Boom or Caution in the Hong Kong and China Investment Landscape March 25, 2025
The Hang Seng (HSI) and China (CSI300) index posted gains of 17.67% and 14.68% respectively in 2024, making them top performers year to date in 2025. With further rallies of 25.48% (HSI) and 4.84% (CSI300) at the time of writing, the key question for investors is whether it is time to take profit or double down and stay invested for the long term?
To understand this market momentum, let’s look at some of the main driving factors for this recent upbeat:
- Government Support for Private Sector: Chinese President Xi Jinping’s recent meeting with top business executives, including Alibaba’s co-founder Jack Ma on 17 Feb 2025, sparked optimism in the private sector. This move aims to revive business and consumer confidence, particularly in the technology sector, (to add reason why tech sector).
- Advancements in Artificial Intelligence: The introduction of DeepSeek’s low-cost AI language model has invigorated China’s tech industry. The Hang Seng Tech Index surged by nearly 20% recently, which reflects investor confidence in the sector’s growth potential.
- Takeaway from China’s ‘two sessions’: Clear targets for the year 2025 emerged from the recent ‘Two Sessions” with policymakers addressing concerns plaguing China’s economy especially consumer demand’s weakness and house prices.
- Global Trade Tensions Drive Interest in Chinese Equities: Amid ongoing trade tensions and recession concerns linked to US President Donald Trump’s aggressive trade policies, global investors are seeking refuge in an unexpected market: Chinese equities. Attractive valuations in Hong Kong and China markets have further amplified their appeal.
Top AI related stocks listed in Hong Kong
| Stock | YTD Return (%) | Forward P/E | Analysts Average Target Price (HK$) | Potential Upside (%) | Last Traded Price (as of 19 March 25) |
| Alibaba(9988.HK) | 71.03 | 15.11 | 150.96 | 6.83 | 141.1 |
| Xiaomi(1810.HK) | 67.10 | 51.81 | 49.75 | -14.22 | 58.2 |
| Tencent(0700.HK) | 28.87 | 19.46 | 537.23 | -0.6 | 540 |
| Meituan(3690.HK) | 14.95 | 20.45 | 205.41 | 17.51 | 175.9 |
| JD.COM(9618.HK) | 29.87 | 9.84 | 203.98 | 15.6 | 176.2 |
| Baidu Inc(9888.HK) | 20.01 | 10.46 | 107.06 | 7.9 | 99.2 |
Source: Yahoo Finance on 19 Mar 2025
VS Global Counterparts
Figure 1. HSI trading at 5 years average P/E ratio
Figure 2. HSI (Orange Line) still considered undervalued compared to main global counterparts
Figure 3. HSTECH (white) is overstretched for the short term, but likely to converge with the NDX (blue) in the long term.
Is China’s macro environment trends reflective of recent growth?
- China’s GDP grew 5% in 2024, hitting the government’s target and outperforming expectations in Q4 2024. The government has since set a new target of 5% GDP growth for 2025
- Retail sales rose 4% year-on-year(YoY) in the January-February 2025 period, up from 3.7% YoY growth in December
- Industrial production climbed 5.9% in the first two months of 2025, slightly trailing December’s 6.2% growth, but outperforming analysts’ expectations of 5.3% in a Reuters poll
- Inflation rates remained stable in the recent months with deflationary pressures evident in the latest -0.7% reading
- While home prices are still declining, the pace of decline has moderated, signaling tentative stabilisation. Industrial output has rebounded, especially in high-tech sectors such as semiconductors and green energy, while property-related industries lagged
- Private investment is likely to remain weak in 2025, due to the overall constraints on credit growth and continued deflationary pressures in producer prices
HK IPO market going strong
On the bright side, Hong Kong is gearing up for more IPOs, adding another layer of optimism to the broader market. Notable developments include:
- Mixue Group (2097.HK): Since its listing on 3 March 2025, this stock has gained over 100% till date
- Contemporary Amperex Technology Co (CATL): Another popular company that is currently listed in China only. CATL has formally applied for a listing on the Hong Kong Stock Exchange on 11 Feb 2025 and is pending approval.
- IPO Activity Surge: According to financial data from Wind and HKEX, IPO filings on the main board of HKEX double YOY as of 3 Feb 2025. Deloitte’s Dec 2024 forecast projects of 80 IPOs in Hong Kong this year, aiming to raise an estimated sum of HK$130 billion to HK$150 billion.
To take advantage of this market, POEMS currently allow investors to trade in HK Pre-IPOs before the listing date! You can learn more about this and open an account here!
Key Takeaways
While stock prices are soaring with promising developments in the Hong Kong and China markets, underlying economic indicators reveal a mixed picture. Internal demand consumption remains weak, and while fund flows remain stable, they are not yet significant.
The recent Two Sessions on 5 Mar have definitely carved a compelling way forward for the world’s second-largest economy, but the full impact on macroeconomic data will unravel in the coming months
Diversification: The Way Forward
For investors seeking exposure to Hong Kong and China equities while managing risk, exchange-traded funds (ETFs) offer a prudent solution:
- For broad based investing, the Tracker Fund of Hong Kong (2800.HK) mirrors the performance of the Hang Seng Index, and provides diversified exposure in the Hong Kong stock market.
- For more exposure into the tech sector, especially on the AI front, the CSOP Hang Seng TECH Index ETF HKD (3033.HK) is one of the more popular ETFs.
You may also learn more about ETFs with our POEMS ETF Screener here
Specially for POEMS Users
Trade Hong Kong and China stocks with POEMS and enjoy exclusive perks! For a limited time only, we’re offering free mobile live price subscription for the Hong Kong market. Simply click subscribe on your “Market Data and Rewards” tab of your POEMS account to activate your free 3-month subscription. (renewable until September 2025)
Additionally, POEMS is one of the few platforms that offer Hong Kong Pre-IPO market trading, allowing our customers to trade Hong Kong shares one day before their official listing in the Hong Kong Exchange.
Stay ahead in the market with POEMS – your gateway to global investment opportunities!
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About the author
Global Markets Desk (Asia Market)
The Global Markets Desk Asia Market Dealing team specializes in managing Asia Markets, covering key regions like Greater China, Malaysia, Japan, Thailand, and others. In addition to executing client orders, they also provide educational content through market journals and webinars, offering insights into macroeconomics, stock picks, and technical analyses for the Asia market landscape.
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