UOB Kay Hian Private Wealth Management
Date of Report: July 28, 2025

China’s New Economy: Uncovering the Next Wave of Growth in Hong Kong Stocks (2025 Outlook)

Introduction: Revisiting China’s New Economy and the Hong Kong Opportunity

In the second half of 2025, investors are closely watching tariff risks and global economic uncertainties. While UOB Kay Hian Private Wealth Management remains cautious on global equities, the firm holds a relatively optimistic view on Hong Kong and China markets. A central theme is the ongoing trend of de-dollarization, positioning Hong Kong stocks—whose underlying assets are largely RMB-based—as essential for forward-thinking portfolios.
Recently, a Chinese CIO Series webinar featuring Ma Dongfan, Founder and Chief Strategist of Horizon Insights, provided valuable perspectives on Hong Kong stocks and China’s evolving economic strategy. Below, we distill the key market drivers, policy shifts, and stock opportunities shaping China’s new economy.

Key Market Drivers: Southbound Inflows, Policy Shifts, and Structural Resilience

• Capital Flows: Robust southbound inflows have been the key driver of Hong Kong’s market rally in 2025. This liquidity surge is sector-specific, heavily benefiting biopharma, internet, and electronics, while sectors such as electric vehicles (EVs), banks, and insurance have not seen similar increases. Notably, loose liquidity conditions in mainland China are supporting sustainable inflows. There are also early signs that foreign investors are returning to Hong Kong as their sentiment improves.
• Policy Support: Policy stimulus has been more restrained than anticipated, as China remains committed to economic reforms and avoids over-stimulating traditional sectors like real estate. Instead, the government is channeling support toward new technologies, industries, AI-related infrastructure, and consumption subsidies. The newly announced Yarlung Tsangpo hydropower project highlights China’s strategic approach to economic development. With an additional RMB 1 trillion in fiscal balance this year, expectations are rising for more stimulus measures in the second half of 2025.
• Economic Fundamentals: Despite new tariffs and sluggish real estate and consumption, China’s exports and trade surplus are growing. Industrial production and electricity consumption remain high, underpinned by structural shifts as competitive Chinese brands expand globally, opening new avenues for growth.

Top Sectors and Investment Themes for 2H2025

Ma Dongfan points to three major sectors for robust growth:

• AI Applications
• Innovative Drugs (Biopharma)
• New Consumption Trends and Brands

In-Depth Company and Sector Analysis

Xiaomi Corp (1810.HK): The AI-Driven Consumer Ecosystem

Xiaomi is positioned as a global leader in the integration of smartphones, home appliances, and electric vehicles, with a leading role in consumer AI applications. The company’s unique ecosystem is driving robust EPS growth (72% in 2025E), and Xiaomi is increasingly recognized for its global reach and innovation. Its forward PE stands at 27.4, with a healthy net cash position, making it a standout in both growth and financial stability.

Akeso (9926.HK): Biopharma Innovation with Global Ambitions

Akeso exemplifies China’s biopharma innovation and international expansion. The company’s pipeline focuses on high-difficulty, major diseases, targeting rapid overseas business growth. Despite negative EPS growth projections in the short term, Akeso’s long-term innovation potential and global strategy remain attractive, though its valuation (246.5x forward PE) reflects the high expectations.

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

Despite overall weak consumption in China, a new generation of brands is emerging, fueled by social media and short video platforms such as Douyin, RedNote, and Tencent. Pop Mart, Laopu Gold, and Eastroc Beverage are leading this shift, posting exceptional EPS growth rates (Pop Mart: 166%, Laopu Gold: 170%). These companies are capitalizing on evolving consumer trends and structural changes, offering investors exposure to high-growth, trend-driven consumption.

Structured Note and Equity Linked Note Opportunities

Featured Structured Note: Xiaomi Corp (1810.HK)

• Currency: HKD
• Tenor: 6 months
• Strike Price: 89.00 and 95.54
• Coupon Frequency: Monthly
• Knock-Out Type: End of period
• Annualized Coupon: 10% (89.00 strike), 15% (95.54 strike)

Benefits: Enhanced returns with fixed coupons; principal protection at strike; suitable for bullish investors or those willing to own Xiaomi shares at the strike price. Risks: Exposure to underlying stock price declines; no entitlement to dividends during the note tenor; subject to issuer credit risk.

Equity Linked Notes: Diversified Yield Plays

Clients seeking yield can access equity linked notes across global blue chips and Chinese leaders. Selected indicative yields and prices (as of July 25, 2025) include:

• Broadcom Inc (AVGO): Yield up to 20.5%, Price 94.97
• Alibaba Group (9988 HK): Yield up to 18.3%, Price 95.59
• Nvidia Corp (NVDA): Yield up to 26.91%, Price 93.50
• Trip.com (9961 HK): Yield up to 20.96%, Price 94.98
• Meta Platforms (META): Yield up to 13.79%, Price 96.56
• Microsoft (MSFT): Yield up to 24.35%, Price 94.08
• SPDR Gold Shares (GLD): Yield up to 6.61%, Price 98.32

These notes allow investors to tailor risk/return profiles across strike levels and volatility bands.

Model Portfolios: ETF, US Stock, and China Stock Allocations

All ETF Portfolio

A globally diversified model, the ETF allocation (as of July 25, 2025) includes:

• SPDR S&P 500 ETF TRUST (SPY): 11.6%
• SCHWAB US DVD EQUITY ETF (SCHD): 4.1%
• ENERGY SELECT SECTOR SPDR (XLE): 3.9%
• INVESCO QQQ TRUST SERIES 1 (QQQ): 5.5%
• CSOP FTSE CHINA A50 ETF-HKD (2822 HK): 5.1%
• HANGSENG CHINA ENT INDEX-HKD (2828 HK): 3.0%
• ISHARES CORE U.S. AGGREGATE (AGG): 24.6%
• VANGUARD S/T CORP BOND ETF (VCSH): 24.8%
• SPDR GOLD SHARES (2840 HK): 10.0%
• Cash (USD): 7.4%

Performance year-to-date: 5.8%; since inception (Dec 29, 2023): 14.4%.

US Stock Model Portfolio: Core Recommendations and Trading Buys

Major positions (weight, sector, and performance highlights):

• Broadcom Inc (AVGO): 6.2%, Information Technology, 25.8% YTD return
• Energy Select Sector SPDR (XLE): 6.0%, Energy, 3.3% YTD return
• Nvidia Corp (NVDA): 5.8%, Information Technology, 29.2% YTD return
• Amazon.com Inc (AMZN): 5.7%, Consumer Discretionary, 5.5% YTD return
• Berkshire Hathaway Inc (BRK/B): 5.5%, Financials, 6.8% YTD return
• Microsoft Corp (MSFT): 5.3%, Information Technology, 22.3% YTD return
• Meta Platforms (META): 4.9%, Communication Services, 21.9% YTD return
• Schwab US DVD Equity ETF (SCHD): 4.8%, 1.9% YTD return
• Occidental Petroleum (OXY): 3.5%, Energy, -8.6% YTD return

Cash weighting: 42.2%; total portfolio YTD return: 4.8%.

China Stock Model Portfolio: Core Recommendations and Trading Buys

Top holdings and highlights:

• China Resources Land Ltd (1109 HK): 6.4%, Real Estate, 38.9% YTD return
• Tencent Holdings Ltd (700 HK): 6.1%, Communication Services, 33.2% YTD return
• Petrochina Co Ltd-H (857 HK): 6.0%, Energy, 26.7% YTD return
• Galaxy Entertainment Group Ltd (27 HK): 5.9%, Consumer Discretionary, 15.8% YTD return
• CSOP FTSE China A50 ETF-HKD (2822 HK): 5.9%, 7.6% YTD return
• Alibaba Group Holding Ltd (9988 HK): 5.8%, Consumer Discretionary, 45.6% YTD return
• HSBC Holdings Plc (5 HK): 5.8%, Financials, 38.6% YTD return
• China Mobile Ltd-H (941 HK): 5.6%, Communication Services, 16.2% YTD return
• Trip.com Group Ltd (9961 HK): 5.1%, Consumer Discretionary, -6.3% YTD return
• Sands China Ltd (1928 HK): 4.6%, Consumer Discretionary, -10.1% YTD return

Portfolio YTD return: 14.9%.

Key Dates and Market Events to Watch

• Jul 26-28: World AI Conference Shanghai
• Jul 27-30: FedEx CEO leads US-China Business Council delegation meetings in China
• Jul 28-29: US-China Trade Talks in Stockholm
• Jul 28-31: China Politburo Meeting (estimated)
• Jul 29-30: FOMC Rate Decision
• Jul 31: China July NBS PMI, Top 100 Developer Real Estate Sales, US PCE & Personal Income/Spending, US Initial Jobless Claims
• Aug 1: New US tariffs take effect, HK Stablecoin Ordinance starts, China July Caixin/S&P Mfg PMI, Macau July Casino Revenue, US Labor Data
• Aug 2: Berkshire Hathaway (BRK/B) earnings (est.)

Conclusion: Positioning for China’s New Economy in 2025

With Hong Kong’s strategic position in the era of de-dollarization and China’s focused support for innovation-driven sectors, investors should carefully monitor liquidity trends, policy developments, and sector rotation. The highlighted stocks and sectors—AI, biopharma, and new consumption—offer high-growth potential, while diversified model portfolios provide robust risk-adjusted returns. As more stimulus is expected in the coming months, the Hong Kong and China equity markets remain compelling for dynamic, forward-looking investors.