2025 Hang Seng Index Review and Outlook: Can Easing US-China Relations Ignite a New Rally?

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The fate of the Hang Seng Index in 2025 is closely tied to the direction of US-China relations. With tariff reductions following the Busan meeting between China and the US, the market has the key catalyst to start a new rally. However, the height of the rally still depends on the strength of mainland China’s economic recovery and coordination with global liquidity.

In 2024, the real-time Hang Seng Index quotes showed resilience amid volatility. The index recovered from 17,047.39 points in 2023 to 20,059.95 points. The trading range in the fourth quarter was between 20,960 and 24,764 points, indicating the market was building a bottom and rebounding.

Key Points

• The trend of the Hang Seng Index in 2025 is closely related to US-China relations.
• Strong recovery in mainland China’s economy is an important foundation for the Hang Seng Index rise.
• Federal Reserve rate cuts will bring increased global liquidity, benefiting Hong Kong stocks.
• Investors should focus on investment opportunities in AI technology, high-dividend state-owned enterprises, and consumption recovery.
• Geopolitical risks and trade frictions may affect the market; investors need to remain vigilant.

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2024 Review: Building Bottom Amid Volatility, Trend Has Reversed

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2024 was a dramatic year for the Hong Kong stock market. The market experienced from pessimistic bottoming at the beginning of the year to confidence repair at the end, ultimately successfully reversing the downward trend lasting several years. This process is not only a change in index points but a fundamental shift in market sentiment and capital flows.

Real-Time Hang Seng Index Quotes Review and Sector Rotation

Reviewing 2024, the real-time Hang Seng Index quotes followed a clear “V”-shaped reversal path. At the beginning of the year, the market continued weakness, with generally low investor sentiment. However, as mainland China’s stable growth policies were gradually strengthened, market confidence began to slowly recover. In sector performance, technology and financial stocks most sensitive to liquidity and policy led the way, becoming core forces leading the broader market rebound. Subsequently, as economic recovery expectations strengthened, consumption and cyclical sectors also began to take over, forming a healthy sector rotation pattern.

Key Nodes from Early-Year Low to Rebound New High

The turning point for the Hang Seng Index in 2024 appeared at the end of the third quarter. A decisive event was the strong economic stimulus measures launched by mainland China.

• September 24, 2024: The People’s Bank of China announced a series of unexpectedly loose policies. Measures included rate cuts, lowering bank reserve requirements, and providing approximately $69.4 billion in special funds to institutions to boost the capital market.

This series of combined punches greatly boosted investor confidence. After the policy announcement, both the Hang Seng Index and Shanghai Composite Index recorded over 12% weekly gains, creating the best weekly performance in nearly a decade and laying a solid foundation for subsequent upward rallies.

Technical Analysis: Bullish Signals Ending Downtrend

From a technical chart perspective, the real-time Hang Seng Index quotes in 2024 issued clear trend reversal signals. The index not only successfully stood above the 250-day moving average seen as the bull-bear dividing line but, more importantly, formed the classic bullish arrangement of “higher highs” and “higher lows.”

After breaking through previous important resistance levels, the index did not deeply pull back but consolidated strongly at highs. This indicates sufficient buying support, exhausted downside momentum, the long-term downtrend declared ended, and the market structure formally shifting from bear to bull.

This series of technical signals confirmed the validity of the market bottom, opening imagination space for further rises in 2025.

Easing US-China Relations: Core Engine for New Hang Seng Rally

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If the rebound in 2024 was based on mainland China’s policy support, then whether the Hang Seng Index can start a true main upward wave in 2025, its core engine is undoubtedly easing US-China relations. The decline in geopolitical risks directly acts on market risk appetite, unbinding suppressed Hong Kong stock valuations.

Busan Meeting Outcomes: Substantial Benefits from Tariff Reductions

The China-US leaders’ Busan meeting at the end of 2024 injected the most critical boost into the market. The trade agreement reached by both sides, particularly adjustments in tariffs, constituted substantial benefits. The market generally believes the meeting outcomes far exceeded expectations, directly reducing enterprise operating costs and future uncertainties.

The core outcomes of the agreement include:

• Tariff Reductions: The US agreed to lower tariffs on Chinese imports related to fentanyl by 10 percentage points and suspend reciprocal tariffs until November 10, 2026. This makes the previous comprehensive tariff of up to 57% expected to drop to 47%.
• Suspension of Retaliation: China agreed to suspend all retaliatory tariffs announced since March 2025, particularly measures targeting US agricultural products (such as soybeans and pork).
• Restrictions Eased: The US promised to suspend some trade and export control actions within a limited period.

Although after the Busan meeting news was announced, real-time Hang Seng Index quotes experienced a short-term small pullback with some investors taking profits, this did not change the long-term boost to export-oriented enterprise profit expectations from tariff reductions. The market needs time to digest this benefit and gradually reflect it in enterprise valuations.

Temporary Easing of Tech Sanctions: Valuation Repair for Related Industry Chains

For the technology sector occupying important weights in the Hang Seng Index, the Busan meeting brought not only tariff benefits but the key signal of “temporary easing of tech sanctions.” According to the agreement, the US agreed to suspend “certain” export control measures, winning a year’s valuable breathing room for Chinese technology enterprises.

Although the agreement did not detail which specific controls were suspended, this gesture itself greatly eased market pessimism. In past years, tech sanctions were the “Sword of Damocles” hanging over related companies, causing their valuations to be significantly compressed. Now, the temporary easing brings valuation repair opportunities to the following areas:

1. Semiconductor Industry Chain: Improved external environment for chip design, manufacturing, and equipment companies helps stabilize supply chains and expand markets.
2. Artificial Intelligence and Software: Potential relaxation of restrictions on accessing advanced AI software helps related enterprises maintain technological competitiveness.
3. Smart Device Manufacturers: Enhanced supply stability for components reduces production interruption risks.

This shift allows investors to reassess the long-term value of tech leading stocks, pushing the valuation center of the entire sector upward and providing core momentum for the Hang Seng Index rise.

Geopolitical Games: Potential Variables in Easing Relations

While remaining optimistic, investors must clearly recognize that easing US-China relations is not smooth sailing, with many potential variables still existing. In 2025, the evolution of the global geopolitical landscape may still disturb market sentiment.

The following are risk points needing close attention:

• Renewed Trade and Tech Frictions: Current easing has a “transactional” color. In the future, the US may still impose new restrictions in fields like semiconductors and AI. China may also counter through restricting key mineral exports, leading to escalated frictions.
• Indo-Pacific Geopolitical Conflicts: Tensions in the Taiwan Strait and South China Sea are long-standing risks. China’s increasingly frequent military activities in related areas and the US response through strengthening regional alliances (such as AUKUS and Quad) may trigger unexpected conflicts, impacting market confidence.
• US Policy Uncertainty: The existence of hawkish figures toward China within the US government and the “transactional” nature of its policies make long-term relationship directions difficult to predict. Any sudden event may become a trigger affecting bilateral relations.

Therefore, investing in 2025 is more like “walking a tightrope.” Investors need to closely track the latest geopolitical dynamics, assess their potential impact on real-time Hang Seng Index quotes, and prepare for potential volatility.

Internal Support: Effectiveness of China’s Economic Policy Support

Easing US-China relations provides upward elasticity for the Hang Seng Index, but the solidity of the rally still needs solid support from mainland China’s economy. In 2025, the effectiveness of China’s economic policy support becomes the key internal variable determining market confidence. Policymakers seek balance between “stable growth” and “high-quality development,” with the landing effect of specific measures directly affecting Hong Kong stocks’ profit foundation.

Macro Policy Tone: Parallel Stable Growth and High-Quality Development

The core tone of mainland China’s macroeconomic policy in 2025 is parallel “stable growth” and “high-quality development.” The government sets the 2025 GDP growth target at around 5%, showing determination to stabilize the economic panorama. However, policy priorities also reveal long-term strategic intentions.

• Technological Self-Reliance as Primary Task: The Central Committee of the Communist Party of China clearly defines the path of technological nationalism and industrial upgrading, focusing on cutting-edge fields like artificial intelligence, semiconductors, and biomanufacturing.
• Consumption Transformation as Secondary Goal: Although the government is committed to promoting transformation toward a consumption-led growth model, consumption importance in policy ranking is lower than industry and technology upgrades.

This policy combination means the market should not expect large-scale “flood irrigation” consumption stimulus but focus more on structural opportunities.

Fiscal and Monetary Coordination: Rate Cut Space and Policy Landing Effectiveness

To achieve growth targets, coordinated fiscal and monetary policy efforts are crucial. The People’s Bank of China at its early 2025 work conference has indicated continuing supportive policy stance. Currently, one-year and five-year Loan Prime Rates (LPR) remain at historical lows of 3.0% and 3.5%. Analysts generally expect rates to remain stable in the short term.

The policy toolbox continues innovation, supporting the capital market in a precise drip irrigation manner. The two new tools launched at the end of 2024 have significant effects, injecting liquidity and confidence into the market.

The implementation of these tools clearly indicates the policy level’s firm attitude toward stabilizing the capital market, providing strong downside support for the Hang Seng Index.

Real Estate Stabilization and Consumption Recovery Sustainability Assessment

Real estate and consumption are two major pillars of mainland China’s economy; the sustainability of their recovery directly relates to investors’ long-term confidence.

Real Estate Market is showing signs of stabilization. As of October 2025, new home prices in China’s 70 large and medium cities have fallen for 28 consecutive months, but the year-over-year 2.2% decline is the slowest since March 2024. Market differentiation is obvious, with first-tier cities like Shanghai rising 5.7% against the trend, while most cities are still adjusting.

Consumption Field shows cautious optimism in recovery. Retail sentiment reached a four-month high, but recovery is not achieved overnight. Given previous resident savings rates once rising, consumer confidence recovery needs time. The market generally expects recovery to present a “U-shaped" or "K-shaped” form, meaning recovery speeds in different consumption areas will differ, requiring investors to more finely identify structural opportunities.

Global Macro Changes: Fed Rate Cuts and Liquidity Turning Point

Improvement in the external environment, particularly global liquidity shifting from tight to loose, is another key for whether the Hang Seng Index can continue strengthening. In 2025, the Federal Reserve starting a rate cut cycle marks a turning point in global capital flows, of great significance to the highly open Hong Kong market.

Federal Reserve Rate Cut Cycle: Timing and Pace Impact on Hong Kong Stocks

The Federal Reserve’s policy shift injects certainty into the market. According to TradingKey report, the Fed has consecutively cut rates in September and December 2025, lowering the federal funds rate target range to 3.50%-3.75%. The market has also formed preliminary consensus on future rate cut pace.

Historical experience shows rate cut impacts on the market are not linear. Before the September 2025 rate cut, the Hang Seng Index once rose 2%. In the early rate cut stage, the market may fluctuate due to concerns about economic weakness. But as funds shift from fixed income products to stocks, investor sentiment improves, ultimately pushing the index toward new highs.

Dollar Index Turn and Foreign Capital Return to Emerging Markets

Federal Reserve rate cuts directly lead to dollar index weakness. JPMorgan Asset Management points out the dollar index (DXY) fell 10.7% in the first half of 2025, the worst same-period performance in over 50 years. The weak dollar trend creates favorable conditions for foreign capital returning to emerging markets including Hong Kong.

EPFR data shows that although overseas active funds representing long-term capital net outflowed from Hong Kong stocks, the outflow scale has significantly slowed compared to the same period in 2024. At the same time, passive fund inflows into Hong Kong stocks reached $26.94 billion, doubling from last year. This trend indicates global capital is reallocating. For global investors, using efficient digital finance platforms like Biyapay makes cross-border asset allocation more convenient, seizing emerging market warming opportunities.

Hong Kong Stock Structure Characteristics: High Volatility and Industry Concentration Analysis

Hong Kong stock market’s high sensitivity to global liquidity stems from its unique industry structure. Finance and technology two major sectors dominate the Hang Seng Index, with extremely high combined weights.

Both industries are interest rate-sensitive sectors. When globally entering a rate cut cycle with ample liquidity, technology stock valuations rise, and financial institutions’ operating environments improve. This industry concentration amplifies Hong Kong stock volatility, making it show higher elasticity at liquidity turning points, but also meaning greater adjustment pressure once the macro environment reverses.

2025 Hang Seng Index Point Prediction and Investment Strategy

Under the dual role of improved external environment and internal policy support, investor expectations for the Hong Kong stock market in 2025 turn optimistic. However, specific upside space and investment paths still need comprehensive judgment combining valuation, earnings expectations, and potential risks.

Comprehensive Institutional Views: Index Target Price Range Prediction

Combining views from multiple investment banks, the market holds cautious optimism on the Hang Seng Index trend in 2025. Mainstream predictions believe the index year-end target range falls between 25,500 points and 31,561 points. This prediction reflects positive impacts from easing US-China relations and global liquidity turning point.

From a technical perspective, the index’s key support is near 24,400 points, an important platform for previous rebounds. The preliminary resistance above is at 28,200 points; breaking this level will open greater upside space for the market.

Earnings Expectations and Valuation Repair: Potential Upside Space Calculation

The Hang Seng Index’s upside potential ultimately depends on corporate earnings growth and valuation repair. As of the end of 2025, market valuation levels have reflected some optimistic expectations.

The current price-to-earnings ratio is higher than the historical average level. This indicates the market has anticipated digestion of economic recovery benefits. The future trend of real-time Hang Seng Index quotes will more depend on whether corporate earnings can exceed current expectations, thereby supporting higher valuations.

Investment Theme Outlook: AI Technology, High-Dividend SOEs, and Consumption Recovery

Investment opportunities in 2025 will revolve around three main themes:

1. AI Technology: Temporary easing of tech sanctions brings breathing room to artificial intelligence, semiconductors, and other fields; valuation repair rallies in related companies are worth expecting.
2. High-Dividend State-Owned Enterprises: In the context of global macro uncertainty, state-owned enterprises with stable cash flows and high dividends provide defensive choices for investors.
3. Consumption Recovery: Mainland China’s consumption market is showing strong recovery momentum.
   • Food industry growth 12.3%, automobile sales growth 11.2%.
   • Outbound tourism fully recovered, international air passenger volume exceeding 2019 levels.
   • Consumption brands like Mixue Bingcheng and Guming successfully listed in Hong Kong, showing capital market confidence in China’s consumption prospects.

Risk Checklist: Macro and Geopolitical Risks to Watch

Investors must face potential risks when positioning. Easing US-China relations is not without variables, and other geopolitical conflicts may also impact the market. For example, tensions between Dutch chip manufacturer Nexperia and its Chinese subsidiary highlight the vulnerability of global semiconductor supply chains.

These risks not only affect Asian markets; their impacts will also transmit globally. For example, escalated Middle East conflicts will directly push up Brent crude oil prices and cause VIX index (market fear gauge) surges, negatively affecting assets like US high-yield credit.

The core driving forces of the Hang Seng Index in 2025 come from the dual-wheel drive of “easing US-China relations” and “mainland China economic repair.” Technically, the long-term downtrend has ended, but the degree of relationship easing remains the key variable determining rally height. Under cautious optimism, investors should adopt balanced allocation strategies, grasping structural opportunities from the following three main themes:

• AI Technology: Benefiting from technological breakthroughs and improved external environment.
• High-Dividend State-Owned Enterprises: Providing defensiveness in value revaluation.
• Consumption Recovery: Mainland China inflation warming and huge savings (approximately $22.4 trillion) release potential.

FAQ

What is the most key factor affecting the Hang Seng Index trend in 2025?

The dynamic evolution of US-China relations is the core. The stability of this relationship directly affects market risk appetite and Hong Kong stock valuations. The strength of mainland China’s economic repair provides fundamental support; both jointly determine index height.

Has the Hang Seng Index confirmed entering a bull market?

Technically, the long-term downtrend has ended. But a sustained bull market needs continued improvement in corporate earnings and stable macro environment coordination. Investors should remain cautiously optimistic and focus on fundamental verification.

If US-China relations tense again, how should investors respond?

When relations tense, investors should increase defensive asset allocation. For example, high-dividend state-owned enterprises have defensive attributes due to stable cash flows. At the same time, closely monitor geopolitical dynamics and timely adjust portfolio risk exposure.

Besides AI tech stocks, which investment themes are worth attention?

The other two main themes are high-dividend state-owned enterprises and consumption recovery.

• The former benefits from value revaluation, providing stable returns.
• The latter benefits from warming mainland China resident consumption confidence and potential release.