Hong Kong Equity Market Review for May: AI Theme Continues, Leadership Concentrates; Early Signs of Recovery in Real Estate

Overview

This report reviews the performance of China and Hong Kong equity markets in May 2026, focusing on the sustainability of the AI theme and its differentiated impact across sectors, as well as early signs of recovery in the real estate sector and shifts in macroeconomic indicators. While AI-linked sectors posted strong gains, internet platforms underperformed due to uncertainties surrounding AI commercialization. The report also highlights stronger-than-expected export growth and improved retail sales data.

Core views

During May, risk appetite softened across both mainland China and Hong Kong equity markets, with offshore markets under pressure, while A-shares continued to outperform. Specifically: 1. **Information Technology (IT)**: The AI theme remained robust, but leadership increasingly concentrated among a few key winners. Companies such as联想 (Lenovo), 盛意科技 (SUNNY), JCET, 三环集团 (Sanhuan Group), and GigaDevice performed well in AI servers, PCBs, OSAT, MLCC, and storage segments. 2. **Real Estate**: Early signs of recovery emerged, with increased secondary housing transaction volumes and a modest uptick in prices. High-quality developers such as COLI and CRL led the gains. 3. **Utilities**: Datang Power stood out, driven by the launch of the nation’s first power-calculationSynergy project, the Meng Su UHV project, and falling coal prices. 4. **Hong Kong Market**: Tightened cross-border capital controls affected sentiment in the financial sector. However, the assessment indicated limited fundamental impact. Stronger-than-expected retail sales data signaled further demand recovery. 5. **Exports and Macro Overview**: Export growth surpassed expectations, driven by high-value-added manufacturing. Domestic economic activity was broadly below expectations in April, yet exports outperformed internal demand.

Analysis framework

The report employs a blended quantitative and qualitative analytical framework: 1. Uses JPM’s Quantitative Macro Indicator (QMI) to track underlying macro strength and analyzes Hong Kong and China’s economic performance through a business cycle lens. 2. Conducts detailed sector-level breakdowns, particularly in IT, real estate, and utilities, incorporate stock-level performance and weight-shift dynamics. 3. At the macro level, evaluates economic health using trade data, unemployment rate, CPI, and retail sales. 4. Integrates analyst insights and market data to forecast near-term market trajectory and key stock performance.

Methodology notes

• Industry/F产业 Analysis FrameworkSupply-demand framework

  Analysis of AI-related supply chain companies through supply-demand dynamics.

  The sustainability of the AI theme depends on technological advancements on the supply side and application expansion on the demand side. The report evaluates how supply-demand balance influences stock performance by examining firms in AI servers, PCBs, and other related segments.

• Valuation MethodologyPE/PEG valuation

  Assessment of market valuation levels using forward P/E (FTM P/E).

  The report compares forward P/E ratios of MXCN and MXHK indices and combines this with IBES consensus EPS growth forecasts to assess current valuation relative to future expectations.

• Cycle & Volume FrameworkInventory Cycle

  Assessment of real estate market supply-demand balance via months of inventory.

  The report notes that Hong Kong real estate inventory dropped to 9 months—the lowest level since 2021—indicating rising demand.

• Cycle & Volume FrameworkBusiness Cycle

  Classification of economic cycle stages using QMI indicators.

  The report introduces JPM’s QMI indicators for China and Hong Kong, categorizing economic conditions into four phases—recovery, expansion, contraction, and slowdown—to contextualize market performance relative to the macro cycle.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Sun Hung Kai Properties (0016.HK)

  Serves as the dominant proxy for the Hong Kong real estate recovery

  Strengths

  High-quality developer with leading market share

  Comparison

  COLI and CRL outperformed other developers during the segment

  Risks

  Recovery may remain uneven

• Techtronic Industries (0669.HK)

  BENEFITS FROM grew demand in AI-adjacent products and resilient U.S. consumption

  Strengths

  Upside potential from AI-adjacent product expansion; stable U.S. demand

  Comparison

  Teceterronics exhibits greater resilience than most industrials peers

  Risks

  Global demand volatility could weigh on earnings

Key data

• MSCI China Index Monthly Change-3.4%In USD terms, May 2026
• CSI 300 Index Monthly Change+2.7%In USD terms, May 2026
• AI Server Stocks’ Performance+105%Exemplified by Lenovo among AI-linked stocks
• Hong Kong Secondary Housing Price Growth+1.5%May 2026
• Year-on-Year Export Growth+42.9%Surpassing expectations, primarily driven by high-value-added manufacturing

Impact & implications

The report expects the AI theme to persist but anticipates continued consolidation of leadership among a select group of winners. The early signs of real estate recovery suggest potential broad-based stabilization, though unevenness in the rebound remains a concern. Tightened cross-border capital controls in Hong Kong may temporarily pressure financial sector sentiment, but the fundamental impact appears limited. Robust export growth underscores regional resilience in tech-driven trade, while improved retail sales signal renewed consumer confidence and demand.

Risks

• Recovery may remain uneven
• Global demand volatility could weigh on earnings
• Policy shifts could impact cross-border capital flows

What to watch

• Progress in AI technology commercialization
• Sustainability of real estate recovery
• Trends in export data
• Future retail sales performance