Overseas expansion and a commodity boom have put Chinese companies trading on the mainland in a position to beat their offshore-listed peers in earnings, cementing the outperformance of yuan-denominated stocks since the outbreak of Middle East hostility.
“Earnings for mainland-listed companies are showing signs of trending up, and those companies are really doing a good job in business transformations by going overseas,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “What we’ve seen in the Hong Kong market is different as competition is intensified and margins are eroded by pretty weak consumption in China. The bifurcation of the two markets will continue.”
The divergence in earnings performance could cement the edge mainland-listed stocks have over those in Hong Kong, where sentiment remains fragile after the eruption of the US-Iran war due to greater exposure to global capital flows. The Hang Seng gauge has dropped nearly 3 per cent this month, while the CSI 300 is virtually unchanged.
Companies in non-ferrous metals, chemicals and power equipment benefited the most from increased product prices and improved utilisation, according to Huatai Securities. Meanwhile, nearly 60 per cent of the mainland-listed companies that registered sales increases flagged contributions from overseas markets, it said.
