Chinese firms’ Hong Kong stocks trade at smallest discount to onshore shares in 5 years

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.

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.

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.

“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.”