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<\/p>\nInvestors should remain invested in both China A-shares and Hong Kong-listed equities to capitalise on artificial intelligence (AI) trends despite diverging performance year-to-date.<\/p>\n
This is the view of Patrick Ho, chief investment officer, North Asia at HSBC Private Bank and Premier Wealth, who made the case for a barbell approach to Chinese equities in a recent note.<\/p>\n
China A-shares as represented by the CSI 300 index have materially outperformed both the MSCI China index and the Hang Seng index year-to-date as China\u2019s mainland stocks outpace their Hong Kong-listed counterparts.<\/p>\n
<\/p>\n
This performance differential reflects the structure of the global AI rally so far, and is amplified by China\u2019s K-shaped economic story, according to Ho.<\/p>\n
He said: \u201cFor that reason, we currently hold a preference for A-shares over H-shares, driven primarily by A-shares\u2019 much larger exposure to AI-related hardware beneficiaries.\u201d<\/p>\n
\u201cHaving said that, we believe it is important to be positioned in the full-arc AI opportunity set in China, which means taking exposure to some of the large offshore-listed internet and cloud players as critical enablers of the AI transition and adoption.\u201d<\/p>\n
The Hang Seng index has just 7% invested in the information technology sector, although its largest constituents include the country\u2019s Hong Kong-listed cloud giants Tencent and Alibaba.<\/p>\n
Whereas the CSI 300 Index has a much larger direct exposure to a diversified group of technology stocks, with almost a third (31%) of its constituents in the information technology sector.<\/p>\n
As part of a \u201cbarbell\u201d investment strategy, Ho said \u201cit is important to stay invested across the entire AI ecosystem\u201d despite having a preference for A-shares over H-shares.<\/p>\n
He said: \u201cKey A-share tech benchmarks (ChiNext and STAR50) provide concentrated exposure to AI hardware and industrial value chains that stand to benefit directly from accelerating global AI capex.\u201d<\/p>\n
\u201cThat said, large Hong Kong-listed tech stocks provide deeply discounted entries into the AI monetisation layer and complement the onshore listed AI hardware names.\u201d<\/p>\n
\u201cWhile they have been under pressure due to margin challenges in their traditional business (i.e., e-commerce and food delivery) and regulatory headwinds, low valuation means some of their market-leading model\/cloud business has become somewhat a \u2018free option\u2019.\u201d<\/p>\n
A bifurcated Chinese economy<\/p>\n
The backdrop for investing in Chinese equity market is one that is becoming increasingly bifurcated as policymakers champion local AI development while its consumption, property and discretionary spending act as a drag on its economy.<\/p>\n
This K-shaped bifurcation could be deepening even further, according to Ho.<\/p>\n
\u201cThe upper arm of the K \u2014 AI compute, semiconductors, and advanced equipment and hardware \u2014 is expanding rapidly, fuelled by policy support, export-driven demand and domestic substitution,\u201d he said.<\/p>\n
\u201cThe lower arm \u2014 consumption, property, and discretionary spending \u2014 remains structurally impaired. The splits map directly onto equities.\u201d<\/p>\n
He pointed out that the rally in AI stocks has been concentrated in AI hardware enablers such as semiconductors, advanced packaging, optic modules, and AI servers \u2013 where A-share listings dominate.<\/p>\n
This contrasts sharply to H-share technology names such as China\u2019s large internet platforms and AI application adopters which are being dragged by consumption weakness, regulations and a near-term capex overhang, Ho noted.<\/p>\n","protected":false},"excerpt":{"rendered":"Investors should remain invested in both China A-shares and Hong Kong-listed equities to capitalise on artificial intelligence (AI)…\n","protected":false},"author":2,"featured_media":78793,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[20667],"tags":[255,35132,35133,1772,9881,22880],"class_list":["post-78792","post","type-post","status-publish","format-standard","has-post-thumbnail","category-hsbc","tag-china","tag-china-a-shares","tag-chinese-equities","tag-hong-kong","tag-hsbc","tag-hsbc-private-bank"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116882001409268753","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/78792","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=78792"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/78792\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/78793"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=78792"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=78792"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=78792"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}