Hong Kong stocks rise, but volatile trading signals fragile sentiment

Hong Kong’s financial markets are reacting to shifting global interest rate expectations.

Hong Kong’s stock market has surged 24.6% in early 2025, rebounding from recent lows, but market sentiment remains fragile as trading volumes fluctuate amid economic uncertainty, according to Nomura.

In its report, Nomura noted Hong Kong’s financial markets are reacting to shifting global interest rate expectations, with the possibility of US Federal Reserve rate cuts in 2025 influencing capital flows into the city’s financial sector.

A reduction in US rates could make Hong Kong assets more attractive to international investors, supporting further market stability.

At the same time, foreign investment sentiment in Hong Kong is showing signs of recovery, particularly in the technology and financial sectors.

Analysts note that Hong Kong remains a key hub for cross-border investments in Greater China, despite recent geopolitical headwinds.

Beyond equities, Hong Kong’s commercial real estate sector continues to face pressure, but Nomura expects some stabilisation by late 2025.

Transactions involving distressed assets have increased, indicating ongoing market adjustments as investors seek opportunities amidst lower valuations.

Despite these challenges, the city's economic fundamentals remain intact, with real estate and financial services still serving as core pillars of Hong Kong’s economy.

Whilst Hong Kong’s GDP growth projections have been revised downward, Nomura’s analysts believe that global economic stability and China’s policy direction will play a critical role in shaping the city’s outlook.

The combination of a strong early-year stock market recovery, improving foreign investor sentiment, and potential interest rate cuts could help bolster Hong Kong’s financial landscape in the months ahead.