Hong Kong Equity Strategy: Accumulating Through the Policy Noise

Research evidence excerpt

Global Markets Strategy

20 August 2026

Hong Kong Equity Strategy

Accumulating Through the Policy Noise

MSCI HK's July rally paused in August, with offshore taxation measures

triggering a sentiment-driven pullback MTD. However, we see limited

evidence of a meaningful deterioration in capital flows, earnings expectations

or macro fundamentals. China's actions are better viewed as part of a broader

global shift towards offshore wealth transparency than a cross-border mobility

tightening (Figure 1). Historically, Hong Kong fund inflows to the asset and

wealth management industry have been driven by investment opportunities,

not policy headlines, and we expect AI-led capital formation, a robust tech

listing pipeline, and an attractive offshore yield premium to remain

structurally supportive (Figure 2). As for trading strategy, we recommend

accumulating MXHK through the current policy noise, as the momentum is

likely to build as tech leadership moderates (see our late July call for tech

recovery in August). Beyond the near-term trading horizon, we expect

MXHK to attract strategic allocation flows in 2H26, supported by

improving GDP and EPS revisions, attractive valuations, and an incremental

rotation towards Value and Quality under JPM’s business cycle framework

(Figure 30). Unlike the highly concentrated AI vs. non-AI trade seen in 2Q,

investors we spoke with are shifting towards a more diversified exposure

following July’s sharp deleveraging (Figure 24). We remain OW Financials

and Real Estate, funded by UW Consumer Discretionary. Our top picks are

HKEX and BOCHK (capital markets leverage, NIM expansion, high yield),

Techtronic (AI-adjacent upside optionality and resilient US demand), and

Swire Prop / Link REIT (property upcycle, prefer landlord over developers).

Into the 1H26 results season, we see limited scope for broad results-led

earnings upgrades, given only around half of MXHK constituents have

historically beaten or met consensus. We believe Financials look best

positioned to deliver upside surprise (Figure 13).

Equity Macro Research

Tim Huang AC

(852) 2800-4323

J.P. Morgan Securities (Asia Pacific) Limited/

J.P. Morgan Broking (Hong Kong) Limited

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