U.S. Investors Are Missing Out on 2025’s Strongest Rally

The rally in Hong Kong-listed Chinese stocks is world-leading so far this year. But even though many of the biggest names have dual listings on Wall Street, U.S. investors are missing out.

The volumes for companies with dual U.S.-Hong Kong listings are currently far higher in Hong Kong than they are on U.S. exchanges. That didn’t use to be the case.

For e-commerce empire Alibaba Group Holding BABA (HK:9988), for instance, the recent trading has seen Hong Kong volume at anywhere from 4-times to close to 8-times the volume of U.S. trade, notes Sandeep Rao, senior researcher at index-fund provider Leverage Shares. Internet-search operator Baidu BIDU (HK:9888) often demonstrates an even higher disparity in conviction, as measured by the difference in volumes in Hong Kong and the United States.

Select Stocks in Favor

Chinese investors view quality Hong Kong listings such as Alibaba as a safe haven, and now have access to the dual-listed company via the Stock Connect scheme linking mainland and Hong Kong markets. Their U.S. counterparts often have a view that’s colored by broader macro and geopolitical concerns, putting them off the same stock.

“As China's market breadth collapsed in the wake of the ongoing downturn in economic sentiment, the broad ‘China growth’ story has been replaced by a ‘flight of capital’ to a select number of stocks that are considered too big to go under,” Rao says. “This is the predominant reason why Alibaba enjoys greater favor in Hong Kong.” Wall Street investors, meanwhile, read the heavy economic going in China as a serious risk factor – resulting in a dip of conviction.

Hong Kong’s strong showing so far this year is led by China’s “Seven Titans,” as I noted in a story earlier this month, a term first applied in a report from Société Générale. Those Seven Titans are: Alibaba; the world’s largest electric-vehicle maker BYD BYDDY (HK:1211); No. 2 e-commerce platform JD.com JD (HK:9618); videogame developer NetEase NTES (HK:9999); China’s homegrown semiconductor hope SMIC (HK:0981), now delisted from Wall Street; WeChat app operator and videogame distributor Tencent Holdings TCEHY (HK:0700); and smartphone Xiaomi XIACY (HK:1810), which recently unveiled a performance model of its EV.

The Hang Seng Index is up 23.4% so far this year, although it did adjust 2.2% today after a strong recent showing. Investors had bought into Hong Kong leading into the U.S. Federal Reserve’s decision to leave rates unchanged, also affecting Hong Kong rates given the Hong Kong dollar’s currency peg to its U.S. counterpart.

It is a major and sudden change. The S&P 500 more than doubled from the start of this decade, through the end of last year, while Hong Kong stocks lost one-third of their value. In fact, Hong Kong stocks heading into 2025 were struggling to maintain their levels set back in 2000.

Consumer and Tech Plays

For 2025, the Hang Seng leads the main indexes worldwide, and as I’ve noted recently, its subindexes look even better when you screen for China-based consumer and tech plays. The Hang Seng China Enterprises Index is up 26.2% in 2025, with the Seven Titans driving the Hang Seng Tech Index up 30.6% so far this year.

U.S. investors can access the tech index via the KraneShares Hang Seng Tech Index ETF KTEC. As I’ve noted in my recent columns, I took a small position in that, as well as holding BYD shares.

It’s of course easiest for U.S. investors to trade Hong Kong companies if they’re listed on Wall Street. Global funds with Qualified Institutional Investor status will be incentivized to trade the Hong Kong tickers, Rao says, given the higher volumes and lack of any delisting risk. There’s a third, roundabout way to invest into Hong Kong via the Deutsche Börse in Germany, which has a little-known stock-connect scheme like the ones linking Hong Kong with Shanghai and Shenzhen.

It’s clear some global investors have been taking money off the table in U.S. stocks and reallocating to Hong Kong, with high currency flows into the Hong Kong dollar. The angst over the Magnificent Seven, jokingly rechristened the Maleficent Seven in a recent Goldman Sachs report, has created concern on U.S. tech, just as China pledged to support consumption, and DeepSeek and other Artificial Intelligence models from the likes of Alibaba upended the tech sector.

Six of Seven Titans on Wall Street

SMIC has removed its Wall Street listing, given the chipmaker’s sensitive nature – the state-backed company is now on a U.S. government list of companies ruled to be part of China’s military-industrial complex, which bars U.S. investors from owning their securities. 

The other Seven Titans remain listed on U.S. exchanges, though, sometimes with a primary listing, or at least with an over-the-counter ticker. But there’s always a risk of political tensions. Tencent finds itself on a separate Pentagon list of “Chinese military companies,” as I noted in January, which doesn’t affect U.S. investors but could be a sign of problems to come. It is appealing that decision.

It’s relatively rare now to find a Chinese company that is only listed on Wall Street. That’s still the case for the Temu app operator PDD Holdings PDD, which also runs the Pinduoduo bulk-buying e-commerce site in China.

But Temu and unlisted e-commerce app rival Shein now face pressure on their business inside the United States. The Trump administration has sought to end the de minimis rule that allows merchants to ship goods worth less than $800 direct to customers, duty-free. The system was designed to make small shipments such as samples easier to send, but China now accounts for 60% of the traffic, mainly on direct-to-consumer apps such as Temu and Shein.

The White House was forced to suspend a chaotic implementation that briefly forced the U.S. Postal Service to stop accepting any parcels from China, and caused Hong Kong’s mail service to cease U.S. shipments. But it has vowed to revisit the removal of de minimis treatment once systems are in place to process shipments and collect any increase in taxes.

Listing in London or Hong Kong

Such hostility is encouraging Shein to pursue an initial public offering in London rather than on Wall Street. And it’s likely to force PDD Holdings to list closer to home, too.

“Pinduoduo is already facing pressure through its international arm Temu,” Rao notes. “It has long been expected that PDD will consider Alibaba's success and seek to replicate it with a dual-listing in Hong Kong.”

It used to be the case that Chinese companies decided to go to Wall Street in the first instance, with Hong Kong as a backup. Now, Wall Street is the greater liability.

“Going forward, banks and underwriters will likely consider IPOs of Chinese companies to be fraught with marketability and regulatory issues,” Rao says. “The rising attractiveness of Hong Kong as an alternative for maintaining exposure on major Chinese companies, despite these issues will likely lead to a surge in high-conviction Chinese companies to dual-list in Hong Kong.”

At the time of publication Frew McMillan had long positions in KTEC and BYDDY.