Hang Seng Index Rises 33% This Year, Best Five‑Year Performance; Multiple Institutions Forecast Breakthrough Above 30,000 Next Year

As 2025 draws to a close, Hong Kong’s equity market has delivered a standout performance. Supported by policy measures, improved liquidity and emerging structural opportunities, the three major indices recorded their strongest annual gains in five years.

By the close on December 19, the Hang Seng Index had advanced 33.25% year‑to‑date to 25,690.53 points. The Hang Seng Tech Index finished the year up 25.74% at 5,479.04 points, and the Hang Seng China Enterprises Index also rose 25.74% to 5,479.04 points. Trading activity in Hong Kong increased markedly during the year, with southbound flows serving as the principal source of incremental capital. Net southbound inflows exceeded HKD 1.38 trillion, a record, and the southbound share of trading volume (12‑month average) climbed from 47% at the start of the year to 61%.

The market exhibited distinct sector rotation across four phases. In the first quarter, liquidity improvements underpinned a broad market recovery as the Federal Reserve implemented three rate cuts totaling 75 basis points while domestic policy remained accommodative, narrowing the U.S.–China rate differential. Southbound investors were particularly active, with first‑quarter net purchases reaching HKD 440 billion and the Hang Seng Index rising roughly 20% while the Tech Index gained nearly 15%. The second quarter saw a sharp adjustment following an external shock that briefly pushed the Hang Seng down to 19,260 points; sentiment recovered after a May joint statement reduced tariff measures, and rotation favored new consumption and innovative pharmaceuticals. From July through October, a combination of domestic policy support and larger‑than‑expected Fed easing created fresh structural opportunities, with the Hang Seng and Tech indices advancing further as technology valuations repaired and domestic demand strengthened. In November and December, defensive positioning became more prominent; the Hang Seng declined about 3% in November but rebounded modestly in December after a court ruling altered tariff expectations, and high‑dividend sectors such as telecommunications, utilities and financials provided portfolio ballast.

Several sectors led the market’s gains. Gold miners produced exceptional returns: Zhufeng Gold（01815.HK） surged 1,195.45%, Lingbao Gold（03330.HK） rose 604.6%, Datang Gold（08299.HK） climbed 293.54%, and Shandong Gold（01787.HK） advanced 189.54% as international bullion prices rallied from USD 2,623.8 per ounce at the start of the year to above USD 4,300 in October. Hong Kong‑listed miners outperformed the metal itself, with Zhaojin Mining reporting a 140% year‑on‑year increase in net profit for the first three quarters and Zijin Mining posting a 55.45% rise. The new‑energy vehicle segment also performed strongly, with XPeng Motors‑W（09868.HK） up 64.46% and Leapmotor（09863.HK） up 48.52%, supported by trade‑in incentives, tax relief and progress on conditional L3 autonomous driving approvals and pilot programs in designated urban areas. Technology names benefited from AI narratives and product advances; Alibaba‑W（09988.HK） rose 81.16%, Kuaishou‑W（01024.HK） gained 62.37%, Tencent Holdings（00700.HK） increased 47.83%, and Baidu Group‑SW（09888.HK） climbed 44.40%, with firms reporting improvements in model efficiency and steps toward using domestically designed AI chips. Financials also rallied, led by insurers and brokerages: New China Life Insurance（01336.HK） rose 162.98%, China Life Insurance（02628.HK） gained 102.10%, People’s Insurance Company of China（01339.HK） advanced 87.14%, while brokerage stocks such as Essence International（06058.HK） increased 123%, GF Securities（01776.HK） rose 82.57% and CICC（03908.HK） gained 61.92%. Insurance benefited from valuation re‑rating, premium growth and improved investment returns, and brokerages were supported by regulatory easing, consolidation activity and valuation recovery.

Structural shifts in market participation and policy innovation also characterized 2025. Exchange‑traded funds became a dominant vehicle for capital inflows, with public funds’ Hong Kong equity holdings reaching RMB 1.3117 trillion by the end of the third quarter and passive products accounting for 52.3% of that total for the first time. The Hong Kong Exchange introduced a dedicated listing channel for specialized technology and biotech companies in May, reducing uncertainty and compliance costs for those issuers, and added 89 new constituents during the year, including leading names in new energy and technology. The Hong Kong government announced initiatives to develop an international gold trading hub, encourage refiners to establish operations locally and explore cooperation with the mainland on processing and trading arrangements, measures that support the market’s structural transformation.

Looking to 2026, institutional sentiment has turned broadly positive and target ranges have narrowed. Standard Chartered projects the Hang Seng to trade between 28,000 and 30,000 over the next 12 months, HSBC targets 31,000, Guosen Securities sets a 30,000–32,000 range under a 3.5%–4.0% U.S. Treasury yield scenario, and JPMorgan anticipates nearly 20% upside for both A‑shares and Hong Kong stocks. Seasonal patterns also favor a potential early‑year rally; historical data indicate a high probability of gains between New Year and Lunar New Year, with average returns around 4.5% in that window. Analysts identify three potential catalysts for further upside: a consensus on RMB appreciation that could alter capital flows, resilient export performance if U.S.–China relations remain stable in the first half of 2026, and technological breakthroughs in AI and semiconductors that could trigger independent rallies in the tech sector. With the U.S. easing cycle expected to deepen, institutions estimate up to USD 900 billion could return to emerging markets, positioning Hong Kong as a primary offshore platform for Chinese assets.