Hong Kong Stocks Post Best Year Since 2017 Driven by AI Tech Rally

This analysis is based on the Wall Street Journal report [1] published on December 31, 2025, which highlighted Hong Kong stocks ending the year with their best performance since 2017. The Hang Seng Index (^HSI) recorded a 28.58% annual gain, driven by an AI-fueled tech rally [0]. Tech giants Tencent (00700) and Alibaba (09988) outperformed the broader index, posting gains of 43.41% and 72.94% respectively [0]. A key driver was regulatory reforms under Hong Kong’s Chapter 18C framework, which enabled 12 pre-profit AI and robotics logistics firms to list in 2025, raising capital for AI-driven solutions [3]. Additionally, Hong Kong’s government investment of $128 million in an AI research institute boosted investor confidence in the region’s AI ecosystem [4]. Tech stocks exhibited higher volatility than the broader market, with daily standard deviations of 2.01% for Tencent and 3.28% for Alibaba [0].

1. AI as a cross-sector catalyst
   : The global AI trend lifted both established tech giants and stimulated IPO activity in emerging AI/robotics logistics sectors via the Chapter 18C reforms, demonstrating AI’s broad market impact [3].
2. Policy-investment synergy
   : Supportive listing regulations (Chapter 18C) and government AI research investments worked together to enhance Hong Kong’s appeal as a regional tech hub [3][4].
3. Volatility-return tradeoff
   : While tech stocks delivered significant gains, their higher volatility indicates investor sensitivity to AI-related news and regulatory developments [0].

• Tech hub expansion
  : The 2025 rally may attract more AI and tech firms to list in Hong Kong, strengthening its status as a regional tech hub.
• AI ecosystem growth
  : Government investments and regulatory support could drive long-term R&D and innovation in Hong Kong’s AI sector [4].

• Valuation concerns
  : Analysts warn of “extreme” valuations in AI stocks, raising the risk of a correction if earnings fail to meet optimistic expectations [2].
• Economic growth uncertainty
  : Natixis has criticized Hong Kong’s government forecast of 2.9% annual growth (2026–2029) as overly optimistic, which could dampen market sentiment [4].
• Regulatory tensions
  : US export controls on AI chips may disrupt supply chains for Hong Kong’s tech firms, impacting their AI development capabilities [2].

• The Hang Seng Index (^HSI) gained 28.58% in 2025, its best year since 2017 [0].
• Tech giants Tencent (00700) and Alibaba (09988) rose 43.41% and 72.94% respectively [0].
• Regulatory reforms (Chapter 18C) enabled 12 pre-profit AI/robotics logistics firms to list in 2025 [3].
• Hong Kong’s government invested $128 million in an AI research institute [4].
• Risks include stretched AI stock valuations, economic growth concerns, and regulatory tensions [2][4].