Tech giants listed in Hong Kong are benefitting from a DeepSeek-driven rally, while sentiment toward onshore shares remained capped by a soft economic recovery. The financial hub’s outperformance is also helped by strong buying from mainland investors.
To be sure, Beijing’s plans to boost consumption may trigger a reversal of the trend. After months of mostly outflows, a US$2.5 billion ($3.33 billion) exchange-traded fund tracking the largest and most liquid stocks in mainland China saw its biggest inflow this week since October 2024.
In the longer term, the premium “could be lower than in the past due to increasing southbound ownership in Hong Kong, which is now at a similar level compared to foreign active funds’ ownership,” UBS Group strategists including James Wang wrote in a note.
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Some level of premium should remain given the higher liquidity and turnover in Hong Kong, as well as the lack of ability to short onshore shares, they said.
Chart: Bloomberg
