Equities in the Hong Kong Special Administrative Region have entered a consolidation phase following the rebound earlier this month, with economists and strategists expecting a more targeted and sector-driven rally in the second half of the year, as national industrial priorities become clearer.
They said artificial intelligence, computing infrastructure, and undervalued technology heavyweights positioned for an earnings recovery are poised to lead the next gains, bolstered by policy support for new quality productive forces. However, global uncertainties, particularly rising expectations for Fed rate hikes, could cloud the market outlook.
The Hang Seng Index (HSI) has risen more than 8 percent since July 2, the first trading day of the month, closing at 24,963.23 points on Friday. In the near term, the benchmark is likely to consolidate around the 25,000 level, said Kenny Ng Lai‑yin, a strategist at Everbright Securities International.
Ng said the upside momentum has not yet been exhausted and he expects the HSI to target 28,000 points later this year. The latest rally was driven by capital inflows into traditional technology giants, and “their stocks are trading at relatively low valuations, leaving room for further increase”.
He added that the downside risks appear limited as the 22,500 level tested in late June serves as a strong floor. Additionally, the wave of interim results announcements in August will be critical for market direction, Ng said, noting that solid earnings from major internet companies will provide support for the broader market, though their performance may vary.
“Capital rotation between traditional tech names and AI concepts like application and hardware has been increasingly evident.” In addition to valuation-driven rally in some internet giants, AI stocks are also set for recovery in short term, he added.
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Jenson Peng, chief investment strategist at the Bank of East Asia, said “The central government’s policy mix is expected to support both consumption and investment, with a tilt toward the latter.”
Investment related to the “six networks” — water networks, new-type power grids, computing infrastructure, new-generation communications networks, urban underground pipelines, and logistics systems — is likely to accelerate, providing a key platform for developing new quality productive forces, he said.
As a result, Peng said, gains in Hong Kong stocks would concentrate in policy-favored sectors such as new energy and computing infrastructure.
Samuel Tse, a senior economist and strategist at DBS Bank, said the deployment of the central government’s fiscal spending is anticipated to accelerate in the second half of the year, with additional stimulus potentially directed to technology investment. “Ongoing support for the tech sector should underpin Hong Kong’s initial public offering market,” he said.
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Alicia Garcia-Herrero, chief economist for Asia Pacific and Middle East at Natixis Corporate & Investment Banking, echoed the view, saying that positive macroeconomic signals could support a modest recovery in Hong Kong stock valuations and investor sentiment.
Contact the writer at irisli@chinadailyhk.com
