China's Real Estate & Tech Stocks: The New Successors to Mag 7?

Since the beginning of 2025, the previously dominant Magnificent 7 (Mag 7) stocks have shown signs of losing momentum and have underperformed the market index. Apart from Nvidia, the latest earnings reports from the other six giants have failed to surprise investors. It might be time to turn our focus to Chinese assets, which are expected to emerge as potential successors to the Mag 7.

Real Estate Market Receives Government Support

The Chinese real estate market, which has been plagued by a collapse since 2021, has finally received help from the government. According to sources familiar with the matter, Chinese authorities are working on a proposal to assist China Vanke Co. in plugging a funding gap of about 50 billion yuan ($6.8 billion) this year, highlighting the government's support for the distressed developer.

Under the plan, regulators would allocate 20 billion yuan of special local government bond quotas to purchase unsold properties and vacant land from Vanke. This funding would enable the Shenzhen-based developer to pay both public and private debts due this year. Vanke and its affiliates would also be allowed to tap other financing sources, including new bond sales and bank loans for debt repayment.

Following the announcement, Vanke's stock price in China surged by 10%, hitting the daily limit, and its Hong Kong stock price soared by 19%. This news also boosted its peers, with a gauge of China property shares rising by 8.2%. Real estate holds significant weight in the Chinese stock market, and if market confidence is restored, it is expected that the Chinese stock market will perform well.

Vanke's bonds, which were deeply distressed, have also rebounded in response to the support measures, with investors betting that the company will be able to repay its debt, at least in the short term.

Chinese Tech Stocks Rise with AI-Driven Growth

In addition to real estate, another bright spot for Chinese assets recently has been the growth of technology stocks driven by AI models like DeepSeek. Analysts from Morgan Stanley, JPMorgan, and UBS expect this growth momentum to continue.

After a prolonged period of limited attention, global investors have begun reassessing the investability of Chinese companies in the tech and AI sectors. Morgan Stanley's strategist team, including Laura Wang, notes that given the light positions of global investors, we expect this momentum to continue in the short term.

UBS also believes that with DeepSeek's push, "we are still less than halfway through the rebound." They add that ample liquidity and lower interest rates should help AI-related companies further re-rate positively.

Meanwhile, JPMorgan strategists, including Rajiv Batra, have observed positive fund flows into Chinese internet stocks this year, with a significant surge following the DeepSeek shock. "We see a window of opportunity in Asia over the coming months, with another tactical rally in China driving upside," they wrote.