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Hong Kong’s bull market remains China, indicating that an inactive economic recovery with the US and trade tensions are squeezing feelings from mainland investors.
Mainland China stocks have been flat so far this year, but compared to the 20% profit of Hong Kong’s Hangsen Index, the city’s largest age outperformance over the mainland since 2008.
Hong Kong’s Bull Run is driven by a record flow of investment from mainland China amid post-deepsec enthusiasm for technology companies such as Alibaba and Tencent, which are not listed on the mainland.
However, the mainland stock market, with many companies in traditional sectors such as mainland, property and energy, is booming. Deflationary pressure, weak consumer sentiment, and declining home prices have hurt the sentiment of investors in mainland stocks known as A-Shares.
“We’re excited to be able to help people understand the importance of our efforts,” said Dong Chen, Chief Asian Strategyman at Pictet Asset Management. “You’re looking at the wider economy, and it’s still at its bottom, but you haven’t picked it up yet. Basically, you need a stronger stimulus.”
A-Shares rallyed last September after authorities provided support to the stock market. Investors entered optimistically in 2025 that Beijing could introduce more fiscal stimulus packages to boost the economy and markets, but these measures were not realized.
China’s stock market is particularly sensitive to around 2 million retail investors in the country. While Beijing has stepped up efforts to encourage institutional investors to buy and hold shares for the long term, retail investors still make up the majority of trading in the mainland market.
“For the mainland market to take off, we need retailers to jump in with both feet,” said Ajay Rajadhyaksha, global chairman of Barclays’ research.
Margin trading at A-Shares, which is used as a proxy for Chinese retail investor sentiment, has been flat since April. Daily sales for Shanghai and Shenzhen Stock Exchanges fell after a surge in February after the release of Deepseek.
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Retail investors have been hurt by years of declining home prices after government efforts to curb real estate developer debt led to defaults for several builders. The majority of the wealth of Chinese households is held in their property.
At a cabinet meeting last month, Chinese Prime Minister Li Qiang pledged greater efforts to stimulate consumption, improve real estate demand and increase household wealth, but analysts said previous policies this year, including an electronics trade-in program, will not reverse sentiment.
“In reality, support for the stimulus policy for property and consumption remains limited and narrow,” said Winnie Wu, Chief China Equity Strategist at Bofa Global Research, adding that the Tradin-In program is “frontload” only for consumption.
The rising tensions between the US and China did not help. Juliana Hansveden, portfolio manager for 90 emerging markets, said Beijing could refrain from stronger stimulus amid uncertainty over trade negotiations with the Trump administration.
Foreign profits on Chinese stocks have fallen, but measurements have become more difficult to measure after authorities last year stopped data on the northbound flow of their stock connection programs. According to an analysis by the Financial Times, Chinese stock exchange funds residing in North America and Europe had net flows of $1.6 billion per year.
“For many US-based investors, China is just no go,” Pict’s Chen said.
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Some investors point to Beijing’s positive rhetoric about consumption and the private sector, as well as innovative companies trading with attractive ratings as reasons for optimism.
“True growth may not be entirely full and it’s acceptable. It will be a more bottom-up opportunity,” Hanseven said.
“China and Hong Kong are the only markets that have not been reflected at pre-Covid levels,” said George Morina, head of Asian trading at Franklin Templeton Investments. “It’s cheap from an evaluation standpoint. You can’t ignore that.”
