Hong Kong's Stock Market Surges as Economic Recovery Takes Hold
Hong Kong, Friday, 4 July 2025.
In 2025, Hong Kong’s stock market experienced significant growth, with stamp duty income reaching US$3.78 billion. This surge highlights renewed investor confidence amidst earlier economic challenges.
Stamp Duty Surge and Economic Implications
Between January and May 2025, Hong Kong saw a dramatic rise in stock market-related stamp duty income, amounting to HK$29.69 billion (approximately US$3.78 billion). This significant increase reflects the city’s robust economic turnaround driven by a vibrant stock market, which has seen a flurry of trading activity and initial public offerings (IPOs) [1]. The rise in market activity is crucial as it helps ameliorate fiscal pressures previously exacerbated by a struggling real estate sector that affected government revenue [1].
Factors Behind the Bull Market
The resurgence of Hong Kong’s stock market can be largely attributed to reduced transaction costs following a decision to cut stamp duties to 0.1% in November 2023. This move has positioned Hong Kong as one of the most cost-effective trading hubs worldwide, trailing only behind the U.S., mainland China, and Japan, which do not levy such fees [2]. Coupled with nearly zero margin financing costs, these changes have spurred investor activity, particularly encouraging individual investors to partake in new IPOs [2]. This environment has bolstered market liquidity and turnover, further fuelling the city’s ongoing economic recovery [1][3].
Market Performance Indicators
As of June 2025, the Hang Seng Index has climbed an impressive 20% during the first half of the year, showcasing Hong Kong’s position as a leading market, despite macroeconomic challenges such as the ongoing U.S.-China trade war which commenced in April 2025 [1][4]. Furthermore, the market capitalization surged by 24% to HK$40.9 trillion by the end of May, reflecting robust investor engagement. Average daily turnover reached HK$242.3 billion, doubling that of the previous year, signaling increased market confidence [1][3].
Impact on Investor Sentiment
The uptick in market activities has drawn significant interest from mainland Chinese investors, whose contributions account for a substantial portion of stock purchases this year. By June 2025, these Southbound investors accounted for 90% of their record 2024 inflows, highlighting their crucial role in the current bull market [5][6]. The influx from mainland funds is largely driven by China’s strategic push for high-quality growth this year and efforts to curb excessive competition in certain sectors, thereby enhancing investor optimism about sustained growth [5].