Citigroup expects Hong Kong property prices to remain flat in the second half of the year, with the super luxury market likely to continue outperforming the broader market

Citi's Head of Investment Strategy and Asset Allocation, Liao Jiahao, expects that property prices in Hong Kong may remain stagnant in the second half of this year, but a long-term improvement in supply and demand balance is needed to support a rebound in residential prices. He predicts that the transaction volume in 2027 will exceed the number of completed units in that year.

He further stated that a broad recovery in investment demand may still take time, as investment demand often depends more on price expectations and stable long-term interest rates. Additionally, Citi analysts expect that after the latest "Policy Address" optimizes the capital investment plan, the super luxury market may continue to outperform the broader market.

Regarding the stock market, Liao Jiahao mentioned that due to the relatively low base in the internet sector, comprehensive corporate earnings benefiting from global economic growth, a rebound in demand for industrial stocks following interest rate cuts in the U.S., and robust growth in the consumer staples sector, the Hang Seng Index's earnings per share forecast for 2026 has been raised from 8.1% three months ago to 9.8%.

Citi analysts believe that China's 15th Five-Year Plan is expected to become a positive catalyst for growth in multiple industries, including technology, tourism, healthcare, insurance, and renewable energy.

As for the strong momentum in gold, it may continue into the first quarter of next year, supported by both cyclical and structural factors, with short-term expectations seeing prices at $3,800 per ounce.

In the U.S., Liao Jiahao pointed out that there may be downside risks in the U.S. labor market in the coming months, which could lead to increased market expectations for interest rate cuts by the Federal Reserve, negatively impacting the dollar. Citi analysts' baseline forecast is for a soft landing of the global economy in the second half of this year, while the continuous underperformance of U.S. economic data may lead to a final round of declines for the dollar, but they believe this is merely cyclical and expect the dollar to recover next year