Bank of East Asia: Hong Kong's GDP is expected to grow by 2.5% to 3% in 2026, raising the Hang Seng Index target level to 30,800 points

The Zhitong Finance App learned that on December 16, the Bank of East Asia (00023) released its 2026 economic and investment outlook. Chief economist Zhuo Liang emphasized that Hong Kong's economic recovery is likely to be comprehensive, with Hong Kong's GDP growth expected to be between 2.5% and 3%; investment strategist Wu Yongqiang raised the 2026 Hang Seng Index target level to 30,800 points, corresponding to a profit target of HK$2,400 per share, which is equivalent to 12.8 times the price-earnings ratio; in terms of the property market, private residential sales prices in Hong Kong have recorded a low increase in the number of units in 2025, and it is expected to reach a further high level in 2026 The number of units has increased, and there is a clear trend of stabilization in the Hong Kong property market.

Wu Yongqiang said that Hong Kong stocks are more optimistic about the three major sectors of artificial intelligence (AI), emerging industries, and service consumption. In response to the AI bubble that the market is paying close attention to, he believes that AI will still be the main focus of investment in 2026, but the investment focus will shift from irrational pursuit to rational screening. Currently, AI development is still in its early stages, and there is plenty of room for growth. Furthermore, thanks to continued interest rate cuts in the US, positive wealth effects, and the Hong Kong government's promotion of a major economy, Hong Kong's economic recovery trend is expected to continue. He is also more optimistic about sectors such as the Bank of Hong Kong, Hong Kong real estate rent collection, and Hong Kong transportation.

Wu Yongqiang warned that the mainland may not release more intensive policy signals until the end of the first quarter of next year. There is a risk that economic data for the first quarter will remain weak. Let's take a look at the Hang Seng Index target of 27,000 for the first quarter.

Zhuo Liang pointed out that Hong Kong's economic recovery has covered many fields, and international trade has shown strong resilience. In the first 10 months of 2025, Hong Kong recorded positive growth in all major export markets, and exports to the US also rose slightly by 0.8%, highlighting the diversification advantages of export markets. The improvement in private consumption and retail sales was particularly remarkable. Retail sales reversed the decline in May 2025, private consumption resumed expansion in the second quarter, ending four consecutive quarters of contraction, and the upward trend in the labor market unemployment rate will further ease.

Zhuo Liang expects that next year, Hong Kong's retail sales value will increase in the number of units, and the number of visitors to Hong Kong and the appreciation of the RMB will be the driving factors. However, there is a chance that the export growth rate will slow down next year, and the increase in units may be high due to this year's high base effect.

In terms of the property market, Zhuo Liang emphasized that the interest rate environment is a key driving factor. The continuation of the Federal Reserve's interest rate reduction cycle will be a fundamental factor in consolidating the Hong Kong property market and is expected to push private housing prices back up further. Currently, the Hong Kong dollar prime interest rate (P) will no longer be lowered in line with the US. In terms of the Hong Kong dollar interest rate, HIBOR still has room to decline. It is expected that the one-month HIBOR associated with the housing estimate will be below 3% for most of 2026 and 2.3% at the end of 2026, as a driving force to support a new growth cycle in the residential property market.

On the US side, Zhuo Liang expects the Federal Reserve to cut interest rates 3 to 4 times in 2026, with a cumulative margin of 75 to 100 basis points due to weakening labor markets and stabilizing inflation. At present, the US unemployment rate has rebounded from 3.4% to 4.4%. Although core PCE inflation has not reached the 2% target, it has stabilized, and there is plenty of room for interest rate cuts. In terms of US stocks, Wu Yongqiang predicted that the target level of the US S&P 500 index in 2026 would be 7,500 points, which is equivalent to 23.8 times the price-earnings ratio. It is recommended to focus on chips, cloud platforms and AI application segments.