Key Benchmarks Performance
Over the one-month period ending 30 June 2026, the Philadelphia Semiconductor Index was the clear global leader, rising 11.0%. This exceptional gain reflects continued investor enthusiasm around artificial intelligence, cloud infrastructure spending, advanced chip demand and strong earnings expectations across the semiconductor ecosystem.
Beyond semiconductors, performance was relatively broad-based across developed markets. The S&P 500 Health Care Index gained 6.6%, indicating some rotation into defensive growth sectors after the strong rally in technology. Spain’s IBEX 35 advanced 6.0%, benefiting from robust banking sector earnings and resilient economic conditions. Japan’s Nikkei 225 rose 5.6%, maintaining its position as one of the strongest-performing major markets globally. Continued foreign investor inflows, improving corporate governance standards and strong technology exports have remained key support factors for Japanese equities.
Within Asia, the Philippines gained 4.7%, Taiwan advanced 3.1%, and Singapore rose 2.6%. Taiwan’s continued strength reflects its central role in global semiconductor production, while Singapore benefited from stable financial sector earnings and its defensive market characteristics. Thailand also generated positive returns of 1.5%, adding to an already impressive first-half performance.
In contrast, several markets experienced notable weakness during June. Hong Kong’s Hang Seng Index fell 9.1%, making it the weakest major market in the dataset. Persistent concerns regarding China’s economic recovery, ongoing property sector challenges and weak investor sentiment continued to weigh on Hong Kong equities. Indonesia’s Jakarta Composite Index declined 7.9%, extending an already difficult year amid capital outflows and weaker investor confidence. The NASDAQ Composite lost 2.8%, likely reflecting some profit-taking following substantial gains earlier in the year, while the broader S\&P 500 declined 1.1%. Malaysia and Brazil also recorded modest monthly declines.
Looking at year-to-date performance, the first half of 2026 has clearly been defined by the dominance of AI-related markets. The Philadelphia Semiconductor Index and South Korea’s KOSPI have both returned an extraordinary 101.1%, meaning investors in these markets more than doubled their capital within six months. Such returns are extremely rare for broad market benchmarks and highlight the extent to which capital has been concentrated in the global AI supply chain.
Taiwan ranks as the next strongest performer with a gain of 59.3%, followed by Japan at 39.2% and Thailand at 26.3%. The common thread among Taiwan, Korea and Japan is their significant exposure to semiconductors, technology hardware, electronics manufacturing and AI infrastructure spending. The current market environment continues to reward countries that occupy strategic positions within global technology supply chains.
The strength of North Asia contrasts sharply with performance elsewhere. While the U.S. market remains positive, gains have been far more moderate. The NASDAQ has risen 12.8% year-to-date, while the S&P 500 has advanced 9.6% and the Dow Jones Industrial Average has gained 8.9%. This suggests that although technology continues to lead globally, performance within the U.S. has become increasingly concentrated in a relatively small group of AI beneficiaries rather than being reflected across the broader market.
European performance has been respectable but unspectacular. Spain’s IBEX 35 has gained 12.5%, outperforming many regional peers. The FTSE 100 is up 5.7%, while France’s CAC 40 has risen 3.1%. Germany’s DAX has slipped marginally into negative territory at -0.6%, reflecting relatively weaker industrial momentum and subdued investor sentiment.
ASEAN markets have shown significant dispersion rather than moving as a unified bloc. Thailand has emerged as one of the strongest regional performers with a 26.3% gain. Singapore has generated a healthy return of 11.3%, supported by its banking sector and defensive characteristics. However, the Philippines remains roughly flat at -0.3%, Malaysia has declined 1.0%, and Indonesia has experienced a severe correction of 34.7%. The divergence highlights the importance of domestic economic and market factors rather than regional trends alone.
The most notable underperformance has come from China-related markets. The Hang Seng Index has fallen 10.7% year-to-date, while China Shanghai’s gains have been relatively modest at 3.2%. China has largely failed to participate in the global AI-driven equity rally that has fuelled gains in Taiwan, Korea and the U.S. Instead, investors have remained focused on slower economic growth, weak consumer confidence and ongoing challenges in the property sector.
India has also disappointed relative to expectations, with the Sensex declining 10.3% year-to-date. After several years of strong outperformance, Indian equities appear to be facing a combination of valuation adjustment, earnings normalization and profit-taking by investors.
Table 1: Global Key Benchmarks Performance
Source：LSEG Lipper, as of 26/06/30
Hong Kong MPF Performance by LGC Analysis
June 2026 was a challenging month for fund investors overall, with the average fund across all Lipper Global Classifications declining 1.4% for Hong Kong MPF universe. Performance dispersion was significant, with defensive sectors outperforming while Greater China-focused equity categories experienced substantial losses.
The strongest-performing classification during the month was “Equity Sector Healthcare”, which gained 5.6%. The sector benefited from investors seeking quality earnings, resilient cash flows, and more defensive exposure amid growing volatility in broader equity markets. Healthcare also appeared to attract capital from investors taking profits from technology-related sectors that had delivered exceptional gains during the first half of the year.
Equity Europe was the second-best performing classification with a return of 1.7%. European equities continued to benefit from relatively stable economic conditions, supportive monetary expectations, and solid earnings from financial and industrial companies. The positive performance was notable given the weaker returns recorded across several global equity markets during the month.
Fixed income categories generally delivered muted returns. Bond Asia Pacific Local Currency, Bond Asia Pacific Hard Currency, and Money Market HKD each posted gains of approximately 0.1%, while Bond CNY was largely flat. The modest performance reflects a relatively stable interest-rate environment, with limited directional moves in regional bond markets during the period.
Money market funds remained largely unchanged. “Money Market Other” and “Money Market CNY” both declined marginally by 0.1%, reflecting lower short-term yield adjustments rather than significant market volatility.
Among broader equity categories, performance was mixed. “Equity Global” declined 0.6% while “Equity US” fell 1.0%. Despite continued strength in selected AI- and semiconductor-related stocks, weakness across the broader U.S. market weighed on diversified global equity funds. The softer performance suggests that market leadership remained concentrated in a narrow group of sectors rather than being broadly distributed across equity markets.
Mixed-asset strategies also struggled during the month. “Mixed Asset HKD Aggressive” lost 1.1%, while “Mixed Asset Other Flexible” declined 1.4%. The negative returns reflected simultaneous pressure in both equity and fixed income allocations, limiting the diversification benefits typically associated with balanced portfolios.
Within Asia, the largest losses were concentrated in Greater China markets. “Equity Korea” declined 2.5%, despite Korea’s strong year-to-date gains driven by the semiconductor rally. The monthly weakness likely reflected profit-taking following exceptional performance earlier in the year.
Investor sentiment toward China-related markets remained particularly fragile. “Equity Greater China” fell 4.4%, reflecting continued concerns over China’s economic recovery, consumer demand, and property sector conditions. Mainland-focused funds performed even worse, with “Equity China” declining 7.0%.
The weakest classification during June was “Equity Hong Kong”, which fell 7.5%. Hong Kong equities continued to face significant headwinds from subdued economic growth expectations, weak capital market activity, and persistent investor caution toward China-linked assets. The underperformance of both China and Hong Kong fund classifications stands in stark contrast to the strong gains seen in North Asian technology markets such as Taiwan and Korea at the broader index level.
Figure1：Top/Bottom 10 Hong Kong MPF Performance by Lipper Global Classifications, June 2026
Source：LSEG Lipper, as of 26/06/30, in Hong Kong Dollar
The first half of 2026 was characterized by exceptionally strong equity market performance, led overwhelmingly by technology-oriented Asian markets. Investors continued to channel capital toward beneficiaries of the global artificial intelligence and semiconductor investment cycle, resulting in significant dispersion across Lipper Global Classifications. While Korean and broader Asia-Pacific equity funds generated exceptional gains, China-focused funds remained the largest underperformers.
The standout performer during the period was “Equity Korea”, which surged an extraordinary 111.4%. Korean equities were the primary beneficiaries of the global semiconductor boom, driven by strong demand for AI-related memory chips, data center infrastructure, and technology exports. The scale of the gains highlights Korea’s position at the center of the global AI supply chain and reflects a substantial re-rating of the country’s technology sector.
Strong performance was also evident across regional Asian equity classifications. “Equity Asia Pacific” delivered a return of 56.4%, while “Equity Asia Pacific ex Japan” gained 30.9%. These results were largely supported by the strength of Taiwan, Korea, and technology-driven markets across North Asia. The region continued to attract investor flows due to its dominant role in semiconductor manufacturing, advanced electronics production, and AI infrastructure development.
Japan also enjoyed a solid first half, with “Equity Japan” returning 15.7%. Japanese equities benefited from strong corporate earnings, improving shareholder returns, supportive corporate governance reforms, and continued foreign investor interest. While returns lagged the spectacular gains recorded in Korea and Taiwan, Japan remained one of the stronger-performing developed markets.
Among global equity sectors, diversified portfolios produced respectable gains. “Equity Global” advanced 12.2%, while “Equity US” returned 9.7%. The positive performance reflected continued strength in large-cap technology companies and AI-related businesses. However, returns were significantly lower than those achieved in Asia’s technology-oriented markets, indicating that leadership remained concentrated in a relatively narrow segment of the global equity universe.
Within multi-asset categories, performance was also positive. “Mixed Asset HKD Aggressive” gained 8.6%, while “Mixed Asset HKD Balanced” returned 7.6%. These returns demonstrate that investors with diversified allocations benefited from equity market gains despite receiving a more moderate participation rate than pure equity strategies.
European equities produced solid returns, with “Equity Europe” advancing 8.0%. The region benefited from easing inflationary pressures, improving economic sentiment, and resilient corporate earnings, although performance remained well behind the growth-oriented Asian markets.
Interestingly, “Equity Greater China” generated a positive return of 8.0%, despite significant weakness in both Mainland China and Hong Kong. The classification likely benefited from exposure to Taiwan, whose strong semiconductor-driven performance helped offset losses in other Greater China markets. This divergence highlights the increasingly different trajectories of Taiwan compared with Mainland China and Hong Kong.
At the bottom of the ranking were China-focused equity funds. “Equity China” declined 9.0% for the year-to-date, making it the weakest-performing classification during the first half of 2026. “Equity Hong Kong” also remained under significant pressure, falling 8.3%. Both categories continued to struggle against a backdrop of slower economic growth, weak consumer confidence, ongoing property sector challenges, and subdued foreign investor sentiment.
The contrast between Korea’s gain of 111.4% and China’s decline of 9.0% underscores the enormous divergence in investor preferences during 2026. Capital has overwhelmingly favored markets with direct exposure to semiconductors, artificial intelligence, and advanced technology manufacturing, while markets facing domestic economic challenges have been largely ignored.
Figure2：Top/Bottom 10 Hong Kong MPF Performance by Lipper Global Classifications, Year-to-Date (as of 26/06/30)
Source：LSEG Lipper, as of 26/06/30, in Hong Kong Dollar
Outlook
The outlook for Hong Kong in the second half of 2026 remains cautiously constructive, supported by improving domestic demand, resilient exports, stronger capital market activity, and ongoing benefits from the global AI investment cycle. However, growth is still likely to be uneven, with the economy facing headwinds from geopolitical uncertainties, a sluggish property market, and continued structural changes in consumption patterns.
The Hong Kong government has maintained its full-year GDP growth forecast at 2.5%–3.5%, even after the economy expanded by an impressive 5.9% year-on-year in the first quarter, the strongest quarterly growth rate in almost five years. Growth has become more broad-based, with exports remaining strong while private consumption and investment have also shown signs of improvement.
A key driver for H2 2026 will continue to be external trade. Hong Kong has emerged as an indirect beneficiary of the global artificial intelligence boom through its role as a re-export and financial hub for advanced electronics and technology-related products. Strong global demand for semiconductors, AI infrastructure, and related electronic products is expected to provide ongoing support for merchandise exports. The government views external trade as one of the principal growth engines for the remainder of the year.
Financial services are likely to be another bright spot. Hong Kong has benefited from renewed investor confidence, stronger fundraising activity, robust cross-border capital flows, and deeper integration with Mainland China’s financial markets. Improved IPO activity, expanding wealth management services, and continued southbound investment flows are expected to support earnings in the banking, brokerage, and professional services sectors.
Tourism and services should also continue recovering in the second half. Visitor arrivals have been rising steadily, supported by government-sponsored events, enhanced transportation links, and increasing cross-border travel. While tourist spending patterns remain more value-conscious than before the pandemic, the improvement in visitor volumes should continue to support hotels, restaurants, transportation services, and selected retail segments.
Domestic demand is showing signs of improvement but remains the most uncertain component of the recovery. Consumer confidence has gradually strengthened as employment conditions remain stable and interest rates begin to ease alongside U.S. monetary policy. Nevertheless, Hong Kong consumers continue to face competition from cross-border spending in Mainland China and changing consumption behavior, limiting the pace of retail recovery.
The property market is likely to remain a mixed story. Residential property conditions have stabilized and could gradually improve if interest rates continue to decline. However, commercial real estate remains under pressure due to excess office supply, changing workplace dynamics, and relatively subdued corporate leasing demand. Property-related sectors therefore remain a potential drag on overall economic growth.
The biggest risks for Hong Kong remain external. Escalating geopolitical tensions, trade fragmentation, protectionist measures, volatility in global financial markets, and a slowdown in key economies could adversely affect exports, investment flows, and tourism. Given Hong Kong’s highly open economic structure, developments in the global economy will remain more influential than domestic factors.
