Amid growing fears of a global recession sparked by U.S. President Donald Trump’s aggressive trade policies, investors are looking for alternative markets to safeguard their wealth. In an unexpected shift, many are turning to Chinese equities, with Hong Kong’s Hang Seng Index emerging as a surprising winner.
Since Trump took office, the Hang Seng Index has climbed 17%, significantly outpacing the U.S. S&P 500, which has dropped about 9% from record highs, shedding a staggering $4 trillion in market value. The shift in investor sentiment signals a growing lack of confidence in the U.S. market and a newfound willingness to bet on Chinese stocks, despite lingering concerns about China’s economy and political environment.
For years, global investors followed the principle of “TINA”—There Is No Alternative—when it came to U.S. assets, believing that American markets were the only safe and lucrative option. That mindset is now shifting toward “TIARA”—There Is A Real Alternative—according to Andy Wong, a senior Hong Kong-based executive at Pictet Asset Management.
Much of this confidence is driven by the resurgence of Chinese technology stocks, which have surged 29% so far in 2025, reaching their highest levels in more than three years. Investors see particular promise in tech, defense, and consumer-facing industries, which have shown resilience amid global economic uncertainty.
A major factor fueling the optimism is the relative affordability of Chinese stocks. Despite their recent rally, they remain about 30% below their 2021 highs. The Hang Seng Index is trading at just seven times projected 12-month earnings—a stark contrast to the S&P 500’s 20 times earnings multiple.
Despite the bullish outlook, Chinese equities have been trading at historically low valuations for a reason. The 2020s saw significant government crackdowns on the tech sector, shaking investor confidence. Additionally, concerns about China’s struggling property market and slowing economic growth have kept many investors cautious.
On the political front, China’s one-party rule under President Xi Jinping presents a risk, with no real opposition to balance decision-making. However, some investors argue that this centralized power creates a more stable environment compared to the political volatility seen in the U.S.
One of the biggest catalysts for the recent rally in Chinese stocks was the debut of DeepSeek’s R1 reasoning model. The AI startup’s successful launch has reinvigorated investor interest in China’s tech sector, drawing comparisons to the AI boom in the U.S.
Another key factor driving optimism is the potential for fiscal stimulus in China. Unlike the U.S., where Trump has taken steps to cut government spending, Beijing has been rolling out support measures aimed at boosting domestic consumption. Investors are betting that these efforts will help stabilize the Chinese economy and drive further gains in the stock market.
According to interviews with more than a dozen fund managers and strategists, the growing interest in Chinese equities is not just at the expense of U.S. stocks. Investors are also moving out of South Korea and India, two markets that have struggled to keep up in 2025.
J.P. Morgan reported record-breaking conversions of U.S. dollars and Chinese yuan into Hong Kong dollars in recent weeks, signaling a significant shift in capital flows. Serene Chen, the firm’s head of credit, currency, and emerging market sales, confirmed the trend but declined to provide specific figures.
At Greenwoods Asset Management, portfolio manager Leo Gao has taken an even more decisive stance. In early February, he sold off all U.S. companies in his portfolio, shifting his focus entirely to China.
One of Asia’s largest hedge funds echoed this sentiment, with its senior portfolio manager telling investors in March that he is especially bullish on Chinese tech firms and consumer-driven businesses.
Over the weekend, Trump refused to rule out the possibility of a recession, further rattling market confidence. His administration’s unpredictable trade policies, including last-minute delays on tariffs for Canada and Mexico, have made it increasingly difficult for investors to plan long-term strategies.
At the same time, slowing U.S. economic data is raising doubts about whether America can continue to outpace other major economies. U.S. stock valuations remain historically high, leaving little room for error. Even minor setbacks could trigger significant market downturns.
Despite mounting concerns, Trump has remained steadfast in his stance, repeatedly insisting that “tariffs are going to make our country rich.” However, many investors are no longer convinced, and some are looking for more stable alternatives outside of the U.S.
While the U.S. faces market uncertainty, China has been actively working to reassure investors. In February, President Xi Jinping held a high-profile meeting with business leaders, a move that was widely interpreted as a signal of support for the private sector.
The Chinese government has also introduced a range of stimulus measures aimed at bolstering economic growth and preventing a prolonged downturn. These efforts have helped restore confidence in China’s markets and have drawn foreign investment back into the country.
In February alone, foreign-based funds poured $3.8 billion into Chinese equities, marking a sharp reversal from three consecutive months of withdrawals, according to Morgan Stanley data.
Kamal Bhatia, CEO of Principal Asset Management in New York, emphasized that long-term investors prioritize stability and predictability.
“Even very large, sophisticated investors don’t want to have their investment thesis change every three years,” Bhatia explained.
Some analysts see irony in the current market shift. Trump has consistently framed China and Europe as geopolitical rivals, yet his policies have inadvertently fueled stock market rallies in both regions.
“The pressure that the Trump administration is putting on foreign governments… has actually, in a lot of cases, resulted in outperformance from those countries,” said Ross Mayfield, an investment strategist at Baird.
Beyond China, European markets have also seen gains, particularly in the defense sector. Trump’s comments casting doubt on U.S. commitment to NATO have led to increased defense spending across Europe, driving up the share prices of military contractors.
However, Europe still faces major economic challenges, including high corporate tax rates, sluggish growth, and a lack of dominant tech firms. Despite these hurdles, some investors believe European equities could continue to benefit from global shifts in capital allocation.
While Chinese equities are experiencing a resurgence, skepticism remains. Many investors still recall the volatility and unpredictability of China’s market over the past decade.
“People have traumatic experiences with Chinese equities,” said Pictet’s Serene Chen. “China used to be called uninvestable, and this deflationary kind of narrative still hasn’t been completely dissipated.”
Despite the recent rally, risks such as deflationary pressures and the possibility of renewed trade tensions with the U.S. continue to weigh on sentiment.
The ongoing market volatility has underscored the importance of a diversified investment strategy. Investors are increasingly looking beyond traditional U.S.-centric portfolios and exploring opportunities in Asia and Europe.
“The past ten days have made it very clear that it pays off to have a regionally diversified allocation strategy,” said Lilian Haag, a senior portfolio manager at DWS.
With Chinese equities rebounding and global markets adjusting to a new economic reality, investors are being forced to rethink their strategies. Whether China can sustain this newfound momentum remains to be seen, but for now, it has emerged as an unexpected safe haven in an increasingly uncertain world.
