FirstFT: Hong Kong stocks outpace mainland China by widest margin in decades

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Good morning and welcome back to FirstFT Asia. In today’s newsletter:

• Hong Kong stocks outpace mainland peers

• Joe Biden diagnosed with prostate cancer

• Global supply chains threatened by lack of Chinese rare earths

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Hong Kong shares have outperformed their mainland peers by the largest margin in nearly two decades, as money from China flows into the territory at record high levels.

What’s driving the rally? The benchmark Hang Seng index is up 16.4 per cent this year compared with a 1.2 per cent decline in mainland China’s CSI 300 index — the biggest outperformance year to date since 2008. The rally has been driven by worries about the Chinese economy and enthusiasm for Hong Kong’s technology stocks after advances by Chinese AI start-up DeepSeek.

AI trade: “The majority of the strong outperformance this year from Hong Kong has been driven by southbound flows [from the mainland],” said James Wang, head of China equity strategy at UBS. “A lot of that has been driven by the AI trade,” he added. Chinese technology companies such as Tencent and Alibaba are listed in Hong Kong and the US but not on the mainland.

A meeting between Chinese President Xi Jinping and the country’s technology companies in February was also seen as positive. “Investors feel the government is giving the green light for the tech sector to grow again,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. Read the full story.

Here’s what else I’m keeping tabs on today:

• Economic data: China publishes April retail sales, industrial output figures and the house price index.

• Trump-Putin call: European leaders are racing to influence the US president’s thinking ahead of the planned call today, in what could be a pivotal week for stalled Ukraine peace talks.

• UK-EU summit: Britain and the EU will agree a major post-Brexit reconciliation at today’s gathering in London, but negotiations went “down to the wire” last night as both sides engaged in eleventh-hour brinkmanship.

Five more top stories

1. Joe Biden has been diagnosed with an aggressive form of prostate cancer, a spokesperson for the former US president said. Biden, 82, on Friday was diagnosed with the cancer, which involves metastasis to the bone, after doctors found a prostate nodule. The news comes as the former president has in recent days returned to the spotlight in an effort to defend his legacy. Here are more details.

2. Pro-EU centrist Nicuşor Dan won Romania’s presidential run-off yesterday, defeating an ultranationalist Eurosceptic who had topped the first round. Dan, the mayor of Bucharest, secured more than 54 per cent of the vote compared with nearly 46 per cent for George Simion, a former football hooligan turned leader of the far-right AUR party.

• Poland: Rafał Trzaskowski was projected to narrowly top the first round of the country’s presidential election yesterday, putting the pro-EU candidate in a run-off with a rightwing rival.

3. The US says it will impose the maximum tariffs it has threatened against countries that do not negotiate “in good faith” as it strikes a more aggressive tone in trade talks. Treasury secretary Scott Bessent said yesterday that tariff rates would go back to the levels that Trump announced his “liberation day” levies on April 2.

4. Nvidia is seeking to reduce its reliance on Big Tech companies by striking new partnerships to sell its artificial intelligence chips to nation states, corporate groups and challengers to groups such as Microsoft, Amazon and Google. “Sovereign AI” deals, such as one announced last week with Saudi Arabia’s Humain, form a crucial part of Nvidia’s strategy to court customers far beyond Silicon Valley.

5. On, the upstart Swiss footwear company backed by tennis star Roger Federer, is stepping up a push to tap the booming health and fitness industry in China. Having enjoyed a meteoric rise in the US, On is now banking on Asia, particularly mainland China and Japan, to drive further expansion.

Join us for a subscriber-only webinar on May 28 for insights into the most consequential geopolitical rivalry of our time: the US-China showdown. Register now and put questions to our panel.

News in-depth

China has begun allowing some shipments of rare earths under new export control rules, but the slow pace of approvals threatens disruption to global supply chains, according to industry participants. Beijing dominates supplies of the minerals, which are vital for technologies ranging from electric vehicles to fighter jets. One European industry executive in China said current delays were “untenable” for foreign manufacturers.

We’re also reading . . . 

• FT Magazine: Mumbai bureau chief Chris Kay reports how India’s most notorious gangster declared war on a Bollywood legend.

• The scourge of the ‘woke right’: The radical Maga right has a way of looking at the world that chimes with the illiberal left, writes Jemima Kelly.

• Alcohol consumption: Gaming, video streaming and social media have had a far bigger impact on drinking than concerns over its effect on health, according to the head of Japan’s Asahi.

Chart of the day

China’s recorded holdings of Treasuries have fallen below those of the UK for the first time since the start of the century, underlining an ongoing shift in Beijing’s management of its foreign reserves.

Take a break from the news

What do AI chatbots say about their own bosses? An analysis of six of the leading makers of chatbots — OpenAI, Anthropic, xAI, Meta, Google and DeepSeek — show subtle differences in how they refer to the leaders of various AI groups.