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

Hong Kong Stocks in 2025: Strategic Insights for Investors Targeting China’s New Economy

Executive Summary: Revisiting China’s New Economy Through Hong Kong Markets

The financial landscape in 2025 presents investors with a complex interplay of global risks and sector-specific opportunities. UOB Kay Hian Private Wealth Management maintains a cautious stance on global equities due to ongoing tariff risks, but holds a relatively optimistic outlook on Hong Kong and China-related markets. A key theme is the irreversible trend of “de-dollarization,” highlighting the strategic importance of Hong Kong-listed companies, which are USD assets on the surface but have strong RMB-based fundamentals underneath.

Market Dynamics and Key Drivers

• Capital Flows: Robust southbound inflows from mainland China have powered Hong Kong’s market rally, especially benefiting biopharma, internet, and electronics sectors. However, EVs (e.g., BYD, Xiaomi), banks, and insurers have not seen substantial southbound increases, indicating local and foreign capital are the main buyers in these names. Ample liquidity in mainland China underpins these trends, with signs that foreign investors are returning as sentiment improves.
• Policy Environment: Policy support in 2025 has underwhelmed compared to expectations, largely due to China’s commitment to deep economic reforms. Authorities have avoided over-stimulating traditional sectors like real estate, instead focusing on new technologies, industries, AI-related infrastructure, and targeted consumption subsidies. A notable example is the Yarlung Tsangpo hydropower project, reflecting China’s strategic development agenda. With RMB 1 trillion in extra fiscal balance this year, further stimulus is anticipated in the second half of 2025.
• Fundamentals: Real estate and overall consumption remain weak. However, China’s exports and trade surplus are growing despite new tariffs. Industrial production and electricity consumption remain elevated, driven by structural shifts as Chinese brands expand globally, creating new growth avenues.

High-Conviction Sectors and Stock Picks for 2025

Key themes for stock selection include AI applications, innovative pharmaceuticals, and emerging consumption trends leveraged by social media and digital platforms.

Xiaomi (1810.HK): AI and Ecosystem Leader

Xiaomi stands out as a unique global leader in the integrated ecosystem of smartphones, home appliances, and electric vehicles (EVs). It is also a prominent player in consumer AI applications. The company’s robust momentum is supported by strong EPS growth (72% for 2025, 41% CAGR through 2027) and a solid capital structure with negative net debt to equity, making Xiaomi especially attractive to investors seeking exposure to China’s next-generation technology champions.

Akeso (9926.HK): Biopharma Innovator

Akeso exemplifies China’s biopharma innovation and global expansion ambitions. While the company faces a volatile earnings profile with negative EPS growth projections, its expansive pipeline targeting major diseases and rapid overseas business growth position it as a key player in the pharmaceutical sector.

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

Despite sluggish consumption overall, new brands and consumer trends are rapidly emerging, fueled by the proliferation of social media and short-form video platforms such as Douyin, RedNote, and Tencent. Companies like Pop Mart, Laopu Gold, and Eastroc Beverage are riding this wave, showing substantial EPS growth and robust returns on equity. These names are increasingly favored by funds seeking growth in the evolving Chinese consumer landscape.

Structured Note and Equity-Linked Product Ideas

UOB Kay Hian highlights several structured notes and equity-linked notes based on its recommended stocks and ETFs, offering enhanced yield and risk-managed exposure to key names.

Featured Structured Note: Xiaomi Corp (1810.HK)

• 6-month tenor, HKD-denominated, monthly coupon payments.
• Strike options: 89.00 (10% p.a. coupon) and 95.54 (15% p.a. coupon).
• Capital protection at maturity if the strike is not breached; otherwise, investors receive shares at the strike price plus coupons.
• Risks include exposure to price declines, forfeiture of dividends during the note period, and issuer credit risk.

Equity-Linked Notes (Sample Yields and Assets)

• Underlying stocks include Broadcom, Alibaba, Nvidia, Galaxy Entertainment, Trip.com, Occidental Petroleum, Meta Platforms, Amazon, PetroChina, Walmart, Microsoft, Energy Select Sector SPDR Fund, HSBC, Berkshire Hathaway, SPDR Gold Shares, China Mobile, SPDR S&P 500 ETF, Consumer Staples SPDR Fund, Vanguard European Stock Index, Genting Singapore, Sands China, China Resources Beer, iShares MSCI China ETF, Thai Beverage, and more.
• Yields range from 0.99% to 26.91% depending on the underlying, strike level, and volatility.
• Equity-linked notes offer alternative ways to capture upside in strategic sectors with defined risk profiles.

Model Portfolio Strategies

All ETF Portfolio Allocation

• Equity subtotal: 33.3%, fixed income: 49.4%, gold: 10%, USD cash: 7.4%.
• Year-to-date portfolio return: 14.4% since December 2023 inception.

US Stock Model Portfolio: Core Recommendations

• Key overweight positions: Broadcom, Nvidia, Amazon, Berkshire Hathaway, Microsoft, Meta Platforms, Schwab US Dividend Equity ETF, Occidental Petroleum, and AppLovin.
• Consumer-focused names like Walmart and Consumer Staples SPDR also feature, along with energy and technology sector leaders.
• Significant cash allocation (42.2%) for flexibility amid market volatility.

China Stock Model Portfolio: Core Recommendations and Trading Buys

• Top positions: China Resources Land, Tencent Holdings, PetroChina, Galaxy Entertainment, CSOP FTSE China A50 ETF, Alibaba, HSBC, China Mobile, Trip.com, Sands China, China Construction Bank, China Resources Beer, Kweichow Moutai, Bosera CSOE HIDV ETF, JD.com, Innovent Biologics, Xiaomi, Chongqing Machinery, Meituan, and iShares MSCI China ETF.
• Portfolio performance: 21.2% YTD, with a strategic mix of real estate, technology, communication services, energy, consumer staples, and discretionary names.
• Cash holdings in RMB, HKD, and USD provide liquidity and risk management.

Key Events to Watch

• World AI Conference, Shanghai (July 26-28)
• FedEx CEO and USCBC delegation meetings with Chinese officials (July 27-30)
• US-China Trade Talks in Stockholm (July 28-29)
• China Politburo Meeting (July 28-31)
• FOMC Rate Decision (July 29-30)
• Major corporate earnings releases: Microsoft, Meta, Qualcomm, Amazon, Apple, HSBC, Berkshire Hathaway, and more.
• Important macroeconomic releases: China NBS PMI, US labor data, new US tariffs, HK Stablecoin Ordinance enactment, and Macau casino revenues.

Conclusion: Navigating Opportunity in Hong Kong and China Stocks

Investors in 2025 face a rapidly shifting landscape, with Hong Kong markets emerging as a strategic entry point to China’s new economy. Key opportunities lie in AI, innovative pharmaceuticals, and the new wave of consumer brands. Structured products and diversified portfolios provide tactical flexibility, while a focus on policy trends, capital flows, and global developments is essential for outperformance. UOB Kay Hian’s in-depth sector analysis and model portfolios offer a comprehensive roadmap for navigating the complexities and unlocking the potential of China’s evolving capital markets.