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

Hong Kong and China’s New Economy: 2025 Market Outlook, Top Stock Picks, and ETF Strategies

Market Overview: Hong Kong’s New Chapter Amid De-Dollarization

The second half of 2025 is shaping up to be a transformative period for Hong Kong and China equities. UOB Kay Hian’s Chief Investment Officer, Qi Wang, maintains a cautious stance on global equities due to tariff risks but holds a relatively optimistic outlook on Hong Kong’s markets. The ongoing global trend of de-dollarization further highlights Hong Kong stocks as essential assets, as these companies’ core businesses are fundamentally tied to RMB, despite being listed as USD assets.

Webinar Insights: Revisiting China’s New Economy

During a recent CIO Series webinar, Ma Dongfan, Founder and Chief Strategist at Horizon Insights, outlined several factors driving Hong Kong’s equity rally and identified key sectors and stocks to watch for the remainder of 2025.

Capital Flows & Liquidity Trends

• Strong southbound inflows have driven Hong Kong’s market performance, with sectors such as biopharma, internet, and electronics benefiting the most.
• EV, banks, and insurance sectors have not seen significant inflows, suggesting local and international funds are focusing elsewhere.
• Mainland China’s loose liquidity supports ongoing inflows, and there are early signs of foreign investors returning to Hong Kong as sentiment shifts.

Policy Direction & Economic Strategy

• Policy support has been less robust than anticipated, reflecting China’s focus on economic reforms over short-term stimulus, especially in traditional sectors like real estate.
• Government initiatives are now channelled toward emerging technologies, new industries, AI-related infrastructure, and targeted consumption subsidies.
• Major projects, such as the Yarlung Tsangpo hydropower development, underscore China’s strategic, long-term approach.
• China maintains a significant fiscal buffer, with an additional RMB 1 trillion available for potential stimulus in the second half of 2025.

Sector Fundamentals: Resilience and Growth

• Despite weak real estate and overall consumption, China’s exports and trade surplus continue to grow—showing resilience even in the face of new tariffs.
• Industrial production and electricity consumption remain robust, driven by Chinese brands’ global expansion and ongoing structural shifts in export composition.

Top Stock Picks: Analysis and Forward Metrics

Ma Dongfan highlights several sectors and companies that stand out for their innovation, growth potential, and resilience.

Xiaomi (1810.HK): AI Ecosystem Pioneer

Xiaomi stands out as a unique global leader, integrating smartphones, home appliances, and electric vehicles under a cohesive ecosystem. The company is also a key player in consumer AI applications, benefiting from its diversified product portfolio and expanding global footprint.

Akeso (9926.HK): Biopharma Innovation

Akeso exemplifies China’s progress in biopharma innovation and international expansion. The company is rapidly scaling its overseas business with a robust pipeline targeting high-difficulty, major diseases. Despite negative EPS growth in the near term, Akeso’s long-term prospects remain compelling due to ongoing R&D and global ambitions.

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

This group of rising consumer brands reflects the emergence of new consumption patterns in China, driven by social media platforms like Douyin, RedNote, and Tencent. Even in an environment of weak overall consumption, these companies are leveraging digital engagement and shifting consumer preferences to fuel growth.

Structured Product Spotlight: Xiaomi FCN Note

• 6-month Fixed Coupon Notes (FCN) are available on Xiaomi Corp, offering 10%-15% annualized coupon based on strike price.
• Product benefits include enhanced return with fixed coupons, principal protection if the strike is not breached, and the opportunity for investors with a bullish view to accumulate Xiaomi shares at the strike level.
• Risks include exposure to price declines, lack of dividend entitlement during the tenor, and issuer credit risk.

Equity-Linked Notes: Yield Opportunities Across Global and China Blue Chips

A wide range of equity-linked notes are available, providing yields on leading global and Chinese names as well as ETFs. Key highlights include:

Model Portfolios: ETF, US, and China Stock Picks

All ETF Portfolio: Diversified Global Allocation

UOB Kay Hian’s global asset allocation model portfolio highlights a diversified approach across equity, bond, and gold ETFs:

• SPDR S&P 500 ETF TRUST (SPY US): 11.6% weight, YTD return 9.4%
• SCHWAB US DVD EQUITY ETF (SCHD US): 4.1% weight, YTD return 1.9%
• ENERGY SELECT SECTOR SPDR (XLE US): 3.9% weight, YTD return 3.3%
• INVESCO QQQ TRUST SERIES 1 (QQQ US): 5.5% weight, YTD return 11.1%
• CSOP FTSE CHINA A50 ETF-HKD (2822 HK): 5.1% weight, YTD return 6.5%
• HANGSENG CHINA ENT INDEX-HKD (2828 HK): 3.0% weight, YTD return 26.5%
• ISHARES CORE U.S. AGGREGATE (AGG US): 24.6% weight, YTD return 3.6%
• VANGUARD S/T CORP BOND ETF (VCSH US): 24.8% weight, YTD return 3.9%
• SPDR GOLD SHARES (2840 HK): 10.0% weight, YTD return 28.4%
• Cash: 7.4%

US Stock Model Portfolio: Core Recommendations and Trading Buys

Key positions and performance as of July 25, 2025:

China Stock Model Portfolio: Core Recommendations and Trading Buys

Highlighted positions as of July 25, 2025:

Upcoming Events to Watch

• World AI Conference in Shanghai (July 26-28)
• US-China Trade Talks in Stockholm (July 28-29)
• China Politburo Meeting (Estimated July 28-31)
• FOMC Rate Decision (July 29-30)
• Key earnings releases: Alibaba, Microsoft, Meta, Qualcomm, Amazon, Apple, Berkshire Hathaway, and more
• New US tariffs go into effect (August 1)
• Hong Kong Stablecoin Ordinance enacted (August 1)

Conclusion: Positioning for Opportunity in China and Hong Kong

The evolving landscape of China’s new economy and Hong Kong’s role as a bridge for RMB-denominated assets make these markets a focal point for forward-looking investors. With robust sectoral trends in AI, biopharma, and new consumption, as well as diversified ETF and equity-linked note strategies, investors have a range of tools to navigate the shifting global environment in 2025.
For more detailed portfolio construction or to discuss any of the highlighted products, investors are encouraged to consult with UOB Kay Hian’s advisory team.