DeepSeek, Alibaba: Silver linings for emerging markets strategy

DeepSeek and Alibaba's rise from the ashes have bolstered the case for investing in Chinese companies, according to an emerging markets expert seeking the best opportunities in the face of geopolitical tensions and heightened risks.

J.P. Morgan Asset Management investment specialist for the Asia Pacific equities team Emily Whiting said certain companies are showing promise in 2025 despite China's economy not delivering as quickly as expected.

The rise and fall and the rise again of Alibaba is one example. Alibaba once dominated the MSCI Emerging Markets Value Index, accounting for more than 8% of the index in 2016. At the end of April, it had a weighting of 6.5%.

"What was once a growth darling, was reduced to a real value stock," Whiting told Financial Standard.

Alibaba suffered on the back of co-founder Jack Ma's sudden hiatus from the public eye some five years ago. At the time, Alibaba's financial arm Ant Financial was set to float.

"This was pulled because Ma made a comment that wasn't supportive of the government. There was also a change in regulations and questions around whether it should list as a tech company or a bank," Whiting said.

During his sabbatical, Ma reportedly taught and conducted research at universities while Alibaba wasted away.

"In the last couple of years, though, Alibaba has rebuilt itself, focusing on its cloud business, which is partly why it's now doing so well," Whiting said.

What it's also done well in the last 18 months is better allocate capital.

"Eight months ago, Alibaba delivered about a 9% yield that combined dividends with buybacks. Investors could double their money in about eight years with compounding. It then regained shareholder appetite, because it has shown to have good capital discipline," she said.

Incidentally, what "turbocharged" Alibaba was DeepSeek, which made a splash at the start of 2025, threatening to disrupt the likes of ChatGPT and Gemini.

"DeepSeek requires cloud, and Alibaba leads on cloud," she added.

In late January, several chip makers waved billions of dollars goodbye as DeepSeek proved that the decentralised technology can be built at a fraction of the cost that did not require state-of-the-art chips. Nvidia, for example, saw its share price tank 17% and wipe more than US$500 billion off its market value.

Taiwan's TSMC is another company that Whiting and her team favour.

"We think it is a unique asset. It is the dominant company globally from a semiconductor standpoint, and a 'pure-play fab', meaning the company only manufactures for other people. This is in complete contrast with Intel, which used to be number one. As Intel was pulling back, TSMC was pushing forward," she explains.

"TSMC's capex for 2025 is going to be between US$38 billion and US$42 billion. It is so far ahead that it keeps putting more and more distance between it and second place."

As Taiwan looks to be a flashpoint between the US and China, as an emerging markets investor Whiting takes the geopolitical risks that comes with the territory in her stride.

"Political risk is part and parcel of emerging markets investing. What investors have to understand is that there's an element of subjectivity to it. How do you quantify the impact of an election on a market? How do you quantify the impact of a currency move on a market?" she asks.

"You don't, because part of it is dependent on how strong and stable your foundations for that market are at that point in time."

What Whiting and her team can do is appraise the value of a business.

"You do that by way of your cost of capital. For markets where we think there's higher geopolitical risks, there'll be a slightly higher hurdle rate," she notes. This is the case for Taiwan and China.

"For their stocks to look as attractive, they need to bring in a bit more to compensate for the fact that there's more volatility in the returns.

"The risk will always be there, but that's not a reason not to invest in one of the best technology companies globally, because this technology company impacts everyone," she said.

Financial Standard was a guest at J.P. Morgan Asset Management's 2025 Media Summit.