Bank of East Asia: Lowering this year's Hang Seng Index target to 29,000 points, with a possibility of a pullback to 23,000 points in a pessimistic scenario.

Bank of East Asia published a research report stating that for the Hong Kong stock market, under the basic scenario assumption (the Middle East conflict may ease in the next 4 to 6 weeks, Brent oil prices fall below $90 per barrel), the bank will lower its 2026 Hang Seng Index profit forecast from HK$ 2350 to HK$ 2300; lower the NTM forecasted P/E ratio from 13.1 times to 12.6 times; lower the 2026 Hang Seng target from 30800 points to 29000 points, with short-term fluctuations seen as opportunities to absorb. Sectors/themes that are favored include AI cloud platforms, advanced semiconductors, humanoid Siasun Robot & Automation, copper and gold mines, photovoltaic and energy storage equipment, emerging mainland consumption, mainland insurance, Hong Kong real estate, and Hong Kong transportation. The bank further states that under the pessimistic scenario assumption (Middle East conflict worsens/continues into the third quarter, Brent oil prices rise to $120 per barrel and remain until the third quarter); the bank will lower its 2026 Hang Seng profit forecast from HK$ 2350 to HK$ 2200; lower the NTM forecasted P/E ratio from 13.1 times to 11 times; lower the 2026 Hang Seng target from 30800 points to 24200 points, with the second quarter expected to face a correction of over 10% (testing below 23000 points); short-term safe-haven sectors/themes include upstream energy and oil and gas equipment, oil tanker transportation, coal, new energy electricity and storage, new energy vehicles, mainland banks, and local utilities. The bank mentions that from the beginning of the year till now, the MSCI Hong Kong Index has outperformed other A and Hong Kong market major stock indices, benefiting from the positive performance of the Hong Kong financial, consumer, and real estate markets, as well as local corporate earnings in 2025 generally exceeding expectations. Under the basic scenario, the bank maintains a positive view on the Hong Kong local financial, real estate rental, transportation, and utility sectors, for the following reasons: low interest rates support a continued recovery in property sales; demand for wealth management, asset management, and IPO financing services from financial institutions remains strong; hosting more large-scale events drives tourist visits and local consumption; the Hong Kong government accelerates alignment with the Mainland's "14th Five-Year Plan", focusing more on innovation and technology, Northern development, and cross-border finance. The bank points out that supported by growth momentum in various aspects, Hong Kong's economy has shown strong performance in 2025. Looking ahead to 2026, with the easing of global trade policy uncertainties, continued abundant market liquidity, and sustained high public investments, the stimulus from favorable factors is expected to continue the economic recovery momentum, with a projected annual growth of 2.8%. Benefiting from lower interest rates, continued economic recovery, and the further increase in property demand driven by talent moving to Hong Kong, residential property prices in 2026 are expected to achieve high single-digit growth.