The Hong Kong shares of dual-listed Chinese companies are trading at the smallest discount to their onshore peers in nearly five years, as a weaker US dollar spurs inflows and mainland investors snap up these stocks.
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The H shares of 160 firms, including Industrial and Commercial Bank of China and BYD, are trading 22 per cent below their mainland-listed A shares, according to a Hang Seng gauge tracking the disparity between the two markets. That marked the smallest gap since June 2020, as trading averaged 29 per cent over the past year.
For dual-listed Chinese companies, their Hong Kong-traded stocks are known as H shares and the mainland tranche is referred to as A shares.
The narrowing discrepancy reflects how H shares have enjoyed bigger gains since the start of the year, with the Hong Kong stock market benefiting from global investors’ efforts to diversify investments amid a weakening US dollar, as the Trump administration’s erratic tariff policy dented the dollar’s status as a reserve currency.
China’s onshore investors have also rushed to H shares in droves to gain exposure to the nation’s biggest technology companies, which stand to thrive on breakthroughs in the field of artificial intelligence.
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“We are still positive on Hong Kong stocks, which are below the historical average in valuation and are set to benefit from a rebalancing of global capital allocations,” said Bao Chengchao, an analyst at Guolian Minsheng Securities. “In terms of liquidity, the interest-rate cuts by the Fed are pencilled in for this year and mainland buying is expected to gain momentum in the long run.”