What is the future of Hong Kong stocks after diverging from A-shares | Jiantou Macro · Zhou Junzhi Team

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（Source: CSC Research, Macro Team）

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In recent years, the separation between A/H shares has mapped onto the current “super cycle,” i.e., the resonance of the technology cycle, the supply chain reshaping cycle, and the fiscal cycle. The term “super cycle” expresses the global transition between the old and new order.

A/H shares each contain different components of the Chinese “new and old economies.” Under the supply chain reshaping cycle, China Manufacturing is accelerating in its rise, while the hollowing-out of manufacturing in welfare states is accelerating. China is riding this trend to promote the transition between old and new economic drivers. The process of shifting from old to new in China’s economy is also the process in which the divergence between A/H shares deepens.

The composition of liquidity in the A-share market and the H-share market differs. Monetary liquidity is strongly influenced by the fiscal cycle. The correlation between the U.S. dollar index and the RMB exchange rate has changed; they no longer move in simple rhythm synchronization, and thus liquidity in A/H shares is also moving toward divergence.

A/H shares move from coordination toward divergence, but ultimately will return to coordination again. By then, when the world moves out of the chaos period, China’s assets’ influence in the global arena will further increase.

In our previous special research, we reviewed the linkage of five rounds of bull markets in China A-shares and Hong Kong shares since 2000, and found that in most cases their liquidity has been extremely strongly correlated. The few cases where their rhythms deviate also mainly relate to special periods and the monetary policy divergence between China and the U.S.

Since 2025, the rhythms of Hong Kong shares and A shares have once again begun to diverge, and the relative advantages of A/H shares in the first and second half of the year have differed.

I. Since 2025, Hong Kong shares have exited a cycle with a rhythm different from that of A shares

The divergence between A/H shares is not only reflected in the main broad-based index, but also in technology indices. Especially for technology indices, the divergence between the Hang Seng Tech Index and the ChiNext Index and the STAR 50 is even more evident.

Since 2025, the misalignment in the rhythm of A/H shares has been very clear, and the rotation has been unusually fast.

At the beginning, Hong Kong shares led; during the second and third quarters, A/H shares rose in sync, but A shares were more advantageous; after the fourth quarter, A/H shares showed sharp divergence, with the resilience of A shares being more evident.

From A/H share premium rates, Hong Kong shares were relatively stronger in the first half, while A shares were relatively stronger in the second half.

In the first half of 2025, as Hong Kong shares strengthened, the premium rate rapidly fell from 140 to around 125, reaching a low level.

After the second half of 2025, the premium rate stabilized at a low level with narrow fluctuations, meaning that the investment logic based purely on discount arbitrage has become less attractive. It is worth noting that some industry leaders, such as Contemporary Amperex Technology (CATL) and China Merchants Bank, even saw a premium in their H shares, reflecting that Hong Kong shares’ ability to price high-quality assets has improved.

II. When Hong Kong shares deviate from A shares, the first factor is that there are differences on the “numerator” side of A/H shares—that is, the types of listed companies are different

For the same AI industry chain, A-share and Hong Kong-share listed companies occupy different market “ecosystem positions” within the AI industry chain.

The ChiNext Index and the STAR 50 Index are led by AI hardware-end companies, covering leading firms in hard-tech fields such as semiconductors, electronic components, communications equipment, and new energy equipment. By comparison, the Hang Seng Tech Index is led by AI application-end companies, especially platform-type companies with large weights from internet leaders, including Tencent, Alibaba, Meituan, JD.com, and others.

After DeepSeek was released in February 2025, it prompted global re-evaluation of China’s AI application industry. During this period, AI applications strengthened, and the Hang Seng Tech Index clearly outperformed the STAR 50.

In June 2025, the three major platforms Meituan, Alibaba, and JD.com launched a fierce subsidy war in the takeaway delivery market, directly affecting the companies’ operating results and dealing a clear blow to Hong Kong’s technology sector.

At the beginning of 2026, the emergence of AI Agents disrupted the business models of traditional software companies, becoming another important driver of the divergence among A/H technology stocks. In Hong Kong’s market, although internet leaders actively布局 AI Agent domains, market concerns still arose because the pressure of transforming their traditional businesses has not eased. By contrast, in China’s A-share market, AI hardware-end companies are less impacted by AI Agents, and their performance shows relatively more resilience.

While both map to China’s economy, A-share and Hong Kong-share listed companies show clear differences in how they respond to new and old growth drivers.

In the Hang Seng Index, traditional industry weights are relatively large, with cyclic industries such as finance, real estate, energy, and raw materials accounting for a high proportion. Although the internet in the Hang Seng Tech Index belongs to the new economy category, platform economies generally have consumption attributes, and their performance is closely tied to the condition of China’s domestic consumer market.

In China’s A-share market, the ChiNext Index and the STAR 50 Index have a significantly higher share of new economy components, covering strategic emerging industries such as new energy, semiconductors, biopharmaceuticals, and high-end equipment. Although these industries are also affected by the macroeconomic cycle, their growth benefits more from industrial policy support, technological progress, and the domestic substitution process, giving them strong endogenous growth momentum.

III. When Hong Kong shares deviate from A shares, the second factor is that there are differences on the “denominator” side of A/H shares—that is, the liquidity cycles in China and the U.S. are not always the same

As the core channel for foreign investors to allocate China assets, the Hong Kong stock market’s operating characteristics are closely related to the global U.S. dollar credit cycle.

As an offshore financial market, Hong Kong has always had foreign capital as an important source of funding. From 2021 to today, due to so many factors intertwined—pandemic, supply chains, tariffs, fluctuations in the U.S. dollar index, and geopolitical games—foreign capital liquidity in Hong Kong stocks has experienced significant rise-and-fall and setbacks.

Since 2021, foreign capital’s allocation to Hong Kong shares has continued to decline, with the allocation ratio falling from more than 40% to around 25%. After 2025, as the U.S. dollar weakened and China’s economic resilience became evident, the prior pattern of continuous foreign outflows began to reverse, and Middle East funds also started to make allocations to Hong Kong shares.

At the beginning of 2026, due to factors such as geopolitics, international funds exited the Hong Kong market again. It is worth noting that in the long term, global attractiveness of RMB-denominated assets is expected to improve. With Hong Kong shares being the first station for foreign capital to allocate China assets, some foreign capital may be attracted to return. In the near term, there have already been some signs indicating that more Middle East capital is allocating to Hong Kong shares.

A-share liquidity is more influenced by domestic factors. The misalignment between China and U.S. liquidity is the reason behind the historical rhythm divergence between A/H shares; it can also explain the A/H rhythm divergence in 2025.

In the first half of 2025, H shares were clearly stronger than A shares, coinciding with a substantial downward move in the U.S. dollar index (continuously falling from the 110 high to around 96). After the second half of 2025, Hong Kong shares performed weakly, clearly underperforming A shares. During this period, the U.S. dollar index strengthened and domestic liquidity remained ample.

Contrary to the Federal Reserve’s restrictive stance in the second half of 2025, domestic macro liquidity was relatively abundant. In 2025, the required reserve ratio cuts totaled 50bp and policy interest rates were lowered; the 7-day reverse repo rate fell to 1.5%, the 1-year MLF fell to 2.2%, and the 5-year LPR dipped to 3.4%, relative to historical lows. In addition, in 2024, the People’s Bank of China established swap facilities and provided relending for stock buybacks and increases in holdings, which provided targeted liquidity support for the equity market.

IV. When Hong Kong shares deviate from A shares, the third factor is institutional factors—i.e., financial regulatory policies and disruptions to Hong Kong listings

Financial policy affects recent years’ Southbound Stock Connect funds’ allocation to Hong Kong shares.

Southbound Stock Connect funds are an important incremental source of funds for Hong Kong shares in recent years, and mutual fund and insurance funds are important components of Southbound Stock Connect funds.

Under new rules for public funds, the willingness of actively managed public funds to increase allocations to popular Hong Kong stock segments has declined.

Insurance funds continue to increase allocations to Hong Kong shares, with key focus still on high-dividend sectors such as banks and utilities.

The IPO issuance pace in the Hong Kong market and the size of unlocks have an important impact on the micro-liquidity environment.

Recently, Hong Kong introduced new rules that further encourage companies to list in Hong Kong. In the short term, the disruption to Hong Kong stock liquidity from IPOs may continue.

After new shares are listed in Hong Kong, they usually face a 6–12 month lock-up period. Large-scale issuance and listings in 2025 mean that Hong Kong shares will also face large-scale unlocks in 2026. Large-scale unlocks not only increase pressure from market supply, but may also impact the valuation levels of relevant individual stocks. The match between the unlock schedule and the market’s ability to absorb it is worth paying attention to.

V. The essence of the A/H shares rhythm divergence and future trends for Hong Kong shares

The biggest difference between Hong Kong shares and A shares boils down to two points: one is different listed company composition, and the other is differences in market liquidity. Therefore, when the linkage rhythm of A/H shares deviates, the explanation can generally be found in the numerator and denominator.

We emphasize that the global economy is currently in a very “super big cycle,” behind which are the technology cycle, the supply chain reshaping cycle, and the fiscal cycle resonating with each other. And behind this resonance is the global transition between the old and new order.

At present, the technology cycle is extremely important. The evolution of the technology cycle drives performance across different stock markets. In China’s A-share market, technology stocks mainly involve AI hardware-end companies; in Hong Kong’s market, technology stocks mainly involve AI application-end companies. In different periods, the trading focus of the AI industry chain differs, and thus the divergence among A/H shares (especially technology sectors) becomes evident.

The supply chain reshaping cycle corresponds to the acceleration of China’s manufacturing sector rising, while traditional welfare states are accelerating the hollowing out of manufacturing. In this process, China uses the global supply chain reconfiguration to drive the transition between old and new in the economy. In China’s A-share market, the share of new economy components in the ChiNext Index and the STAR 50 Index is significantly higher. In the Hang Seng Index, traditional industries have larger weights. Even though Hang Seng Tech includes a relatively higher-weighted internet sector, it still has relatively high consumption attributes. Therefore, when China’s economy completes the transition between old and new drivers, it is also the process through which the divergence between A/H shares deepens.

The fiscal cycle mainly refers to multiple consecutive years of fiscal easing in the U.S., Europe, and Japan, with fiscal inefficiencies becoming evident. In this process, monetary policies in Europe, Japan, and the U.S. have been reluctant to tighten due to fiscal pressure. Meanwhile, U.S. technology’s impact causes the fiscal pressure on Western economies to show up to different degrees at different times, ultimately resulting in fluctuations in the U.S. dollar index. The RMB exchange rate exhibits more independence during this U.S. dollar index cycle, which ultimately leads to liquidity divergence between A/H shares.

VI. Hong Kong shares’ outlook after divergence

On the short-term dimension, the strong U.S. dollar environment combined with controversies over AI application-end companies has led some internet companies to cut guidance after being impacted by the “takeaway delivery battle,” and Hong Kong shares have continued to adjust. Since March, against the backdrop of continued escalation in Middle East developments, global funds have entered a “safe-haven mode,” global market risk appetite has declined, and equity markets have been clearly hit. Combined with market concerns that energy price increases could trigger “second-round inflation,” Hong Kong shares, as an offshore risk asset, have faced direct pressure.

On the medium-to-long term dimension, since the second half of 2025, the weighted RMB exchange rate index has continued to strengthen, reflecting a trend of RMB appreciation. Against the backdrop of differentiated growth drivers in major global economies, China’s economic fundamentals’ resilience has gradually become more prominent. RMB assets are shifting from “valuation troughs” to “growth highlands,” and their attractiveness to global funds is expected to continue to improve.

In addition, many high-quality A-share companies in China that possess characteristics of new quality productive forces, along with their sub-sector leaders, are listing in Hong Kong. The composition structure of Hong Kong’s asset pool is undergoing fundamental optimization. The listing of high-quality assets is expected to attract global funds to increase allocations to Hong Kong assets.

Table of contents

Main text

Only part of the core charts are shown. If you need the full report, please contact the CICC macro team or CICC sales.

Risk analysis

Uncertainty remains about the sustainability of consumer recovery. This year, residents’ consumption has begun to pick up, but the level of recovery is limited. In the future, it is expected to continue with low-level consolidation; whether it can further gravitate toward steady normal growth rates still requires close tracking. If consumption continues to be weak, the rebound’s growth momentum will be constrained.

Uncertainty remains about whether the real estate industry can keep improving. This real estate downturn cycle has already lasted for a relatively long time. Although there is currently a temporary rebound trend, many categories of indicators are still showing negative growth. Whether the rebound can be maintained remains to be observed.

Due to limited data availability, there is a risk that the statistics are not sufficiently complete, including risks of calculation errors caused by model failure and risks of data statistical errors.

The impact of tighter monetary policies in Europe and the U.S. may be greater than expected, dragging down global economic growth and asset price performance.

Geopolitical conflicts still entail uncertainty, which may disrupt global economic growth prospects and market risk appetite.

Name of the securities research report: 《After the divergence with A shares, where will Hong Kong stocks go—A new framework for asset allocation on a large scale (14)》

Date of external release: March 28, 2026

Report publishing organization: China CICC Capital Securities Co., Ltd.

Report authors:

Zhou Junzhi, practicing certificate number: S1440524020001

Mao Chen, practicing certificate number: S1440523030002

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