Hong Kong's Business Outlook: Steady Amid Sectoral Storms in Q2 2025

Hong Kong’s business expectations in Q2 2025 remain broadly stable compared to the previous quarter, according to the latest Census and Statistics Department (C&SD) report. Yet beneath the surface, stark contrasts between sectors reveal a fragile equilibrium—driven by real estate optimism, accommodation sector pessimism, and looming global trade risks.

A Mixed Bag of Sentiment

The C&SD’s Quarterly Business Tendency Survey shows that 9% of businesses expect improved conditions in Q2, unchanged from Q1, while 18% anticipate deterioration—a slight improvement from 19% in Q1. The net balance metric, which subtracts negative from positive expectations, stands at -9%, indicating cautious pessimism. However, this masks sharp divergences across industries:

• Real Estate: A standout performer, with employment expectations showing net positive sentiment. More firms in this sector anticipate hiring increases rather than cuts, contrasting with broader sectoral trends.
• Accommodation & Food Services: Suffered heightened pessimism, with a significant majority expecting reduced business volume. This sector’s net balance of -43% (9% positive vs. 52% negative) highlights severe challenges.
• Transportation & Storage: Also saw worsened outlooks, while construction faces employment cuts.

Global Risks Cloud the Horizon

A government spokesperson noted that while large enterprises’ near-term sentiment is stable, the survey’s data—collected through April 10—predates U.S. tariff hikes in early April, which could worsen trade conditions. This timing gap raises concerns about whether the reported stability reflects post-April realities.

The report warns that global trade tensions, inflationary pressures, and geopolitical risks could dampen sentiment further. Hong Kong’s 2025 GDP growth is still projected at 2%-3%, but the downside risks are growing.

Why Investors Should Pay Attention

The data suggests two clear takeaways for investors:

1. Sector Rotations Are Critical:
2. Real Estate: The sector’s resilience—driven by stable employment expectations and government measures to support housing—could make it a defensive play. The HSI Real Estate Index (e.g., listed developers like Henderson Land or Sino Land) may outperform broader markets.

3. Avoid Trade-Sensitive Sectors: Accommodation, transportation, and construction face headwinds from both domestic demand shifts and global trade frictions.

4. Monitor Policy Responses:
   Hong Kong’s government has pledged to bolster businesses through existing measures, but investors should watch for new stimulus. Cross-border tourism recovery and retail sales (which fell 6.7% in December 2024) could provide clues.

Conclusion: Caution and Selectivity

Hong Kong’s business expectations in Q2 are a tale of stability masking deeper divides. While the real estate sector’s optimism offers a glimmer of hope, the broader economy remains tethered to external risks—most immediately, U.S. trade policies.

Investors should focus on sector-specific opportunities and remain vigilant about geopolitical developments. The Hang Seng Index’s performance—currently hovering near 20,000—may reflect this cautious mood, but a rebound in trade-sensitive sectors could hinge on de-escalation.

Key data points underscore the fragility:
- Accommodation sector’s net balance of -43% shows extreme pessimism, suggesting further declines in tourism or consumer spending could hurt.
- Unemployment at 3.1% as of January 2025 hints at labor market stability, but this may weaken if pessimistic sectors cut jobs.

In short, Hong Kong’s economy is holding its ground, but the next quarter will test whether this stability is a mirage or a foundation for recovery.

This article synthesizes data from the Hong Kong Census and Statistics Department’s Q2 2025 Business Expectations Report and external economic projections.