Hong Kong’s stock rally was no fluke, but there’s no room for complacency

US tariffs highlighted Hong Kong’s advantage: close ties to the mainland that brought both policy support and gains from the global fallout

Few people, if any, predicted the Hang Seng Index would jump 20 per cent over the past six months. And yet, despite the doom and gloom, it managed to outperform major markets in the United States, Japan and all the founding countries of Brics. Hong Kong shares even surged ahead of their mainland peers on the CSI 300 by the largest margin since 2008. Its first-half IPOs soared eightfold, returning the local market to the world’s top spot for capital raising.

All these come as those other major benchmarks aren’t performing too shabbily either. The S&P has repeatedly made records in recent weeks; the London FTSE, German Dax and Indian SENSEX have hit or are near multi-year highs; and the Nikkei has, since last year, regained levels since the bubble burst some 35 years ago. All have recovered and then some from US President Donald Trump’s “Liberation Day”, with its almost universal tariffs that sent global equities markets into a tailspin in April. Professionals had warned retail investors not to risk buying the dip. “Dumb” money went ahead anyway and won.

With hindsight, we are perhaps in a better position to understand why. Factors once seen as holding back Hong Kong turned out to be advantages. Consider the adage: as China goes, so goes Hong Kong. The local economy was being dragged down by the mainland’s slowdown as it was also caught up in the trade and tech war between the world’s two largest economies.

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But then Trump’s tariff war sank the US bond and stock markets, at least for a time, and weakened the US dollar, which has fallen the most since 1973. For years, the “Magnificent Seven” of tech behemoths such as Meta, Nvidia and Microsoft were leading the extraordinary American bull run. Then DeepSeek came. The much cheaper but efficient Chinese AI model exposed how overvalued the US tech stocks were, while Trump’s tariffs forced investors to de-risk from US assets in massive sell-offs.

In contrast, the main focus of Beijing’s macroeconomic and financial policies have been continuous support for the economy. The drumbeat of stimulus persisted into May while Washington was busy bullying friends and foes alike with tariffs. Inevitably, big-time fund managers and investment banks have been rerating Asia positively. So Hong Kong became doubly a beneficiary, first because of Trump’s tariff war, and then the negative global reaction to it.

Of course, we cannot be complacent, the tide can turn on a dime. Financial officials and regulators must continue to reform and strengthen our capital market, and broaden and diversify the reach of our trade-driven economy into Asia and the Middle East. The tough challenges ahead are likely to be even more severe than before.

Hong Kong’s stock rally was no fluke, but there’s no room for complacency

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