The author, Julia Wang, is Chief Investment Officer for North Asia, Nomura International Wealth Management.
While global markets celebrated modest gains in 2025, the Hong Kong public market pulled off something remarkable—a 28% surge that defied three years of relentless pessimism and outperformed many of its global peers, including the US, Europe, and mainland China.
Since November, some wobbles have seen the index give up gains. Yet, after a tumultuous three-and-a-half years, the way the Hong Kong market was able to defy broad-based pessimism since late 2024 was impressive.
The IPO market tells an even more compelling story. According to Deloitte, the Hong Kong market will likely have raised nearly HK$286 billion ($36.77 billion) in 2025. CATL, likely the second-biggest IPO in 2025, alongside big names like Zijin Mining drew broad investor interest from overseas as well as mainland China investors.
The comeback won’t repeat, but the story continues
By definition, a surprise comeback is hard to repeat. Investor sentiment has largely recovered from the depths of despair reached in the summer of 2024. The inflows back this up—southbound flows reached new record levels, while EPFR data shows a substantial increase in foreign passive funds since the beginning of the year. This means Hong Kong is unlikely to get another massive re-rating boost as it did in 2025.
But the attraction of the Hong Kong market for companies to list, as well as for investors to participate in, will likely endure. From a medium-term perspective, three structural drivers are reshaping this market in ways that go far beyond temporary sentiment swings.
Three game-changing drivers
First, the Chinese economy is still racing ahead to innovate and adapt to new technology trends, while continuing to move up the value chain. The Greater Bay Area has become a vibrant hub for technology and advanced manufacturing, lending itself naturally to progress in Artificial Intelligence (AI).
The Hong Kong market, as a well-recognised international financial centre that can provide diversified foreign currency financing, FX hedging, as well as a large global investor base, will be their primary choice to raise capital for future development.
Second, China’s development strategy is shifting to ‘dual circulation’, from a single-minded reliance on globalisation in the early 2000s. In this context, it makes sense for Chinese companies to list in a market closer to home, which can help further boost their name recognition amongst their consumers.
Foreign investors would likely also want to stay in the Hong Kong market to maintain their knowledge of, and access to, investment opportunities in China. A slew of regulatory changes, both in mainland China and in Hong Kong have also greatly simplified the approval process, making it easier for Chinese companies, particularly in the tech space to list in Hong Kong.
Third, the characteristics of the Hong Kong market continue to evolve. In 2025, daily southbound buying via Stock Connect exceeded HK$200 billion ($26 billion) per day, making up a third of total liquidity in the Hong Kong market. We expect this trend will only strengthen, as Chinese households and the financial system shift focus away from the property sector for investment purposes.
2026: Sustainable growth over spectacular gains
Looking ahead to 2026, we are cautiously optimistic with different expectations. Our global outlook is a constructive one, as we expect the rally to broaden, alongside a moderately weaker US dollar.
We expect the Hang Seng Index to achieve a more moderate 8-10% return, driven by sustainable earnings growth, particularly with a mildly stronger trend in the RMB. Valuation is fair and can be sustained if the economy in China continues to stabilise. The structural changes of the economy should continue to drive the outperformance of tech and hardware.
We favour healthcare and dividend-paying stocks. For both cyclical as well as structural reasons, we see the IPO pipeline remaining robust, particularly in sectors related to clean energy, AI, healthcare as well as consumers. This reinforces Hong Kong’s growing attraction as a key global IPO destination and the primary choice for Chinese companies—powered by a multipolar world, structural shifts in Chinese household investment and Chinese firms’ growing global dominance.
The comeback year is over. The reinvention has just begun.
