AI narrative + valuation lowland: global funds no longer "retreating" from Chinese stocks.

Title context: AI narrative + valuation lowland: global funds no longer "retreating" from Chinese stocks. Text: Attracted by the prospects of the artificial intelligence (AI) sector and valuation advantages, global fund managers are reversing a multi-year trend of reducing their positions in Chinese stocks. After analyzing nearly 2,800 global funds, Bank of America found that since June, the average allocation of active long-only funds to Chinese stocks has risen to a "benchmark neutral" level, ending a four-year period of "underweight" status. Nigel Tupper, a strategist at the bank, said these funds collectively manage $562 billion in Chinese equity assets. This shift shows that attractive valuation levels and improving earnings expectations in growth sectors such as AI have boosted funds' confidence in allocation. Although this does not mean the market will see a comprehensive bullish rally, it indicates that fund managers have largely completed the operation of cutting exposure, removing a major obstacle on the path to market recovery. Gary Tan, a portfolio manager at Allspring Global Investments, said: "Selling pressure is nearing a bottom, and investors' focus is shifting from position adjustment to corporate earnings delivery." He added that his institution is selectively increasing its positions in Chinese stocks. "The improvement in China's market environment does not require global investors to turn fully bullish; it is enough that they no longer continue to reduce holdings." Other fund flow data also confirms this trend. Industry research data shows that exchange-traded funds (ETFs) focused on mainland China and Hong Kong recorded an inflow of $19 million in August after an outflow of $1.94 billion in July. At the same time, emerging market funds excluding Chinese assets are still seeing an expanding scale of outflows. Rebecca Sin, an industry research analyst, said: "Among major emerging markets, Chinese ETFs once experienced the most dramatic allocation downgrades, and now the situation of systematic underweighting may be bottoming out. The momentum of various factors causing underweighting of Chinese assets has weakened." Valuation advantages also play a supporting role. The MSCI China Index currently has a price-to-earnings ratio of about 10.2 times forward 12-month expected earnings, below its 10-year average of 11.7 times. In addition, earnings in some sectors related to the direction of domestic technological development have recovered. According to statistics, driven by technology hardware and new economy companies, despite weak performance in the real estate and consumer sectors, the first-half net profit of listed companies on the Shanghai Stock Exchange still rose 17.6% year on year. However, this divergence also means that China's market recovery remains uneven. The CSI 300 Index fell about 11% this quarter, and investors still maintain a structural stock-picking approach. Herald van der Linde, head of Asia-Pacific equity strategy at HSBC HOLDINGS, said: "To invest in China, you need to buy China's future." He is bullish on hardware technology and biopharmaceutical sectors, while the consumer industry and real estate are "China's past."