Mainland Chinese investors these days often focus on how well U.S. stocks are doing — and lament the lackluster performance at home. Sure, there are clear macroeconomic differences. Rarely has a major Chinese stock more than doubled this year, as Nvidia has. But a look at first-half performance shows that many Chinese stocks are still up double digits, including some AI plays. Take, for example, the top three performers in the CSI 300 index, which tracks the biggest names on the Shanghai and Shenzhen stock exchanges. Foxconn Industrial Leading the way was Apple’s Foxconn Industrial Internet Co., a Shanghai-listed supplier. It’s up 81% in the first six months of the year. Bank of America Securities has a buy rating on Foxconn Industrial Internet Co. (FII), and on June 26 raised its price target to 33 yuan ($4.54), more than 20% above the stock’s closing price on Friday. “FII is a major supplier of iPhone cases, and cases are also a high-margin business for FII,” the analysts said. “As we anticipate a better iPhone shipment cycle through 2025-26, we expect strong case sales to support FII’s margin/earnings. Additionally, the AI server remains healthy and we remain optimistic about the long-term upside driven by growing demand and faster GPU platform upgrades (sustained demand, higher (average selling price)),” Bank of America forecasts iPhone shipments to grow 3% and 6%, respectively, this year and next. Shenzhen-listed Avari Holdings was a distant second, jumping about 81% in the first half. The top three foreign institutional shareholders by market capitalization are Hong Kong’s Standard Chartered Bank, HSBC and JPMorgan Chase, according to Wind Information data as of Thursday. Following Avari’s latest earnings in mid-May, Huatai analysts said they expect the company to benefit from AI-related demand in mobile phones and PCs. Huatai rates Avari a buy. “Avari has strong advantages in high-end flexible printed circuits (HDPCs), making it well-positioned to capitalize on these trends,” Huatai analysts said. “Moreover, the company has ventured into new areas such as automotive and servers, strengthened deeper collaboration with industry leaders, and gained new customers.” Zhongji Innolight ranked third in the CSI 300’s performance in the first half of the year, surging 70%. Nomura rates Zhongji Innolight a buy, and its analysts met with the optical communications company in late June. “Based on the company’s comments, we are increasingly confident in the strong demand for infrastructure driven by generative AI training and inference, which benefits global leaders such as Innolight,” Nomura analysts said in a June 23 report. “We believe Innolight should be able to maintain its leading position in the global optical transceiver market, thanks to the company’s technology-focused management team, strong execution strength, and strong relationships with major AI infrastructure customers globally,” the analysts said. The CSI 300 as a whole has fallen slightly so far this year, hurt by slowing economic growth and uncertainty over future earnings. That contrasts with the Nasdaq Composite’s 18% gain in the first half of the year in the United States. The broad onshore Chinese stock market, measured by A-shares, has underperformed over the past two years, said Wanda Wang, research director at Morningstar. That has made it difficult for actively managed domestic funds to outperform, leading to “institutional investors flocking” to index-tracking ETFs. Capital controls make it difficult for many investors in onshore China to access overseas markets. But financial institutions have created ways for them to participate in the trend, albeit remotely. Take, for example, the Invesco-managed exchange-traded fund (ETF) that tracks the Nasdaq. It has seen so much buying that it’s trading at more than 10% above its net asset value. That’s prompted the Shenzhen Stock Exchange, where the fund trades, to suspend trading repeatedly, especially last week. — CNBC’s Michael Bloom contributed to this report.
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