Recently, Chinese assets seem to have ushered in a moment of recovery. The Hong Kong stock market took the lead in sounding the counter-offensive, with the Hang Seng Index rising continuously since April 22, accumulating a nearly 14% increase by May 3. The A-share market saw explosive increases on April 26 and 29, breaking through the consolidation range. Meanwhile, the representative of Chinese concept stocks, the NASDAQ Golden Dragon China Index, surged by 6% on May 2 (Eastern Time), and has accumulated a nearly 13% increase since April 22, showing a relatively bright performance.

Multiple factors contribute to the surge in the Golden Dragon Index

On one hand, the surge in the NASDAQ Golden Dragon China Index on May 2 is related to the dovish stance of the Federal Reserve.

On May 1 (local time), the Federal Reserve announced that it would maintain the target range for the federal funds rate at 5.25%-5.50%.

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However, Federal Reserve Chairman Powell stated at the press conference following the monetary policy meeting that there has been a lack of further progress in achieving the 2% inflation target in the past few months, reiterating that they will wait to gain more confidence in inflation before cutting rates.

Powell also pointed out that the level of inflation is still too high, and further progress is not certain, but it is unlikely that the Federal Reserve will raise rates at the next meeting.

Powell's relatively dovish remarks, coupled with the Federal Reserve's slower pace in reducing the balance sheet, have eased the upward pressure on U.S. Treasury yields, also pushing the U.S. stock market to rise during the session. The NASDAQ Composite once soared by 1.7%, but then fell back, although it rose by 1.51% on May 2.

On the other hand, over the past one to two years, the AI field has seen an explosive wave, with tech companies such as NVIDIA (NVDA.US), Advanced Micro Devices (AMD.US), and Meta driving the U.S. stock market not only not falling during the rate hikes but also continuously rising. In addition, the capital markets of many countries, including Japan, have also seen significant gains.

However, recently, the U.S. stock market and the Japanese stock market have shown some signs of weakness, seemingly unable to continue rising, as shown in the figure below.In the context of such a broad backdrop, it is a very routine operation for some funds to cash in on their gains and switch between high and low positions.

China's economy has achieved stable growth, and Chinese assets are still considered a "value lowland." Therefore, betting on "cheap" Chinese assets will be a priority for some funds, which is also one of the reasons for the recent rise in Hong Kong stocks, A-shares, and Chinese concept stocks.

It is worth mentioning that, specifically for some constituent stocks of the NASDAQ Golden Dragon China Index, there have been some positive news recently.

For example, NIO (NIO.US) has seen its U.S. stock price rise by more than 47% since April 22, with a significant increase of nearly 12% on May 1.

The latest news indicates that NIO's vehicle sales skyrocketed in April, with a delivery volume of 15,620 units, a year-on-year increase of 135%, and a month-on-month growth of 32%. Among the new forces that have announced delivery data, NIO's growth rate in both year-on-year and month-on-month terms is the most prominent.

In addition, other Chinese concept stocks that have seen a significant increase recently include Bilibili (BILI.US), XPeng Motors (XPEV.US), and JD.com (JD.US).

Among them, XPeng Motors' sales volume in April grew by 33% year-on-year to 9,393 units. Since the beginning of the year, XPeng Motors has delivered a total of 31,214 units, a year-on-year increase of 23%, which is also a good performance.

How do institutions view the prospects of Chinese concept stocks?

It is noteworthy that some institutions have also expressed positive views on Chinese assets and Chinese concept stocks recently.Morgan Stanley and several other foreign institutions have recently released reports indicating a trend of global capital returning to the Chinese stock market. Strategists at Morgan Stanley also mentioned that regional active funds have begun to increase their holdings in Chinese growth stocks and technology shares.

Ray Dalio, founder of the world-renowned investment firm Bridgewater Associates, recently stated on social media that the Chinese market is crucial for "understanding the world" and "diversification."

Dalio also expressed that Chinese assets are very cheap, and the key question is not whether I should invest in China, but rather how much I should invest.

A quantitative fund under Pacific Investment Management Company (Pimco), which has a total management scale exceeding 2.5 trillion yuan, is turning towards Chinese concept technology stocks.

Chris Brightman, Chief Investment Officer of Research Affiliates LLC, a quantitative fund under the company, stated that internet companies such as Alibaba and Tencent have seen their valuations drop to historical lows, making their stock prices very attractive.