwinds in the form of there's still economic uncertainty baked into China as a whole,” Smahtin says. “You're going to want to keep in mind that this isn't going to be a core exposure ultimately. Right. For a lot of investors, the question should really be, are you comfortable with taking on that risk return trade off in a satellite allocation.”
