Institutions Say Short-Term Volatility Does Not Alter Upward Trend Of Hong Kong Stocks, Hang Seng Index Still Expected To Challenge 30,000 Points Next Year

Since October, The Hong Kong Equity Market Has Experienced A Noticeable Pullback, Drawing Increased Market Attention.

BOCI’s Strategy Report Attributes The Recent Valuation Decline Primarily To A Combination Of Rising Domestic And External Uncertainties And Year-End Investment Behavior That Has Amplified Market Adjustments.

On The Domestic Front, Investors Who Had Accumulated Significant Gains Earlier This Year—Notably Institutional Players—Have Taken Profits To Lock In 2025 Performance Targets, Which Has Temporarily Increased Selling Pressure. Externally, Marginal Tightening Of US Dollar Liquidity Coupled With Renewed Concerns Over An AI Valuation Bubble Has Heightened Market Anxiety Since November, Triggering Sharp Corrections In US Technology Stocks And Weighing On Global Financial Markets.

Historical Patterns Offer Context: Across The Past Six Hong Kong Bull Markets, More Than Sixty Correction Episodes Occurred, With The Hang Seng Index Typically Retracing Between 6% And 20% On Average.

Looking Forward, BOCI Advises Investors To Maintain Discipline, Noting That Corrections Are A Normal Feature Of Bull Markets And That Short-Term Volatility Does Not Invalidate The Broader Uptrend In Hong Kong Equities.

The Institution Projects Continued Macro Policy Support And Timely Policy Intensification In 2026. Given Current Valuation Levels, The Hong Kong Market Still Appears Attractive; BOCI Forecasts The Hang Seng Index To Reach 30,100 Points By End-December 2026, Based On A 13.0x 2026 Forecast Price‑To‑Earnings Ratio, Representing Approximately A 15% Premium To The Twelve‑Year Historical Average.

Liquidity Conditions In Hong Kong’s Financial Markets Have Also Stabilized, While Southbound Capital Has Persisted Inflowing, Which May Provide Additional Momentum For The Local Bull Market. Since September, Following Two Fed Rate Cuts In September And October, Hong Kong Dollar HIBOR Rates Have Rebounded And The Spread Between HKD And USD Funding Costs Has Narrowed, Signaling A Return To More Normal Market Liquidity.

By End-November, Net Southbound Inflows This Year Totaled RMB 1,280.6 Billion, Substantially Above RMB 654.3 Billion In The Same Period Last Year. Southbound Turnover Accounted For 23.42% Of Total Hong Kong Market Turnover, Versus 17.3% In 2024 And 14.1% In 2023, Providing Material Support For Market Stabilization And Recovery.

Although Diverging Views Within The Federal Reserve Have Increased, Rate Cuts In 2026 Remain The High‑Probability Scenario. BOCI’s Base Case Assumes One To Two Fed Cuts Next Year, Which Would Offer A Relatively Accommodative External Liquidity Backdrop For Hong Kong Equities.

On Investment Themes, BOCI Highlights That Strengthening The Real Economy, Advancing Technological Innovation, Building New Productive Forces, And Expanding Domestic Demand Are Core Priorities Under The 15th Five‑Year Plan And Should Form The Principal Investment Threads For Market Participants.

In Particular, Sectors Linked To Technological Innovation And New Productive Forces Are Likely To Be The Dominant Investment Themes Over The Coming Years. Over The Medium To Long Term, Investors Are Advised To Focus On Domestic Demand‑Led Consumer Leaders, Low‑Valuation High‑Dividend Central And State‑Owned Enterprises, And Domestic Brands Positioned To Benefit From Accelerating Import Substitution.