Looking ahead at the performance of Hong Kong stocks for 25 years, although market expectations have been significantly revised down due to multiple disturbances from the beginning of the year to now, it may also fully price in various external risk factors. In particular, within the Range of Technology, pharmaceuticals, raw materials, finance, and consumer Sectors, there are even upward revisions in performance expectations for certain subsectors, demonstrating the unique performance resilience and growth expectations of industries or companies against the backdrop of trade frictions, which is worth paying attention to.
According to the Zhichun Finance APP, CITIC SEC released a research report stating that Hong Kong stocks' 2024 revenue increased by 3.4% year-on-year, and profits increased by 8.5% year-on-year, with growth rates showing an upward trend compared to 2023. The net income margin and ROE have also risen year-on-year; although the performance slightly fell short of expectations, the overall situation shows significant improvement compared to 2023. In the first quarter of 2025, the disclosed quarterly reports of individual stocks show an upward trend in profit growth year-on-year, continuing the steady improvement trend of 2024, confirming the basic trend of recovery in the Hong Kong stock market.
From the industry perspective, Technology and Finance performed brightly in 2024, while there is internal performance divergence in Pharmaceuticals and Consumption, particularly in Biotechnology and Internet enterprises where the performance is impressive; the Telecommunication Services sector is relatively stable, and although the cyclical industry's performance has improved, it still falls short of expectations. This industry performance trend continues into the first quarter of 2025, with sustained growth in the growth Sector, while the cyclical Sector's performance continues to recover quickly, but the performance of the Real Estate and some consumer-related businesses has yet to show signs of improvement.
Looking ahead at the performance of Hong Kong stocks for 25 years, although market expectations have been significantly revised down due to multiple disturbances from the beginning of the year to now, it may also fully price in various external risk factors. In particular, within the Range of Technology, pharmaceuticals, raw materials, finance, and consumer Sectors, there are even upward revisions in performance expectations for certain subsectors, demonstrating the unique performance resilience and growth expectations of industries or companies against the backdrop of trade frictions, which is worth paying attention to.
CITIC SEC's main viewpoints are as follows:
The performance growth of Hong Kong stocks has stabilized and improved, with operational efficiency continuing to rise.
As of June 5, 2025, according to the statistics of component stocks (hereinafter referred to as Hong Kong stocks) with comparable data to the Hang Seng Composite Index, the 2024 revenue increased by 3.4% year-on-year, and profits increased by 8.5% year-on-year, with growth rates showing an upward trend compared to 2023. The net income margin and ROE have also risen year-on-year; compared to expectations (Bloomberg consensus expectations, the same below), the overall performance of Hong Kong stocks in 2024 was slightly below expectations, but compared to the significantly below-expectation results of 2023, there has been a notable improvement, establishing a trend of recovery in the fundamentals of Hong Kong stocks. From the perspective of market cap structure, in 2024, mid-to-large cap stocks performed better, driving the growth of Hong Kong stocks' performance, while small-cap stocks dragged down the overall performance. In the first quarter of 2025, 140 Hong Kong stock companies disclosed quarterly reports, with revenue growing by 1.8% year-on-year and profits growing by 10.4%, continuing the steady and improving trend seen in the annual reports of 2024.
Leading companies in Technology and Finance have shown impressive performance, while the cyclical sectors have improved but did not meet expectations.
In 2024, the Hong Kong market only saw negative revenue growth in Real Estate and Construction and Energy sectors, with six out of twelve primary Industries having revenue growth surpassing that of 2023; profit-wise, all sectors except Real Estate, Construction, Energy, and Composite have positive profit growth in 2024, and seven primary sectors have shown improved or accelerated profit growth compared to 2023. Considering the changes in growth rates and deviations from market expectations, the performance of Information Technology and Financial sectors in the Hong Kong market in 2024 is impressive, while the growth in Consumer, Telecommunications, and Medical Care sectors meets expectations. The improvement in cyclical Sectors' performance has not met expectations, while Public Utilities and Real Estate and Construction have seen worse-than-expected performance.
Cyclical sector performance has bottomed out, yet the performance of most industries is below expectations. The Oil and Gas industry saw a slight improvement in performance growth compared to the same period last year, but the degree and proportion of underperformance are quite high. In other resource-related industries, all except raw materials saw improved or accelerated revenue and profit growth in 2024 compared to 2023, especially under the support of Metal prices that enabled related enterprises to achieve rapid growth, although most enterprises still fell short of expectations. Industries related to manufacturing have shown divergent performances, with Transportation supported by shipping and Logistics exceeding expectations, while other sectors fell short of expectations or faced performance pressure. Entering 2025 Q1, the performance of the Metal and Transportation industries continues to rise, while the trend of improvement in the performance of machinery companies strengthens, indicating a significant rebound trend in cyclical industries.
The Defensive sector faces significant pressure, while the Telecommunications sector shows stable growth. In 2024, the Telecommunications sector has a steady growth performance that meets expectations; the performance of Agricultural Products (pig companies) is notably impressive. However, Food and Beverages and Specialty Retail have shown contraction in performance below expectations due to economic pressures; Public Utilities have also faced overall performance that did not meet expectations due to pressures from coal-fired power and new energy generation, as well as lower-than-expected electricity prices. The trend of sector performance continues into 2025 Q1, with Telecommunications Services experiencing year-on-year growth in 2025 Q1, while performance pressures remain in other sectors.
The Large Financial sector shows performance divergence, with Insurance and Brokerage firms performing impressively, while the Real Estate sector shows the poorest performance. Benefiting from the dual bullish factors of the equity and Fixed Income markets in 2024, insurance companies see profits from their asset side rising, and brokerage asset management's performance also benefits from stock market performance; banks show relatively stable performance, while the Real Estate industry has experienced a significantly sharp contraction exceeding expectations. Overall performance trends continue into 2025 Q1, with Insurance and Brokerage performance continuing to rise year-on-year, banks remaining steady, and Real Estate continuing to drag down sector performance.
The Growth sector, while being an important source of performance growth for the Hong Kong market in 2024, showcases significant internal divergence among various industries. The performance of the Technology sector in 2024 is mainly supported by leading companies in Consumer Electronics and Internet, while the performance of individual stocks in other sectors is frequently below expectations, indicating a clear divergence in overall performance. In the Pharmaceutical industry, overall performance growth among Medical Services companies has essentially stagnated, and their performance falling significantly short of expectations is the main reason for the sector's underperformance; conversely, Medical Devices, Digital Health, Biotechnology, and Pharmaceuticals have seen profits exceeding expectations, showcasing impressive performance. Within the Growth sector, secondary industries related to consumption have experienced a slowdown in performance growth in 2024 as the base effect wears off, but they perform steadily compared to expectations. Among them, Textiles and Apparel, Media and Entertainment, and Specialty Retail have shown particularly impressive performance, and home appliances have also achieved rapid growth supported by national subsidies and overseas expansion; while Social Services fell short of expectations, reflecting lingering shadows in the recovery of consumer spending. In 2025 Q1, industries that performed impressively in 2024 continue their growth momentum, including subdivisions such as Consumer Electronics, Internet, Biotechnology, Pharmaceuticals, and home appliances, but Textiles and Apparel and Airlines show performance under pressure.
Faced with multiple disturbances, expectations for performance in the Hong Kong market are declining, while the main lines in Technology, Pharmaceuticals, and New Consumption look positive.
As of May 30, 2025, the expected revenue and profit growth for the Hong Kong market in 2025 is 4.4%/4.6%, with the former rising compared to 2024, indicating a relatively bullish market outlook for China's economy this year; the latter shows some slowdown, with post-pandemic recovery and cost reduction and efficiency increase expected to reach a conclusion, but it basically matches revenue growth expectations. By industry, the expected highest profit growth rates are currently in Real Estate and Construction, Consumer Discretionary, and Information Technology, while Healthcare also ranks high in profit growth expectations when excluding the impact of specific stocks. Although the US-China trade friction since the end of January has led to downward revisions in performance expectations across the Hong Kong market, it may have been sufficiently priced in till now; the segments within Information Technology such as Consumer Electronics and Gaming sectors, leading Internet companies, and the Healthcare segments of Biotechnology (innovative drugs) and Pharmaceuticals and CXO, raw materials including Metals (Gold and specialty metals) and Chemicals, Brokerage asset management in Finance, as well as New Energy Vehicles and Commercial Retail (New Consumption) and Beauty and Skincare in Consumer sectors have all seen upward revisions in their full-year profit forecasts, with performance expectations for Telecommunication Services and Banks also remaining relatively steady, showcasing unique performance resilience and growth expectations of industries or companies against the backdrop of trade friction.
Risk factors:
1) The friction in the fields of technology, trade, and finance between China and the United States is intensifying; 2) The effectiveness of our policies, implementation effects, and economic recovery are below expectations; 3) Domestic and international macro liquidity is tightening more than expected; 4) The conflicts in the Russia-Ukraine and Middle East regions are escalating further; 5) The sales volume and price stabilization in our Real Estate sector is not meeting expectations.
