The Hang Seng Index delivered a powerful opening statement for 2026, rebounding from late-December 2025 weakness to post a 2.0% weekly gain. This rally, occurring against a backdrop where the index gained nearly 28% in 2025—its best annual performance since 2017—reflects a significant reassessment of risk appetite in Asian markets. As global investors rebalance for the new year, Hong Kong’s capital market is increasingly viewed as a beneficiary of both domestic innovation catalysts and a more accommodative global monetary environment.

AI and Tech Sectors Drive “New Economy” Gains

The week’s momentum was unequivocally led by the technology sector, with the Hang Seng TECH Index jumping 4.0% on Friday alone. Optimism was fueled by a convergence of events: Baidu soared over 9% following plans to spin off its AI chip unit, while Hua Hong Semiconductor spiked nearly 13% on news of a multi-billion yuan private placement to expand capacity. Furthermore, the city’s IPO market marked a “torch climbing” start with the debut of Biren Technology, which saw its shares trade 76% above their offer price, underscoring intense retail and institutional demand for advanced semiconductors.

Macroeconomic Foundations and Policy Shifts

Supporting these sectoral gains is a shift toward proactive fiscal expansion in mainland China, which President Xi Jinping signaled would continue into 2026 to sustain the momentum of 5% GDP growth. Locally, Hong Kong’s manufacturing growth has reached a near three-year high, while inflation remains subdued at 1.0%, providing a stable operational environment for businesses. The Hong Kong Monetary Authority (HKMA), following the U.S. Federal Reserve, has brought borrowing costs to their lowest level since late 2022, a move expected to gradually bolster the city’s property market and lower financing costs for listed companies.

Global IPO Leadership and Financial Connectivity

In 2025, Hong Kong reclaimed its crown as the world’s No. 1 IPO venue, raising over HK$280 billion. This trend is projected to intensify in 2026, with a pipeline of over 300 candidates—including major AI developers like Zhipu AI—ready to list. For international investors, including those in the Israeli tech ecosystem, Hong Kong’s role as a safe haven for managing assets and its enhanced financial connectivity with other regions are serving as critical anchors for business sentiment. This “dual-speed recovery” sees the financial and tourism sectors leading the charge, even as domestic retail faces structural cost pressures.

The outlook for the Hang Seng Index remains bullish for the first half of 2026, with analysts forecasting a potential move toward the 30,000-point mark supported by persistent Southbound inflows. However, the path forward contains notable risks; investors should remain vigilant regarding global trade policy uncertainty and the potential for an AI bubble correction. Monitoring the U.S. Fed’s easing cycle and earnings uplifts from Chinese tech giants will be essential, as the next leg of the rally will hinge on hard numbers rather than just confidence-led re-ratings.