Hong Kong Stocks Spring 2026 Preview: AI Full Industry Chain Triggers Valuation Reset, Five Rationales Support Upside Resilience

At the outset of 2026, Hong Kong’s equity market appears positioned for a pronounced spring rally. China Merchants Securities observes that, unlike A‑shares which benefit from a clear policy floor and state stabilization mechanisms, Hong Kong equities lack such administrative backstops yet exhibit superior price‑discovery efficiency that accentuates the value of high‑quality assets. When market‑driven factors align, Hong Kong’s upside elasticity frequently exceeds expectations.

Five principal rationales underpin the prospective rally. The market enters the year in an earnings vacuum, and strong growth expectations for new‑economy sectors are supporting investor confidence. Renminbi appreciation is creating favorable conditions for global capital allocation into Hong Kong listings. Domestic policy emphasis on technological innovation and demand expansion increases the likelihood that positive sentiment from A‑shares will spill over into Hong Kong. The local market is assembling a comprehensive AI industry‑chain of listed companies, which is attracting long‑term capital. Finally, the reduced scale of share unlocks in January and February is easing near‑term selling pressure.

Macro fundamentals suggest new supply is generating fresh demand. China’s economy currently displays a “weak domestic, strong external” pattern: domestic consumption and fixed‑asset investment face headwinds while exports remain resilient. Liquidity indicators show ample money supply growth even as consumer‑price inflation hovers near zero and producer prices remain negative, signaling constrained effective demand. The structural shift from legacy sectors to new economy leaders is evident: in 2025 the Hang Seng Index’s aggregate net profit was weighed down by banks and oil, but excluding those structural drags the core constituents delivered double‑digit EPS growth. New‑economy earnings momentum is expected to be robust in 2026, with the Hang Seng Tech Index projected to record net‑profit growth of 24% in 2026 and 23% in 2027, materially outpacing traditional sectors.

Policy support is broad‑based and pro‑growth. As the opening year of the 15th Five‑Year Plan, policy levers retain room to promote innovation and stimulate domestic demand. The central bank implemented a 25‑basis‑point structural rate cut and introduced eight measures targeting demand expansion, technological innovation and small‑and‑micro enterprises. Authorities have shown greater tolerance for equity‑market appreciation, leveraging capital‑market wealth effects to offset weak domestic demand and income expectations. Fiscal policy is gradually shifting from land‑based revenue models toward equity‑based approaches, with local governments increasingly holding stakes in quality enterprises to secure long‑term returns. A temporary easing in Sino‑US tensions, including approval for certain chip exports and planned high‑level visits in April 2026, has created a more stable external backdrop; January–February is therefore viewed as a favorable window for risk‑appetite recovery.

Liquidity dynamics combine domestic and international forces. Although the Federal Reserve paused rate cuts in the first quarter and foreign capital remains cautious, a modest appreciation of the renminbi enhances Hong Kong’s appeal to global investors. Southbound flows remained strong in 2025, with net inflows exceeding HKD 1.4 trillion, up 74% year‑on‑year. As some A‑share pockets become richly valued and regulators temper exuberant expectations, capital is likely to seek higher safety margins in Hong Kong assets. IPO issuance pressure is manageable in the near term, with a slower fundraising cadence and reduced unlocking in January–February. The listing of AI large‑model companies such as MiniMax and the planned Hong Kong IPO of optical‑module leader Zhongji Xuchuang have contributed to the emergence of a full AI ecosystem on the exchange—from compute hardware and foundational models to vertical applications—thereby increasing the market’s AI exposure and attracting long‑term investors.

Valuations remain comparatively attractive on a global basis. As of January 16, 2026, the Hang Seng Index traded at a trailing‑12‑month P/E of 12.25x, well below the S&P 500 at 29.6x and the Nasdaq at 35.3x. The Hang Seng’s equity risk premium stood at 3.99%, markedly higher than the negative premium observed for the S&P 500, highlighting a valuation gap. The AH premium index has eased from 2024 highs to around 120, indicating scope for further convergence.

Market style in the early months of 2026 is likely to favor growth. The Hang Seng Tech Index has experienced significant prior declines and now reflects reasonable valuations, while its earnings growth outlook materially outstrips that of traditional sectors. With certain A‑share themes appearing overheated, southbound capital is expected to target scarce A‑share assets and undervalued Hong Kong internet and hard‑technology leaders. The arrival of MiniMax and Zhongji Xuchuang on the Hong Kong market will alter microstructure and increase the weight of growth‑oriented names. Historically, information technology, telecommunications and materials sectors have tended to perform well during spring rallies, aligning with the ongoing AI revolution and the shift toward new productive capacities.

From an allocation perspective, the real‑economy segment offers opportunities as new supply creates demand. Essential‑consumption names have underperformed in recent years and trade at decade‑low valuations; companies that can innovate, expand market share and improve efficiency may see earnings and valuation recovery. Leading consumer staples and food‑sector names such as Mengniu Dairy and Haitian Flavouring warrant attention. The integrated‑resort and gaming sector is showing signs of quality‑led recovery, with operators investing in non‑gaming attractions—performances, conventions and high‑end dining—to enhance guest retention and per‑capita spending; Wynn Macau and Sands China are cited as prominent operators.

Selective alpha opportunities remain available through bottom‑up stock selection. In the innovative‑pharmaceutical space, companies such as Hansoh Pharmaceutical and Innovent Biologics exemplify names with long‑term fundamental support; after strong sector performance in 2025, 2026 may favor oversold, high‑quality stocks that offer alpha potential.

In the virtual‑economy allocation, a barbell approach balancing offensive and defensive positions is recommended. On the offensive commodity side, gold benefits from multiple supports—dollar credibility concerns, central‑bank purchases, geopolitical risk and asset scarcity—making it an attractive hedge; Zijin Mining is an example of a gold‑sector name whose share‑price elasticity can exceed bullion moves. Copper presents structural opportunities amid underinvestment on the supply side and demand driven by energy transition and AI infrastructure; firms with high‑quality global resources such as Zijin Mining and China Molybdenum merit consideration. Aluminum faces supply constraints under a 45‑million‑ton policy ceiling while AI data‑center build‑out competes for power, supporting producers with compliant capacity such as China Hongqiao. Lithium demand, supported by rapid growth in energy‑storage installations and geopolitical pricing mechanisms in South America, favors companies with South American exposure such as Ganfeng Lithium and Tianqi Lithium.

On the equity‑enhancement offensive, insurers stand to gain from the asset‑scarcity environment and equity‑market recovery as they increase allocations to equities and benefit from regulatory easing and lower liability rates; Hong Kong insurance stocks trade at notable discounts to A‑shares, with China Life (2628.HK) cited for its significant valuation gap. On the defensive side, high‑dividend strategies provide fixed‑income‑like characteristics: the Hang Seng High Dividend Yield Index offers a yield of 5.93%, well above 10‑year government bond yields and five‑year RMB deposit rates. Improved corporate governance, regulatory emphasis on cash dividends and southbound inflows into “fixed‑income plus” products support allocations to stable, dividend‑paying names such as COSCO Shipping Holdings, China Shenhua and China Mobile.

In sum, Hong Kong’s market is positioned for a potentially robust spring phase driven by AI‑related valuation re‑rating, supportive policy and improving liquidity. Whether through the scaling of AI industry chains, renewed consumer and entertainment demand, or strategic commodity and dividend plays, the market’s near‑term resilience will depend on the translation of these structural drivers into earnings and capital flows.