Hong Kong’s stock market endured a challenging first half of 2026, significantly underperforming major global benchmarks amid concerns over China’s economy and limited exposure to the artificial intelligence (AI) semiconductor boom. The Hang Seng Index fell 11 percent, marking one of the poorest performances among leading markets, with only Indonesia recording a larger decline. In contrast, the U.S. Nasdaq rose 20 percent and the S&P 500 gained 9.6 percent, propelled largely by strong investor interest in AI-related stocks.
Hong Kong’s underperformance relative to other Asian markets was pronounced. South Korea’s Kospi surged more than 100 percent, driven by demand for memory chips from companies like Samsung Electronics and SK Hynix, which is preparing a significant Nasdaq listing. Similarly, Taiwan and Japan enjoyed substantial gains thanks to their deeper participation in the AI hardware supply chain. By comparison, Hong Kong’s benchmark index lacked comparable semiconductor firms, limiting investor access to the AI-related rally.
Chinese tech giants listed in Hong Kong, including Tencent and Alibaba, saw their shares fall amid skepticism about their ability to capitalize on AI investments amidst weak domestic consumption and competitive pressures. Alibaba’s parent company and others engaged in share buybacks in mid-2026 to support their stock prices, with Tencent repurchasing nearly HK$10 billion of shares in June and Alibaba spending US$50 million on repurchases in the U.S.
Despite the broader market struggles, Hong Kong’s initial public offering (IPO) market remained robust. The city’s stock exchange raised about US$26.4 billion from 83 IPOs in the first half, representing an 84 percent increase year-on-year. This activity was largely driven by Chinese tech companies, with notable new listings such as AI model maker Zhipu AI reaching a market value exceeding HK$1 trillion at one point. However, Hong Kong is expected to lose its position as the world’s largest IPO market, with the Nasdaq raising over US$112 billion, largely boosted by SpaceX’s record US$75 billion offering.
Market watchers note that excess supply from IPO lock-up expirations could dampen stock prices further. An estimated HK$850 billion worth of shares will enter the market in the third quarter, peaking in September. To counteract liquidity concerns and stimulate trading, the Hong Kong Exchanges and Clearing lowered the minimum transaction thresholds for investors and is exploring expanded Stock Connect access to attract mainland buyers.
Economic factors continue to weigh on the market outlook. China’s retail sales contracted unexpectedly in May for the first time since the COVID-19 lockdowns, dampening prospects for corporate earnings across key sectors. Additionally, a more hawkish stance from the U.S. Federal Reserve, with rate hikes possibly continuing, has further pressured emerging-market equities. Hong Kong aligns its interest rates with the Fed to maintain its currency peg, despite its own slowing economy.
Looking ahead, some analysts express cautious optimism about a potential rebound in the Hang Seng Index in the second half, driven by relatively low valuations compared to U.S. markets, the possibility of cooling global inflation following the reopening of oil export routes through the Strait of Hormuz, and the sustained IPO pipeline. However, the market’s full recovery may depend on improved corporate earnings, renewed economic stimulus from Beijing, and easing geopolitical tensions, including trade relations with the U.S. and Europe.