now loading...
Amid slowing global economic growth, Hong Kong stocks are expected to show opportunities, with the Hang Seng index ( HSI ) predicted to reach 25,500 by the end of the year on the back of a recovering Chinese economy and the technical advancement of companies there, according to a recent report.
Global economic growth is slowing in both emerging and mature markets, with the lingering negative effects of tariffs expected to gradually materialize in the US in the second half of this year with weak consumer confidence and corporate orders, finds KGI Investment Advisory’s Mid-Year Market Outlook report.
China’s economy, meanwhile, is in a recovery phase, with the property market reaching its bottom in the second half of 2024, the report notes, with the technological advancement of Chinese companies supporting the performance of the Hong Kong stock market.
Hong Kong's IPO market has also seen a surge in H1 2025. According to Ernst & Young, as of June 11 2025, 40 IPOs are expected to be listed in the Hong Kong market, with proceeds of HK$108.7 billion ( US$13.85 billion ). The number of deals increased by 33% and the proceeds have skyrocketed by 711% year-on-year. The proceeds from H1 2025 are expected to exceed the total amount raised in 2024, propelled by several mega IPO deals. The largest IPO so far in 2025 is the secondary listing of CATL, a Chinese battery giant, which raised HK$35.7 billion ( US$4.55 billion )
The US Federal Reserve is expected to cut interest rates by 25 basis points ( bp ) in the fourth quarter, the report states, followed by further reductions totalling between 50bp and 75bp. In terms of US equities, the likelihood of entering a bear market in 2025 remains low, although a market correction is possible in the third quarter. Annual profit estimates have been revised downward from 14.1% to below 9%. In this environment, investors, according to KGI, are advised to focus on defensive and high-quality stocks to cushion the impact of an economic slowdown.
“The easing of the trade war has reduced the risk of a US economic recession, but its uncertainty has already affected economic confidence and will put pressure on hard data in the future,” says James Chu, KGI’s chairman. “The recent rise in the stock market has brought valuations back to high levels. Investors need to be aware of the expiration of the tariff suspension and the subsequent economic and corporate earnings revisions that could bring volatility.”
On the other hand, China’s economy, the report points out, has shown encouraging signs due to a mix of internal reforms and external developments. In the trade sector, after reaching a 90-day short-term tariff exemption agreement with the US, China’s full-year GDP growth forecast has been revised upward from the original 4.2% to 4.5%.
Although exports to the US continue to decline, exports to countries of the Association of Southeast Asian Nations and India, the report shares, have seen notable growth. Chinese exporters are actively expanding into multilateral markets to mitigate the impact of external shocks.
The Chinese government, the report details, has also introduced four key economic priorities aimed at revitalizing the economy:
These initiatives are expected to provide sustained momentum to economic recovery.
In support of these goals, in May 2025, the People’s Bank of China reduced the reserve requirement ratio ( RRR ) by 0.5 percentage points. For auto finance companies, financial leasing firms and consumer finance companies, it effectively lowered the RRR from 5% to 0%.
This move is projected to inject around 100 billion yuan in long-term liquidity into the market and marks the first RRR cut since September 2024.
Additionally, the central bank has raised the loan quota for technological innovation and transformation from 500 billion yuan ( US$69.71 billion ) to 800 billion yuan, further reinforcing its commitment to supporting strategic industries.
Given these positive developments, the Hong Kong stock market, KGI believes, will continue to reflect stronger fundamentals in the second half of 2025. This optimism is also evident in the upward revisions of earnings-per-share estimates for the HSI.
Source: Hang Seng index
KGI has raised its year-end target for the HSI from 23,200 to 25,500 points, corresponding to an estimated price-to-earnings ratio of about 11 times. This adjustment suggests a potential growth of 6.3% in the second half of the year and a total annual increase of 27.5%.
“Overall, in the second half of 2025, China’s economy will continue to recover driven by policy support, domestic demand rebound, and manufacturing transformation and upgrading,” adds Cusson Leung, KGI’s chief investment officer. “However, attention should remain on uncertainties, such as China-US friction, geopolitical issues and international demand fluctuations.”
