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Classes, online courses mushroom to help traders use AI

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DeepSeek changes public perception of Chinese quant funds

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Brokerages, wealth managers embrace AI to satisfy retail

clients

By Samuel Shen and Tom Westbrook

SHANGHAI/SINGAPORE, March 11 (Reuters) - If you cannot

fight them, join them, is the mantra among Chinese mom-and-pop

investors who are embracing DeepSeek and other artificial

intelligence tools, in sharp contrast with last year's

government crackdown on computer-driven quantitative traders.

Online crash courses have mushroomed and training rooms are

packed with retail traders eager to beat the market using

computer models, as the popularity of DeepSeek - itself backed

by a quant fund - changed not only the market trajectory, but

the perception of China's $700 billion hedge fund industry.

The rapid adoption of DeepSeek in China's retail-dominated

stock market is also prompting changes at brokerages and wealth

managers, while creating new risks for investors in a market

dominated and driven by small-time traders' cash flow.

"The future is the digital age, and AI will be vital," Hong

Yangjun told a packed room of individual investors learning to

trade with AI on a weekend in February.

Just as future warfare will be fought with drones and

robots, the stock market will be a battleground between

computers, the lecturers told the class in an office in downtown

Shanghai.

Such piety is in stark contrast to the public outcry a year

ago against computer-driven quant funds, viewed as

"bloodsuckers" by retail investors, and blamed by regulators for

contributing to market unfairness and volatility.

The industry was also the target of a government crackdown

roughly a year ago, when the sector was worth $260 billion by

some estimates.

Last month, however, investors handed over 15,800 yuan

($2,179.91) each for a weekend lecture by Mao Yuchun, founder of

Alpha Squared Capital, on how to trade stocks with AI, according

to the organiser, who promoted the event by drawing attention to

Alpha Squared's geographical affinity with High-Flyer.

High-Flyer, based in eastern Hangzhou, is the hedge fund

behind DeepSeek - the Chinese AI start up that stunned Silicon

Valley with its cost-efficient large language model and spurred

a rally in Chinese stocks.

Meanwhile, Chinese social media is brimming with online

courses teaching traders how to use DeepSeek to evaluate

companies, pick stocks, and code trading strategies.

"Using quantitative tools to pick stocks saves a lot of

time," said Wen Hao, a Hangzhou-based trader.

"You can also use DeepSeek to write codes," said Wen, who

uses computer programs to determine the timing for buying and

selling.

U.S. fund giants including BlackRock, Renaissance

Technologies and Two Sigma have already been using AI in

investing for some time. Analysts say small asset managers and

even retail investors in China stand to benefit from the

emergence of DeepSeek's open-sourced model.

ChatGPT is off-limits to Chinese users.

DEEPSEEK ADVICE

The fondness for the AI-led turnaround in the perception of

quant trading has coincided with a sunny start to the year for

stocks, after a few years in the doldrums.

Goldman Sachs said the MSCI China index has

made its best start of the year in history and brokers are

racing to build AI models into their platforms.

"In the future, Chinese investors will completely change the

way they make investment decisions and place orders," said Zhou

Lefeng, president of Xiangcai Securities.

"Previously, clients would ask wealth managers for

investment advice. Now they ask DeepSeek."

Larry Cao, principal analyst at FinAI Research, said

DeepSeek is popular because it's cost-efficient, has strong

reasoning ability, and unlike ChatGPT, is readily available, and

is promoted by the Chinese government.

Nevertheless, he is surprised at the level of faith

investors put in the model, cautioning that AI has limits.

"People trust AI models more than they trust financial

advisers, which is probably misplaced trust at least at this

stage," Cao said.

There could also be a herding effect if one school trains

many retail investors to trade using the same signal.

"Large language models seem impressive. But at this stage,

they are not necessarily smarter than most investors."

What's certain, said Feng Ji, CEO of Baiont Quant, is that

DeepSeek has changed retail perception of quant fund managers.

"I can feel strongly that the public are thinking twice

about quant fund managers' contributions to society," said Feng,

whose company uses machine learning to trade.

"I never think we caused retail investors' losses. We

actually provide liquidity and make the market more efficient."

($1 = 7.2480 Chinese yuan renminbi)