Asia Perspectives - Hong Kong Policy Address 2025: Aiming to improve the livelihood and accelerate advancement of the Hong Kong economy

Highlights: In his fourth Policy Address, Chief Executive (CE) John Lee covered many policies over a wide scope of economic and social topics for Hong Kong, with particular focus on stepping up development of the Northern Metropolis and promoting AI as a core industry. There were a series of initiatives for financial markets, in addition to other agendas on attracting talent, as well as boosting tourism and consumption. Compared to past policy addresses, property was a relative minor part this year. Overall, we think the policy address covered short-to-long term plans for the Hong Kong economy and the government is also taking steps to address underlying issues.

• To further enhance integration between Hong Kong and mainland China, as well as to provide a sustainable growth engine, there is a renewed focus to step up efforts on construction and the development of the Northern Metropolis. Once finished, the 30,000 hectare Northern Metropolis, which will consist of technology and logistics hubs and a university town, is expected to house 2.5mn residents and create 650,000 jobs
• Besides AI and data science, the government will focus on trying to lure more diversified industries to the city, including advanced manufacturing, life and health technology, new energy etc. in order to being more high-quality job opportunities and enhance overall economic efficiency
• In addition to the usual focus of enhancing Hong Kong as an international financial centre, a fresh initiative is targeting to build a global gold trading market spanning trading, settlement, and delivery. CE expressed support to the development of new investment products such as tokenised gold and issuing gold funds, as well as other measures including setting up a central clearing system for gold in Hong Kong and inviting the Shanghai Gold Exchange to provide mutual market access
• Despite rallying 29 per cent YTD, and currently at 12-month consensus forward P/E ratio of 15.2x, Hong Kong domestic stocks valuation remain reasonable relative to global equities. Strong mainland Chinese inflows and capital market activity will likely provide support for the market. We retain a neutral position as we look for more evidence of a sustainable improvement in the fundamental outlook of the Hong Kong economy and corporate earnings. We see tactical opportunities among undervalued sectors and stocks signalling growth recovery and offering stable cash returns