r/investing
Hang Seng fell 1.82% Tuesday vs Shanghai's 1.37% as Fed hike odds approach 70%
HK tech stocks face structural headwinds from the USD peg and Fed hawkishness, while A-shares benefit from PBOC easing.
- PBOC easing and record low LPRs provide a structural tailwind for mainland A-shares.
- The HKD-USD peg forces Hong Kong stocks to import Fed hawkishness and high interest rates.
The dollar index broke 101 and Hong Kong's USD peg imports that directly (HKMA base rate at 4.0%, HIBOR pressure), while the PBOC holds record low LPRs with an easing bias. Same China tech companies, two completely different rate environments.
I was looking at my KWEB position and realized I'm basically only long the HK side. KWEB holds zero A shares. CQQQ uses a 25% inclusion factor. Neither gives you real exposure to mainland China tech.
The A share names (CATL, Cambricon, Zhongji Innolight) get the tailwind from PBOC easing. The HK names (Tencent, Alibaba, Meituan) eat the imported Fed hawkishness. That's not random, it's the peg doing exactly what it's supposed to do.
I screened for US listed wrappers that actually weight A shares heavily. CNQQ runs roughly 58/42 A shares to HK but launched September 2025 with AUM around $16.5M, so liquidity is a real question mark. Most A share semiconductor and battery names have no ADR either.
The rate divergence is structural and widens with every Fed repricing.
This is the split market nobody talks about enough
HK stocks are basically US stocks in disguise because of the peg
When the Fed hikes HK hikes with it
Meanwhile A shares get the PBOC easing treatment
Same sector different central banks different outcomes
KWEB holders are essentially betting on the Fed not hiking further not on China tech
That is a very different trade than what most people think they are making
Not really. Try comparing VTI and Heng Seng Index in the last 5 years
HSI follows US macro in the sense that HK mimic the monetary policy from the US Federal Reserve. It doesn't follow the movements proportionally because of the different stock compositions.
In reality, many HK-based investors and traders just buy US stocks. There are reports of a considerable number of portfolios achieving 3-digit YTD returns at some point because they hold high-performing US stocks. In the meantime, China strictly restricts mainland Chinese investors from buying US stocks as more talked about achieving financial independence from the US market.
Pointless statements
You say the two indices are similar but in reality they offer very different returns.
You say some investors do well by buying specific stocks. That's true everywhere.
That’s not true at all… hk stock composition is nothing like US stocks. Not only that their income % domestic vs foreign is also different, so
1) currency effect is not necessarily the same
2) market composition and PE significantly different
By all means and purpose HK is significantly undervalued compared to US. However doesn’t mean it will go up as it’s structurally less speculative and technically more bearish short term with some overhangs ( such as Futu/tiger liquidation etc)
This is exactly why I stopped buying KWEB
You think you are getting China tech exposure but you are really getting a dollar rate play
The Fed hikes and Hong Kong stocks bleed while the A share names keep running on PBOC liquidity
It is the same country two different central banks two completely different outcomes
If you want real China tech exposure you need a different ETF or direct A share access
wow, i learned a lot with this post ! thank you verry much for the analyse
A has little investment value. It’s a very skewed market and largely controlled by their state capital.
This is generally my view point on Chinese stocks
I hope that I can invest in China directly one day.
Already priced in my dude.