- The economy is rebounding after years of pandemic, trade-war, and sentiment-driven weakness.
- Export momentum is at a decade high.
- Low rates and ample liquidity are reviving property, investment and broader domestic demand.
- Equity strength, IPO activity and capital inflows are boosting jobs, tourism and confidence.
- Growth has upside, but higher US rates, AI setbacks and geopolitics remain key risks.
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COMMENTARY: Hong Kong’s rebound
After a prolonged period marred by the pandemic, political uncertainty, and trade wars that sapped consumer, business, and investment sentiments, Hong Kong is showing welcome signs of a turnaround. Wide sections of the economy are presently characterised by a spring not seen in years. We see the outlook as increasingly positive.
It hasn’t been that long when the city’s gradual diminishment was seen as fait accompli. China’s heightened trade tensions with the US weighed in heavily. Post pandemic scarring was deep, immigration was soft, capital markets lacked vitality, property markets were in a funk, and consumption was weak. It’s a very different picture now.
On the cyclical side, an exceptionally strong trade cycle is lifting virtually all Asian economies, pulling up Hong Kong alongside. Some stabilisation in China-US trade relationship has also helped, with sudden imposition of tariffs or non-tariff barriers a matter of last year. Exports are now showing the strongest momentum in a decade.
Low interest rates and ample liquidity, mirroring the direction of US monetary policy, already in place, have acted as a multiplier of the cyclical rebound. Interest sensitive parts of the economy, moribund lately due to poor sentiment, have turned around. Commercial and residential property prices are recovering, a welcome sign for the region’s financial sector.
Even greater cyclical support is coming from an equity market firing on all cylinders. Up 70% since bottoming in early 2024, Hong Kong is benefitting from an IPO wave, led by a seemingly endless array of Chinese companies in critical tech areas lining up to list. In 2025, it was the biggest IPO market in the world, and along with the US, likely to be at the upper echelon of rankings this year. Private and institutional capital flows have picked up, fuelled by the equity market’s verve and a series of regulatory changes that have made taxes on private capital lower.
Tourism is up sharply, thanks to reviving mainland demand and some spillover from the developments in the Middle East. It’s not just short-term visitors, over a quarter of a million overseas professionals have received approval to live and work in the territory since the pandemic. Attractions include low taxes, high standard of living, and strong labour demand. On the latter, unemployment rate has been declining steadily since 3Q last year.
Investment is up, consumption has turned around, inflation is beginning to rise but tolerable, and the public sector is rolling out favourable measures. These developments paved the way for nearly 6% real GDP growth in 1Q. Our 2026 3% for forecast for growth is characterised by clear upside risks. If sustained high inflation pushes up rates in the US and Hong Kong, if the AI wave faces some major headwinds, and as always, if China-US relationship worsens, we will worry about the outlook. But for now, Hong Kong is going through a much welcome moment in the sun.
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GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
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