China Securities Co., Ltd. released a research report stating that since February 2026, the Hong Kong stock market has entered a rapid adjustment phase, with the Hang Seng Index and the Hang Seng Tech Index both experiencing significant simultaneous declines and notable阶段性 pullbacks. However, the overall bull market trend for Hong Kong stocks has not ended. This round of decline is a typical mid-cycle adjustment within a bull market, not a trend reversal, and currently presents the year's first worthwhile window for actively taking long positions. From a long-term trend perspective, this adjustment has only impacted market valuations and short-term risk appetite, without shaking the core driver of Hong Kong stock earnings recovery. Regarding overseas liquidity, recent indications from the TACO suggest marginal improvements, with signs of easing pressure from external liquidity and market sentiment. For institutional investors, conditions are now suitable for early-stage positioning. If subsequent external shocks do not escalate further, Hong Kong stocks are likely to exit the adjustment phase and return to a channel of震荡抬升. The subsequent market trend is also expected to shift from being driven by valuation to being driven by earnings, with the focus on structural high-quality opportunities. The main views of China Securities Co., Ltd. are as follows:
In recent years, A-shares and H-shares have diverged, reflecting the current "super cycle," which is a resonance of the technology cycle, supply chain restructuring cycle, and fiscal cycle. This super cycle expresses the transition between the old and new global orders. A-shares and H-shares encompass different segments of the AI industry chain—A-shares include AI hardware and software companies, while H-shares have a different focus—leading to visible divergence, especially in the tech sector. The composition of old and new economy components within A-shares and H-shares differs. Under the supply chain restructuring cycle, Chinese manufacturing is accelerating its rise, while deindustrialization accelerates in welfare states. China is leveraging this trend to advance its economic transformation from old to new. This transformation process in China is also a process of deepening divergence between A-shares and H-shares. The liquidity composition of the A-share and H-share markets also differs, with monetary liquidity heavily influenced by fiscal牵引 during the fiscal cycle. The correlation between the US Dollar Index and the RMB exchange rate has changed, no longer moving in simple sync, leading to further liquidity divergence between A and H shares. The divergence from previous synergy between A and H shares will eventually return to synergy. At that time, the global economy will emerge from a period of chaos, and the influence of Chinese assets globally will increase further.
In past thematic research reviewing five rounds of联动 bull markets in Chinese A-shares and Hong Kong stocks since 2000, it was found that the two markets exhibited strong linkage most of the time. Rare instances of节奏背离 were primarily related to monetary policy divergences between China and the US during specific periods. Since 2025, the rhythms of Hong Kong and A-shares have begun to diverge again, with relative outperformance differing between the first and second halves of the year.
First, since 2025, Hong Kong stocks have followed a rhythm different from A-shares. The divergence between A and H shares is evident not only in major broad-based indices but also in tech indices. Particularly for tech indices, the divergence between the Hang Seng Tech Index and the ChiNext Index and the STAR 50 Index is more pronounced. The rhythm misalignment in 2025 was very clear, and the rotation was unusually fast. Initially, Hong Kong stocks led; in the second and third quarters, A and H shares rose同步, but A-shares performed better; after the fourth quarter, A and H shares showed剧烈分化, with A-shares demonstrating greater resilience. Looking at the AH premium rate, Hong Kong stocks were relatively stronger in the first half of the year, while A-shares were relatively stronger in the second half. In the first half of 2025, as Hong Kong stocks strengthened, the premium rate fell rapidly from 140 to around 125, a low level. After the second half of 2025, the premium rate stabilized and fluctuated within a narrow range at low levels, meaning the attractiveness of investment logic based solely on discount arbitrage has declined. Notably, premium even appeared for H-shares of some industry leaders like Contemporary Amperex Technology Co. Limited and China Merchants Bank, reflecting the improved pricing power of Hong Kong stocks for quality assets.
Second, the first factor for the deviation between Hong Kong and A-shares is a difference on the分子端—specifically, different types of listed companies. Even within the same AI industry chain, A-share and H-share listed companies occupy different生态位. The ChiNext and STAR 50 indices are dominated by AI hardware companies, covering leading enterprises in hard tech fields such as semiconductors, electronic components, communication equipment, and new energy equipment. In contrast, the Hang Seng Tech Index is dominated by AI application companies, with particularly heavy weighting towards internet giants, including platform companies like Tencent, Alibaba, Meituan, and JD.com. The release of DeepSeek in February 2025 triggered a global reassessment of China's AI application industry. During this period, AI applications strengthened, and the Hang Seng Tech Index significantly outperformed the STAR 50 Index. In early 2026, the emergence of AI Agents impacted the business models of traditional software companies, becoming another important driver of divergence between A and H-share tech stocks. While internet giants in the Hong Kong market are actively布局 the AI Agent field, market concerns remain regarding the transformation pressure on their traditional businesses. In contrast, AI hardware companies in the A-share market were less impacted by AI Agents and showed相对韧性. Although both reflect the Chinese economy, A-share and H-share listed companies differ significantly in how they reflect old and new economic drivers. The Hang Seng Index has a higher weighting in traditional industries—financials, real estate, energy, raw materials, and other cyclical sectors—whose earnings performance is highly correlated with the domestic macroeconomic cycle. Although the internet sector, which has a high weight in the Hang Seng Tech Index, belongs to the new economy, platform economies generally possess consumer attributes, and their performance is closely tied to the domestic consumer market's景气度. The ChiNext and STAR 50 indices in the A-share market have a significantly higher proportion of new economy sectors, covering strategic emerging industries such as new energy, semiconductors, biomedicine, 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 import substitution processes, possessing stronger endogenous growth momentum.
Third, the second factor for the deviation between Hong Kong and A-shares is a difference on the分母端—specifically, the monetary liquidity rhythms of China and the US are not always synchronized. As a core channel for foreign capital to allocate Chinese assets, the characteristics of the Hong Kong stock market are closely related to the global US dollar credit cycle. As an offshore financial market, foreign capital has always been an important source of funds for investors in the Hong Kong stock market. From 2021 to the present, due to the interplay of too many factors such as the pandemic, supply chains, tariffs, fluctuations in the US Dollar Index, and geopolitical games, foreign capital liquidity in Hong Kong stocks has experienced significant起伏波折. Since 2021, foreign allocation to Hong Kong stocks has持续下滑, with the allocation ratio dropping from over 40% to around 25%. After 2025, as the US dollar weakened and China's economic resilience became apparent, the previous trend of sustained foreign capital outflows began to reverse, and Middle Eastern funds also started布局 Hong Kong stocks. In early 2026, influenced by geopolitical factors among others, international funds withdrew from the Hong Kong market again. Notably, in the long run, the global attractiveness of RMB assets is expected to increase. As the first stop for foreign capital allocating Chinese assets, Hong Kong stocks are expected to attract the return of some foreign capital. Recent signs already indicate that more Middle Eastern funds are布局 in Hong Kong stocks. A-share liquidity is more influenced by domestic factors. The historical rhythm divergence between A and H shares can be explained by China-US liquidity misalignment, which also explains the rhythm divergence in 2025. In the first half of 2025, H-shares were明显强于 A-shares, coinciding with a significant decline in the US Dollar Index (falling continuously from highs around 110 to near 96). After the second half of 2025, Hong Kong stock performance weakened, showing a state明显弱于 A-shares. During this period, the US Dollar Index strengthened, while domestic liquidity was abundant. Contrary to the Fed's restrictive stance in the second half of 2025, domestic macro liquidity was relatively ample. Throughout 2025, the reserve requirement ratio was cut by 50 basis points and policy interest rates were lowered, with the 7-day reverse repo rate falling to 1.5%, the 1-year MLF rate to 2.2%, and the 5-year LPR探至 a relatively low historical level of 3.4%. Additionally, in 2024, the central bank created swap facilities and stock repurchase increase relending, providing targeted liquidity support for the equity market.
Fourth, the third factor for the deviation between Hong Kong and A-shares is institutional factors, namely financial regulatory policies and disturbances related to Hong Kong listings. Financial policies have influenced southbound capital's allocation to Hong Kong stocks in recent years. Southbound capital has been an important source of incremental funds for Hong Kong stocks in recent years, with public funds and insurance funds being major components. Under new public fund regulations, the willingness of active public funds to increase allocations to popular sector stocks in Hong Kong has declined. Insurance funds have continued to increase allocations to the Hong Kong market, focusing primarily on high-dividend sectors like banks and utilities. The pace of IPOs and the scale of post-listing lock-up expiries in the Hong Kong market significantly impact the micro-liquidity environment. Recent new rules in Hong Kong further encourage companies to list there, so short-term IPO-related disturbances to Hong Kong stock liquidity may persist. After listing in Hong Kong, new shares typically face a lock-up period of 6-12 months. The large-scale listings in 2025 mean that Hong Kong stocks will face significant lock-up expiries in 2026. Large-scale expiries not only increase market supply pressure but may also impact the valuation levels of related individual stocks. The match between the pace of expiries and the market's capacity to absorb them warrants attention.
Fifth, the nature of the rhythm divergence between A and H shares and the future trend of Hong Kong stocks. The biggest differences between Hong Kong and A-shares boil down to two points: different listed companies and different market liquidity. Therefore, deviations in the联动 rhythm between A and H shares can generally be explained by factors on the分子端 and分母端. We emphasize that the world is currently in an unusual "super cycle," driven by the resonance of the technology cycle, supply chain restructuring cycle, and fiscal cycle. Behind this resonance is the transition between the old and new global orders. The current technology cycle is very important, and its evolution affects the performance of different stock markets. Chinese A-share tech is primarily composed of AI hardware companies, while Hong Kong stock tech is primarily composed of AI application companies. Different periods focus on different parts of the AI industry chain for trading, leading to the显露 divergence between A and H shares, especially in the tech sector. The supply chain restructuring cycle corresponds to the accelerated rise of Chinese manufacturing and the accelerated deindustrialization of traditional welfare states. In this process, China is leveraging the tailwind of global supply chain restructuring to advance its economic transformation from old to new. The ChiNext and STAR 50 indices in the A-share market have a significantly higher proportion of new economy sectors, while the Hang Seng Index has a higher weighting in traditional industries. Even though the Hang Seng Tech Index includes internet stocks with high weights, they still possess strong consumer attributes. Therefore, the process of China's economy completing its transition from old to new is also a process of deepening divergence between A and H shares. The fiscal cycle primarily refers to years of consecutive fiscal easing in the US, Europe, and Japan, with accumulated fiscal弊端 becoming apparent. In this process, monetary policies in Europe, Japan, and the US have been reluctant to tighten due to fiscal pressures. Meanwhile, US technology has caused fiscal pressures in Western economies to manifest to varying degrees at different times, ultimately表现为震荡 in the US Dollar Index. The RMB exchange rate has exhibited greater independence during this US Dollar Index cycle, ultimately also leading to liquidity divergence between A and H shares.
Sixth, the future trend of Hong Kong stocks after the divergence. In the short term, a strong US dollar environment combined with controversies surrounding AI applications, and some internet companies下调业绩 due to the impact of "food delivery wars," have led to持续调整 in Hong Kong stocks. Since March, against the backdrop of escalating Middle Eastern tensions, global capital has entered a "risk-off mode," global risk appetite has declined, equity markets have been significantly impacted, and coupled with market concerns about "secondary inflation" triggered by rising energy prices, Hong Kong stocks, as offshore risk assets, have borne direct pressure. From a medium- to long-term perspective, since the second half of 2025, the weighted RMB exchange rate index has持续走强, reflecting a RMB appreciation trend. Against the backdrop of diverging growth momentum among major global economies, the resilience of China's economic fundamentals has gradually become prominent. RMB assets are switching from "valuation洼地" to "growth高地," and their attractiveness to global capital is expected to持续提升. Furthermore, currently, a large number of quality A-share companies and segment leaders with characteristics of new quality productivity are listing in Hong Kong, leading to a fundamental optimization of the composition of the Hong Kong stock asset pool. The listing of quality assets is expected to attract increased global capital allocation to Hong Kong stocks.
Risk提示: The sustainability of the consumption recovery remains uncertain. This year, household consumption has begun to warm up, but the recovery level is limited. Whether it will continue to fluctuate at low levels or move closer to normalized growth rates仍需密切跟踪. If consumption remains weak, the momentum for economic recovery will be limited. Whether the real estate industry can continue to improve remains uncertain. This round of the real estate downturn has lasted for a considerable time. Although there is a短暂回暖 trend currently, many indicators still show negative growth. Whether the warming trend can be maintained仍需观察. Limitations in data availability pose risks of insufficient statistical completeness, risks of estimation errors due to model failure, and risks of data statistical errors. The impact of tight monetary policies in Europe and the US may exceed expectations, dragging down global economic growth and asset price performance. Geopolitical conflicts remain uncertain, disturbing global growth prospects and market risk appetite.
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