DDN Business Insider | HK's economic outlook for 2025: Virtual assets may see new opportunities, property market to embrace betterment
Editor's note: As an international financial center, Hong Kong's economic development is always affected by both internal and external environments. On today's New Year special program, we delve into Hong Kong's 2025 prospects to discuss the opportunities and challenges that lie ahead.
【Anchor】Happy New Year everyone, welcome to DDN Business Insider. I am Yunfei Zhang. This episode is the second part of our New Year special program, where we focus on Hong Kong. As an international financial center backed by the motherland and connected to the world, what opportunities and challenges will Hong Kong face in 2025 due to the combined effects of internal and external environments? Today, we have invited Shih Wing-ching, founder and chairman of Centaline Group, Li Luxia, general manager of the Southeast Asia Research Center of Industrial and Commercial Bank of China (Asia), and Fu Rao, executive director of the Hong Kong International New Economy Research Institute, to share their insights. Hello everyone!
【Anchor】First, I would like to ask Ms. Li from ICBC Asia to provide a summary analysis of Hong Kong's macroeconomic outlook for 2025. Especially considering that after Trump take office, the pace of interest rate cuts by the Fed may slow. While economic stimulus measures in the mainland may increase, what are the potential opportunities and challenges for Hong Kong's macroeconomy?
Compared to 2023, logistics will replace human flow as the most significant contributor to Hong Kong's economic growth in 2024. Over the year, low driving force will account for more than half. In contrast, factors such as exchange rates and consumption pattern adjustments will result in weaker growth contribution from human flow in 2024 compared to 2023. In terms of capital flow, supported by policies such as withdrawal, the real estate market will see relatively active trading this year, and the growth contribution from finance and insurance will also turn positive after the trends in Hong Kong stocks decline starting from the second quarter. Looking ahead to 2025, we anticipate that capital flow will replace logistics as the most critical contributor to economic growth by the end of the year.
On one hand, withdrawal measures, including mortgage adjustments, will continue to boost real estate market trading. On the other hand, the Fed's interest rate policies will stimulate capital market trading, further enhancing the contribution from capital flow and finance and insurance. At the same time, we expect human flow in 2025 to perform better than in 2024. The continued recovery of wealthy visitors and measures by the democratic government to promote reproductive economy will enhance consumption attractiveness in Hong Kong. In terms of logistics, we anticipate a decline in contribution in 2025 compared to 2024, primarily due to high technological growth in 2024 and potential adjustments in tariff policies by the new government of the U.S., which may disrupt trade activities. However, logistics still shows resilience, supported by the ongoing recovery of global manufacturing and the competitiveness of mainland exports. In summary, we believe that Hong Kong's economy can still achieve stable growth of around 2.5% in 2025.
【Anchor】Good. What impacts do you predict that the economic development of the mainland will have on Hong Kong?
2025 will be a year for Hong Kong's economy to transition from post-pandemic recovery to transformation growth. I would like to analyze this through human flow, logistics, and capital flow from two aspects. Regarding human flow, we can look at it through the "883"perspective. Currently, 80% of returning visitors are from mainland outbound tourism, and by the end of this year, the numbers will recover to around 80% of previous levels. Among the mainland outbound tourists, 30% choose to visit Hong Kong, indicating a significant portion of mainland residents will continue to travel to Hong Kong during their outbound tourism. Additionally, there is considerable growth potential in the service consumption of mainland residents. In the first three quarters of 2024, service consumption among mainland residents accounted for only 47%, while the figures for the U.S. and South Korea were 68.6% and 61.1%, respectively. This illustrates the economic impacton tourism.
In terms of capital flow, we consider two aspects: from the enterprise perspective, 75% of the market capitalization of Hong Kong stocks comes from mainland enterprises. As the profitability of mainland enterprises continues to improve, it will bolster the valuation of Hong Kong stocks. Simultaneously, a favorable performance in the secondary market will enhance the willingness for IPOs in the primary market. There are still many enterprises lined up for IPOs. From the residents' perspective, amidst the backdrop of real estate transformation, the willingness of mainland residents to allocate capital in Hong Kong capital market is continually increasing. The expansion of cross-border policies also provides more opportunities for mainland residents to allocate assets in Hong Kong. Finally, regarding logistics, we analyze from two aspects: on one hand, the competitiveness of mainland products and the continuous improvement of export competitiveness remain crucial for the resilient growth of Hong Kong's economy and re-export trade. Furthermore, amid significant changes in the global trade environment, coupled with the demand for industrial upgrades in the mainland, the willingness of enterprises to engage in cross-border industrial cooperations is also on the rise. This is reflected in the developments we have observed last year, which will promote the economic development of Hong Kong headquarters, including cross-border entrepreneurship, industrial cooperation, and the development of the Northern Metropolis, all of which are positive for Hong Kong.
【Anchor】Good. Regarding the impact of internal and external factors on Hong Kong's economy, the most direct experience for ordinary investors comes from fluctuations in the stock market. In 2024, Hong Kong stocks showed a trend of first declining and then rising, with an annual increase of 17%. However, as we enter 2025, the outlook for the Hong Kong stock market seems less optimistic. Chen Weicong, senior investment strategist at East Asia Securities, stated in a recent interview, that considering the potential slowdown in the Fed's rate cuts, his view on Hong Kong stocks for 2025 is "mildly positive." He mentioned that the volatility of the Hang Seng Index may be significant in the first two quarters, with an expected fluctuation between 18,000 and 22,500 points. Given the low bond yields in the mainland, Chen believes high-dividend state-owned enterprise stocks, such as telecommunications, banks, and mainland energy sectors, are worth paying attention to.
【Anchor】Besides the stock market, the property market is another widely discussed topic in Hong Kong. I will hand this part over to Mr. Shih Wing-ching. Hello, Mr. Shih. In 2024, the Hong Kong property market saw a revival under the "withdrawal of restrictions" policies. Do you believe these measures will continue to be effective in 2025?
The withdrawal should have a sustained positive effect, but of course, the impact is most evident at the moment because it releases a certain accumulated purchasing power back to normal. These two measures can be said to normalize the property market, but they do not exert too much force. The more significant impact on the property market will come from the decline in interest rates.
【Anchor】Regarding the property market, Mr. Shih, what favorable factors do you see this year?
I believe there are two aspects that are beneficial for the property market. The first is that people are currently overly focused on the negative aspects of Trump's election. However, Trump is known for making exaggerated statements. During his campaign, he promised many things to win over voters, but when it comes to actual implementation, he will face some reality-checks.
So, I estimate that when he actually takes action, people will realize that it may not be as bad as they have imagined. Besides, I believe Trump will prioritize addressing domestic issues in the U.S., such as the bloated government bureaucracy, where they spend extravagantly on expensive items. He will need to reform the government system first, leaving him with less time to deal with international issues. Recently, he also proposed that the U.S. and China could solve all the world's problems together.
Additionally, I believe that interest rate cuts will continue. Some people say that in 2025, there can only be two explanations, but I think this prediction does not take Trump's attitude into account. Since Trump was elected with a strong voter base, he will not heed the opinions of Powell, Azar, or others. He believes that voters elected him to lead the U.S. on a path to become stronger, so the Fed should cooperate with his political direction and economic policies, rather than opposing him.
I believe that after Trump takes office, Powell will gradually align with the need for a low-interest era in the U.S., which will also be beneficial for Hong Kong.
【Anchor】What does Mr. Shih predict for the property market this year?
I believe it will first stabilize at a low level and then gradually improve. Why do I say this? Let's first talk about the decline in property prices. In 2022, prices dropped by 15%, and in 2023, the decline was reduced to over 6%. In 2024, the decrease is expected to be more minor, again just over 6%. You can see that the rate of decline is narrowing, while transaction volumes are increasing. If we look at the primary market, transactions have increased significantly; last year, there were only about 10,000 transactions in the primary market, but in 2024, it is expected to rise to 15,000, an increase of nearly 50%. This is a positive sign. Overall, the total transaction volume in the property market, combining both new and secondary sales,have increased by almost 10%, indicating a growing market activity. This is the basis for the market's recovery; only a market with transaction volume can sustain itself.
Currently, transaction volumes are increasing, with the primary market up by nearly 50% and the secondary market up by 10%. In this situation, sellers are selling more, and with more sales, they are less eager to sell quickly. In the primary market, as developers sell more, their inventory will decrease. Although they are still exporting, I foresee a reduction in supply because developers have not been actively purchasing land recently. Due to developers' lack of aggressiveness in acquiring land, future supply will decrease. Therefore, I expect that in a few years, the Hong Kong property market will again face a situation of supply not meeting demand.
【Anchor】Looking back at 2024, one notable point is the unprecedented boom in Bitcoin. The virtual asset sector in Hong Kong has also developed rapidly. Yu Weiwen previously stated in an interview that if Hong Kong could become a forerunner in this field, "businesses would naturally gather here." Mr. Fu, in your view, what aspects should we focus on regarding the development of the virtual asset sector in Hong Kong in 2025?
I believe that the development of Hong Kong's virtual asset industry in 2025 should focus on three main areas. The first area is the compliance and improvement of the regulatory framework. Since the policy declaration for virtual assets was released in 2022, regulatory bodies such as the Securities and Futures Commission, the Monetary Authority, and Customs have established a relatively comprehensive regulatory framework over the past two years. In 2025, we expect a more flexible and clearer regulatory environment that can attract more investors and assets to enter Hong Kong, providing them with a sense of security while also supporting the development of innovative enterprises.
Secondly, I believe that market liquidity and infrastructure development are also key components of Hong Kong's virtual asset development in 2025. Hong Kong currently has well-established exchanges and financial infrastructure to support our virtual asset industries. The question is how to enhance market liquidity and stability to attract more professional investors. This is a crucial point we need to pay attention to.
Thirdly, international cooperation and talent acquisition are also important. We believe that with Hong Kong's strong focus on developing innovation and technology, it can attract more professionals in blockchain technology and virtual assets, laying a solid foundation for the future of virtual assets in Hong Kong.
【Anchor】Looking ahead to 2025, how do you view the prospects for development in this field in Hong Kong, Mr. Fu?
I hold a very optimistic attitude towards the virtual asset market in Hong Kong in 2025, for three reasons. First, policy support and government initiatives—Hong Kong's government's proactive stance and support for virtual asset policies are further driving the maturity of the virtual asset market, attracting more international capital. Second, the strategic position of the Asian market—As a financial center in Asia, Hong Kong has unique geographical advantages that can connect China with the world. Third, innovation and technological development—Hong Kong's advancements in innovation and technology will significantly boost the development of various sub-sectors in virtual assets, such as DeFi, which is the tokenization of real-world assets (RWA), and NFTs, amongst other sub-sectors that are thriving in Hong Kong.
【Anchor】OK, thank you. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung, Jerry Wang | Translate: Kato Ip | Proofread: Chris Liu
Related News:
Comment