Hong Kong's economy is continuing its steady recovery, with GDP growth expected to reach about 2.6 percent for the year, and its stock market to sustain its upward momentum.

Allen Ding, chief economist of China CITIC Bank International Ltd, said that the robust expansion in exports and the strong performance of the financial sector have established a solid foundation for Hong Kong's 2026 economic growth.

Speaking at the Hong Kong First Quarter Economic and Investment Outlook Conference on Thursday, he said he expects Hong Kong’s GDP growth to reach around 2.6 percent in 2026.

Hong Kong's business environment continued to improve in January. The S&P Global Hong Kong Purchasing Managers' Index (PMI) rose to 52.3, an increase of 0.4 points from the previous month, marking six consecutive months of expansion above the “neutral” threshold of 50.

On the external front, new export orders in January recorded the strongest increase in nearly three years, said Usamah Bhatti, an economist on S&P Global's PMI team. The export news followed a strong performance in December 2025, when the value of Hong Kong's total exports of goods increased 26.1 percent year-on-year to HK$512.8 billion ($65.63 billion), as reported by the Hong Kong Census and Statistics Department.

On the equity sector, the Hong Kong stock market opened 2026 with notable volatility. The benchmark Hang Seng Index briefly surpassed the 28,000-point level — a nearly four-year high — before dipping below 26,500 points. Nevertheless, market experts remain confident in the HSI's performance for the year and have revised the target upward to 29,800 points.

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Ivan Cheung, head of investment advisory at China CITIC Bank International Ltd, said that Hong Kong equities have long traded at a valuation discount relative to European and US markets. Recent capital inflows into Asian markets have demonstrated that investors are reassessing Hong Kong stocks amid positive developments on the Chinese mainland, he said.

However, short-term market fluctuations may still persist, Cheung said. He cautioned about the uncertainties surrounding the US Federal Reserve’s monetary policy on interest rates and the disruptive effects of AI advancements on companies that fail to adapt.

In light of the optimistic outlook for Hong Kong's economic recovery, he recommended investors focus on sectors such as conglomerates, real estate, and local banks.

The HSI edged up 0.14 percent to close at 26,885 points on Thursday. The Hang Seng China Enterprises Index — a key gauge of mainland-based companies listed in Hong Kong — rose 0.5 percent to end the day at 9,093 points. The Hang Seng Tech Index, which tracks the largest technology firms listed in the city, gained 0.74 percent to finish at 5,406 points.

Contact the writer at akirawang@chinadailyhk.com