Invesco's Asia-Pacific fixed income manager, Huang Jiacheng, said that the number of defaults by local developers may increase in 2026. Many developers have heavy debt burdens and their property values have declined. In addition, there are also many land reserves in mainland China. Huang Jiacheng pointed out that unless the Hong Kong government introduces stimulus measures, the chances of defaults in the industry will rise.

He also pointed out that the Hong Kong bond market is not sufficient to support the financing needs of local developers. With an oversupply in the local property market, the real estate industry may undergo an adjustment. Faced with the possibility of further decline in Hong Kong property prices, developers will accelerate the pace of asset sales. However, Huang Jiacheng pointed out that the debt problems of individual local developers are held by institutional investors, not the public, so they will not cause systemic problems.

Invesco expects the US to cut interest rates by 0.75 basis points this year. Huang Jiacheng believes that the market has largely absorbed this news and will not have a significant impact. The bank also predicts further interest rate cuts next year until the natural interest rate drops to 3% to 3.25%. The core inflation rate for this year is expected to range from 2.5% to 3%, while next year it will be below 2.5%.