<div id="readability-page-1">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. The 300 largest mainland-traded companies may post average 2025 profit growth of 6.3 per cent during the coming earnings season, while the growth rate for the firms in the Hong Kong exchange’s benchmark Hang Seng Index would be a mere 2 per cent, according to Bloomberg data. The earnings season runs through the end of April. “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.” Yuan-denominated stocks trading on China’s onshore exchanges also skew heavily to traditional sectors like energy and industrials, which have gained as commodity prices spiked over the past year amid geopolitical tensions and rising energy demand tied to artificial intelligence. In Hong Kong, where Chinese tech companies dominate, bellwethers Alibaba Group Holding, JD.com and Meituan have been mired in a costly price war in the fast delivery market. 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. Contemporary Amperex Technology Ltd, known as CATL, is one of the beneficiaries. As it reported a 42 per cent increase in net income for 2025, the world’s biggest maker of lithium-ion batteries for electric vehicles said this week in its annual results that overseas sales accounted for 30 per cent of its total sales, double the proportion in 2020. On the Hong Kong exchange, Chinese tech giants are expected to drag down general earnings due to cutthroat competition and weaker consumer spending. E-commerce giant JD.com last week said that net profit plunged 53 per cent last year, due to heavy investments in instant delivery and other new businesses. Alibaba’s full-year profit probably fell 14 per cent from 2024 based on the international accounting standard, according to the consensus estimate of analysts polled by Bloomberg, as the Hangzhou-based company made its foray into the instant delivery segment. Alibaba owns the South China Morning Post. Rival Meituan is expected to return to a loss of 23.9 billion yuan (US$3.48 billion) in 2025, the projection showed.  “The involution-style competition among e-commerce platforms has seen losses narrowing but still persisting, creating sustained headwinds for earnings,” said Edith Qian, an analyst at CGS International in Hong Kong. Earnings growth for mainland-listed stocks, also known as A shares, could accelerate to 8 per cent this year, buoyed by China’s faster nominal economic growth and the smaller decline in producer prices, according to UBS Group. The Swiss bank said that companies in materials, information technology, industrials and discretionary consumer goods saw the biggest increases in earnings forecasts over the past month. Barring earnings momentum, the recent flourishing of the so-called Halo trade among global investors – short for heavy assets, low obsolescence – as a shield from AI displacement could add more tailwinds to mainland share prices, as many companies own large amounts of physical assets, according to Goldman Sachs. “Earnings momentum is in [mainland] A shares’ favour in the lead-up to the reporting season,” said Kinger Lau, a strategist at Goldman. “These, together with China A shares’ historically low beta to global equities, underpinned by China’s closed capital account and low foreign ownership in the domestic equity market, suggest that A shares would continue to outperform Hong Kong shares until the concerns over global geopolitics and AI disruption recede.” </div>

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<p>Chinese companies trading on the mainland are set to outperform their offshore counterparts, with projected average profit growth of 6.3% for 2025, compared to just 2% for Hong Kong-listed firms. This divergence is attributed to successful overseas expansions and a commodity boom. Companies in traditional sectors like energy and industrials are benefiting, while Hong Kong tech giants face challenges from intense competition and weak consumer spending. Analysts predict continued earnings momentum for mainland stocks, supported by China's economic growth and favorable market conditions.</p>

Chinese firms with success in global push poised to reap profit rewards