UOB Kay Hian Private Wealth Management
July 28, 2025

China’s New Economy: Key Investment Themes and Stock Picks for 2H 2025

As global markets face ongoing risks such as tariffs and shifting capital flows, UOB Kay Hian Private Wealth Management presents a comprehensive outlook on China’s evolving new economy, with a particular focus on Hong Kong-listed stocks. In this latest analysis, expert views, sector trends, and stock recommendations are dissected to provide actionable insights for investors seeking opportunities amid global uncertainty and the ongoing trend of de-dollarization.

Market Overview: Hong Kong Stocks in the Age of De-Dollarization

UOB Kay Hian remains cautious on global equities due to tariff risks but highlights relative optimism for Hong Kong and Chinese markets. While Hong Kong stocks are denominated in USD, their underlying assets are primarily RMB-based, positioning them as essential in a world experiencing a long-term shift away from the US dollar.

Key Drivers Shaping the Hong Kong Market

• Capital Flow Dynamics: Strong southbound inflows from mainland China have driven Hong Kong’s rally in 2025. Sectors such as biopharma, internet, and electronics have benefitted most, contrasting with more muted flows into EV makers, banks, and insurers. This pattern suggests that both local and international investors are selectively allocating capital, supported by loose liquidity conditions in China and signs of renewed foreign interest.
• Policy Environment: Policy support has lagged expectations as the Chinese government prioritizes economic reform over aggressive stimulus, especially for traditional sectors like real estate. Instead, there is targeted support for new technologies, AI, innovative industries, and consumption subsidies. The newly announced Yarlung Tsangpo hydropower project exemplifies China’s strategic development, and with an extra RMB 1 trillion in fiscal balance for 2025, further stimulus is anticipated in the second half of the year.
• Economic Fundamentals: Despite ongoing tariff pressures, China’s exports and trade surplus continue to grow. Industrial production and electricity consumption remain robust. The underlying resilience is attributed to a structural shift toward more globally competitive Chinese brands and new growth avenues in international markets.

Stock Picks: Sectors and Companies Leading the New Economy

The following companies are highlighted for their strong positions in key growth sectors:

Xiaomi Corp (1810.HK): AI, Consumer Ecosystem, and EVs

Xiaomi stands out as a global leader with an integrated ecosystem spanning smartphones, home appliances, and electric vehicles. The company is also at the cutting edge of consumer AI applications, positioning it as a critical player in both domestic and international tech markets.

Akeso Inc (9926.HK): Biopharma Innovation and Global Expansion

Akeso exemplifies China’s advances in biopharmaceuticals, boasting a robust pipeline and rapid overseas growth. Its focus is on high-difficulty, major diseases, reflecting China’s growing influence in global healthcare innovation.

Pop Mart International (9992.HK), Laopu Gold (6181.HK), Eastroc Beverage (605499.CH): New Consumption Trends

Despite overall weak consumption, these companies are tapping into emerging consumer trends driven by social media, short video platforms, and changing habits. Their products align with the structural shift toward lifestyle and experiential consumption, which is gaining traction in China’s new economy.

Structured Note and Equity-Linked Product Ideas

Featured Structured Note: FCN on Xiaomi Corp (1810.HK)

• Tenor: 6 months, denominated in HKD
• Coupon: 10–15% p.a. (depending on strike)
• Strike: 89.00 or 95.54
• Knock Out: 100% at end of period

This note provides enhanced yield with monthly coupons and is suitable for investors bullish on Xiaomi or comfortable owning the shares at the strike level. Risks include exposure to underlying stock declines and issuer credit risk. Investors will not receive dividends during the tenor.

Equity-Linked Notes Based on Recommended Stocks

A range of equity-linked notes is offered on global blue-chip names and sector ETFs, including Broadcom, Alibaba, Nvidia, Galaxy Entertainment, Trip.com, Occidental Petroleum, Meta Platforms, Amazon, PetroChina, Walmart, Microsoft, and more. These products feature yields from around 2% to over 26% (depending on the underlying, strike, and volatility), with tenors expiring in November 2025.

Model Portfolios: ETF, US, and China Stock Allocations

All ETF Portfolio

ETF allocation reflects a balanced approach, with significant exposure to US equities, China A-shares, bonds, and gold, aiming for both growth and defensive characteristics.

US Stock Model Portfolio: Core and Trading Recommendations

The US portfolio reflects high conviction in technology, consumer, and energy leaders, balanced with select trading buys for tactical exposure.

China Stock Model Portfolio: Core and Trading Recommendations

The China portfolio features a blend of dominant consumer, technology, financial, and industrial names, with high conviction core recommendations and tactical trading ideas. The allocations are designed to capture ongoing sectoral shifts and new economy growth drivers.

Upcoming Events to Watch

• World AI Conference Shanghai (Jul 26–28)
• US-China Trade Talks, Stockholm (Jul 28–29)
• China Politburo Meeting (Jul 28–31)
• Major corporate earnings: Microsoft, Meta, Amazon, Alibaba, HSBC, and many more in late July and early August
• New US tariffs take effect and HK Stablecoin Ordinance enacted on August 1

Conclusion: Positioning for China’s Next Growth Phase

While macro risks and policy uncertainties remain, China’s new economy is creating compelling investment opportunities, particularly in AI, biopharma, and innovative consumer sectors. Hong Kong-listed stocks, underpinned by structural capital flows and resilient fundamentals, are well-positioned for medium- to long-term growth. Investors should monitor sector-specific trends, policy shifts, and upcoming events to make informed allocation decisions in this dynamic market landscape.