Talk Your Book: The Bull Case for China With Brendan Ahern - Animal Spirits Recap

Podcast: Animal Spirits

Published: 2026-01-12

Duration: 32 minutes

Guests: Brendan Ahern

Summary

Brendan Ahern presents a compelling case for investing in China, highlighting the potential for growth in Chinese tech stocks despite recent challenges and geopolitical tensions.

What Happened

Brendan Ahern, Chief Investment Officer at KraneShares, joins Michael Batnick and Ben Carlson to discuss the investment landscape in China. Ahern emphasizes the differences between the Chinese and U.S. economies, noting how the stock market in China does not always reflect its economic growth. He points out that while China's GDP has grown significantly, the stock market has not followed suit, widening the gap since 1990.

Ahern discusses the impact of policy errors on Chinese markets, including the bursting of the tech bubble from 2021 to 2023 and the government's deliberate deflation of the housing bubble. These actions have caused significant losses for China bulls, but Ahern argues that there's potential for recovery as non-U.S. institutions start to reinvest in Chinese equities.

The conversation delves into the AI race between China and the U.S. Ahern notes that China's approach is open-source, focusing on implementation across businesses rather than creating proprietary models. He highlights that Chinese cloud computing companies like Alibaba and Tencent are benefiting from AI adoption.

Ahern also addresses the geopolitical challenges of investing in China, mentioning how U.S. geopolitical narratives can deter investors. Despite this, European and Asian investors are more optimistic, often seeing China as an essential trade partner.

The discussion includes insights into the Chinese consumer's cautious spending habits due to the decline in real estate values. Ahern explains that while the Chinese consumer is wealthy, they are holding back on spending because of the significant portion of their wealth tied to real estate.

Ahern highlights the resilience of the KraneShares China Internet ETF (KWEB), which has maintained high assets under management despite poor performance. He suggests that this is due to a focus on growth sectors like tech rather than traditional industries.

Looking forward, Ahern is optimistic about U.S.-China relations and the potential for policy changes that could boost domestic consumption in China. He believes that the geopolitical climate might improve, allowing for better investment opportunities in the region.

Key Insights

• China's GDP has grown significantly since 1990, but its stock market has not mirrored this growth, resulting in a widening gap between economic performance and market returns.
• The Chinese government's policy interventions, such as deflating the housing bubble and managing the tech sector downturn from 2021 to 2023, have led to substantial losses for investors but also present opportunities for recovery as non-U.S. institutions reinvest.
• Chinese companies like Alibaba and Tencent are advancing in the AI sector by focusing on open-source implementation across businesses rather than developing proprietary models, benefiting from increased AI adoption.
• Despite geopolitical tensions affecting U.S. investor sentiment, European and Asian investors view China as a crucial trade partner, maintaining a more optimistic outlook on investment opportunities in the region.