CITIC Securities: Hong Kong Stock Market Recovery Expected to Begin in 2027

36Kr reports that CITIC Securities released a research report on its 2027 investment strategy for the Hong Kong market, stating that in 2026, the Hong Kong market was dragged down by weakening domestic demand and profitability as well as liquidity pressure, resulting in a simultaneous decline in earnings and valuations. Looking ahead to 2027, Hong Kong market earnings are expected to grow moderately, with the Hang Seng Index and Hang Seng Composite Index projected to rise by 7.4% and 9.9%, respectively, while the Hang Seng Tech Index is forecast to accelerate to 24.8%. Consumption and technology are set to replace the cyclical sector as the primary drivers of growth. Expectations of overseas interest rate hikes have been fully priced in, with the Federal Reserve potentially restarting rate cuts in the second half of the year, alleviating discount rate pressure; however, financing unlocks and a slowdown in southbound capital inflows mean liquidity conditions will remain tight in the first half of 2027. Currently, the dynamic PE ratios for the Hang Seng Index and Hang Seng Tech Index stand at 9.67 and 13.1 times, respectively, at historical lows, with policy support and interconnectivity reforms expected to underpin a recovery. In terms of asset allocation, the firm advises balancing growth and dividend strategies: focus on four growth sectors—biotechnology, AI applications, intelligent driving, and embodied intelligence; use bond-like assets as a cornerstone for dividends while also capturing dividend growth.