- Banks expect Chinese AI-linked stocks to keep lifting Hong Kong and mainland equities into 2026, but with slower gains than 2025.
- Julius Baer targets Hang Seng around 29,500 and CSI 300 about 5,100 by end-2026, while Goldman Sachs forecasts MSCI China up ~20% and CSI 300 up ~12% on ~14% earnings growth.
- Citibank sees AI beneficiaries in internet and gaming and improving conditions for food-delivery, but urges diversification into non-tech sectors and across regions while still favoring US equities.
- Key risks include overheated AI capex with unclear near-term profits, weak domestic demand and property stress, geopolitical and trade shocks, and USD/yuan swings.
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The recent forecasts from Julius Baer and Citibank, coupled with Goldman Sachs’ earnings-led projections, reinforce a consensus that China and Hong Kong markets remain favorable for 2026, particularly powered by the AI industry. Julius Baer is targeting a Hang Seng Index close to 29,500 and CSI 300 at 5,100, representing strong double-digit returns from current levels (~12.8 % and ~7.6 % respectively). While these are healthy, they reflect a tempered growth trajectory versus the sharp gains seen in 2025.
Goldman Sachs adds depth to this view by pointing to earnings growth (estimated ~14 % year-on-year in 2026–27) as the main engine of returns, rather than valuation reratings alone. The bank forecasts MSCI China to rise ~20 % and CSI 300 ~12 %. AI deployment, higher export margins, corporate global expansion, and supportive regulation are expected to contribute materially.
However, Julius Baer and Goldman’s optimism is shaded by caution regarding the rapid increase in capital expenditure in AI, where immediate profitability remains uncertain. For example, Julius Baer highlights “low visibility on profitability in the near future” due to high capex. Meanwhile, domestic consumer confidence and real estate trends remain critical variables, especially for the broader market beyond select tech winners.
Citibank’s strategic stance is more nuanced: while it retains an overweight rating for US equities—anticipating further earnings and interest-rate tailwinds—it encourages clients to diversify, both sectorally (moving some exposure into non-tech, e.g. healthcare) and regionally (more into China/Hong Kong). On currencies, the yuan is expected to continue strengthening toward year-end around 6.8 per USD, while the US dollar is seen weakening initially before recovering in H2.
From a strategic perspective, investors may consider: increasing exposure to China/HK AI-adjacent names, especially internet, hardware, gaming, and export-oriented firms; aligning portfolios toward emerging earnings trends; monitoring macro risks such as US-China trade policy, property sector stress, and dollar/yuan flows; and emphasizing flexibility to shift between regions and sectors given the moderating growth outlook.
Open questions include how much of the projected earnings growth will be realized versus anticipated; whether AI capex translates into profitable ROI; the impact of China’s domestic demand weakness; how trade or geopolitics might disrupt export or tech value chains; and whether USD-yuan and interest rate trends will reinforce or counteract equity returns.
Supporting Notes
- Julius Baer targets Hang Seng at circa 29,500 by end-2026 (12.8 % upside from ~26,149) and CSI 300 at ~5,100 (7.6 % from ~4,737).
- Hang Seng rose ~28 % in 2025; CSI 300 gained ~18 % during same period.
- Goldman projects MSCI China +20 % and CSI 300 +12 % through end-2026, with ~14 % earnings per share growth compared to single-digit in 2025.
- Goldman sees key contributors: AI-powered demand, higher export margins, policy supports, global expansion of Chinese firms.
- Citibank expects internet, gaming sectors to benefit from AI; sees food/delivery firms past worst of price wars; recommends diversifying into non-tech sectors like healthcare and more Asia exposure; maintains overweight US equities but with caution.
- Currency view: Citibank forecasts yuan strengthening to ~6.8 per USD by year-end; US dollar to weaken initially then rally later in 2026.
- Risks: Julius Baer concerned about rapid AI capex and low near-term profit visibility; property and consumer confidence issues in China noted; risks from trade & geopolitical tensions emphasized.