In 2025, the Hong Kong stock market underwent a pivotal transition from cautious repair to value revaluation. Despite repeated global political and economic uncertainties impacting risk assets, Hong Kong stocks did not continue their previous sluggish trend. Instead, with improvements in liquidity and the return of capital flows, the market gradually stabilized and re-entered the international capital radar.

Looking at the overall performance, the Hong Kong stock market showed a clear recovery trend throughout the year. As of mid-December, the Hang Seng Index had risen approximately 33% year-to-date, briefly breaking through the 27,000-point mark and closing above 25,000 points, marking one of the best annual performances in nearly five years. Both the Hang Seng China Enterprises Index and the Hang Seng Tech Index had risen more than 20%, outperforming major global markets, indicating that the market had moved beyond a mere emotional rebound.

At the beginning of the year, market sentiment was still affected by overseas policy disruptions and geopolitical risks, with trading activity remaining restrained. However, as the Federal Reserve released several dovish signals and cut rates by about 75 basis points during the year, global liquidity conditions improved marginally. Combined with the historically low valuations of Chinese assets, Hong Kong stocks gradually became more attractive for investment. After mid-year, the index's baseline shifted higher, and market risk appetite steadily recovered.

Stabilization of Blue-Chip Stocks Lays the Foundation for Index Repair

The repair of the Hong Kong stock market in 2025 was not driven by speculative trading but was built on the stabilization of blue-chip stocks. Core constituents such as Tencent, HSBC, and AIA Insurance maintained relatively steady performance for most of the year, providing continuous support for the index.

Tencent, with stable performance in its core businesses like advertising and gaming, saw its free cash flow continue to grow. Its market value once again reached around HKD 5 trillion, and its stock price outperformed the previous years. In the financial sector, HSBC benefited from a higher interest rate environment, which boosted its profit margins, while AIA saw renewed interest from medium- to long-term investors as its new business value recovered. These blue-chip stocks' stabilization laid a solid foundation for the overall valuation repair in the Hong Kong market.

Clearer Structural Market Trends Gradually Taking Shape

Unlike earlier single-sector rotations, the Hong Kong stock market in 2025 exhibited clearer structural trends. Market pricing gradually shifted from macro expectations to the profitability and cash flow abilities of individual companies, with sectors like technology, finance, energy, and some cyclical industries taking turns leading.

In technology, companies like Xiaomi and SMIC strengthened their strategic positions in their respective industries, providing new support for valuations. In the energy and resources sectors, companies like CNOOC and COSCO Shipping demonstrated certain defensive properties in the volatile market, thanks to their stable performance and high dividend levels. The pharmaceutical sector continued its mixed performance, with innovative drug companies showing signs of recovery while those with insufficient fundamentals faced continued pressure for adjustments.

Share Buybacks as a Key Indicator of Market Confidence

In 2025, share buybacks became an important observation point for the Hong Kong stock market. Although the overall buyback scale had decreased from historical highs, the continued buybacks by leading companies helped stabilize market expectations during periods of volatility.

Tencent maintained a high-frequency buyback pace throughout the year, with a total buyback amount of approximately HKD 62 billion, consistently ranking among the top in the Hong Kong market. HSBC and AIA also showed high levels of certainty in capital management, enhancing shareholder returns through buybacks and dividends. The cancellation of shares reduced the circulating share capital and sent a signal of management's confidence in the company's long-term value.

Capital Flows Become More Rational

From a funding perspective, southbound capital remained the most important marginal force in the Hong Kong stock market in 2025. Data showed that the net inflow of southbound funds reached nearly HKD 1.4 trillion, a historical high, further strengthening the pricing influence of Mainland capital in the Hong Kong market.

At the same time, the capital allocation style became more rational. Companies with high dividends, stable cash flows, and solid industry positions became the key focus of investments. Since the second half of the year, some international funds have also re-entered the Hong Kong market, focusing on leading Chinese companies with global competitiveness. As a result, the market's capital structure has become more balanced.

Conclusion: From Repair to Revaluation

Looking back on 2025, the Hong Kong stock market made an important leap from emotional repair to value revaluation. The index baseline shifted higher, blue-chip stocks gradually stabilized, buybacks continued to build confidence, and marginal capital flows returned, collectively defining the main narrative of the year.

Although external uncertainties remain, compared to the previous long period of "passive undervaluation," the pricing logic of Hong Kong stocks has undergone a substantive change. With valuations still attractive, Hong Kong stocks are gradually entering a more sustainable upward phase, and their position in global capital allocation is expected to continue strengthening.