Key Benchmarks Performance
Global equity markets remained heavily shaped by the artificial intelligence investment cycle as of 31 August 2026, with a pronounced divide between technology-led markets and more domestically driven economies. The strongest advances continued to come from semiconductor-intensive markets in North Asia, particularly Taiwan and South Korea, while several ASEAN markets, China, Hong Kong and India lagged materially behind.
Taiwan was the standout performer during August, with the TAIEX rising 7.0% and extending its year-to-date gain to 59.3%. The index has now surged more than 90% over the past year and 177% over three years, underscoring Taiwan’s position at the centre of the global AI supply chain. Investor enthusiasm remains concentrated in semiconductor manufacturing, advanced packaging, high-performance computing and AI server-related companies. Strong earnings momentum and sustained foreign inflows continue to support the market despite increasingly demanding valuations.
South Korea delivered another strong month, with the KOSPI advancing 3.4% and posting a remarkable 61.8% gain year to date. Korea’s technology sector has become a major beneficiary of surging demand for high-bandwidth memory and AI infrastructure. The market’s 114.1% return over the past twelve months highlights a substantial re-rating of Korean technology stocks, making Korea one of the best-performing major equity markets globally.
Japan maintained its positive trajectory, with the Nikkei 225 gaining 3.0% in August and 31.7% year to date. While Japan’s performance has been less spectacular than Taiwan and Korea, the rally appears broader and more sustainable. Corporate governance reforms, shareholder-focused capital allocation, automation-related exports and industrial technology demand continue to provide support. The Japanese market has benefited from both structural improvements and cyclical tailwinds, creating a more diversified source of returns.
In contrast, Chinese equities remain trapped in a prolonged period of underperformance. The Shanghai Composite recorded a respectable 4.0% gain in August but is only marginally positive for the year at 0.4%. Hong Kong’s Hang Seng Index declined 1.2% during the month and remains slightly negative year to date. Despite periodic policy support measures and tactical rallies, investor confidence toward China’s growth outlook remains fragile. Concerns surrounding domestic consumption, property market weakness and slower economic momentum continue to limit a sustained re-rating of Chinese equities.
Within ASEAN, performance dispersion has widened significantly. Singapore remains the region’s strongest market, with the Straits Times Index gaining 2.3% in August and an impressive 23.9% year-to-date return. Strong banking profitability, wealth management inflows and the market’s defensive characteristics have attracted investor interest amid global uncertainty.
Thailand has emerged as an unexpected outperformer this year despite a 1.8% decline in August. The SET Index has risen 26.6% year to date, benefiting from tourism recovery, domestic consumption improvements and a rebound from previously depressed valuations. The gains suggest investors are beginning to reassess Thailand’s medium-term earnings outlook more positively.
Vietnam delivered one of the strongest monthly performances among emerging markets, rising 5.6% in August. However, the market’s year-to-date gain of 2.7% remains relatively modest, indicating that the recent rally has yet to translate into a broader sustained recovery. Growing foreign direct investment and manufacturing relocation trends continue to support longer-term optimism.
Indonesia remains the most disappointing major market in the data set. Although the Jakarta Composite Index rose 4.6% during August, it remains down 24.5% year to date and 16.7% over the past twelve months. Persistent concerns over capital outflows, commodity price normalization and domestic economic challenges have weighed heavily on sentiment. Similarly, the Philippines remains under pressure, with the PSEi declining 4.5% in August and remaining negative for the year. Higher interest rate sensitivity and weaker earnings growth continue to constrain investor appetite.
The United States maintained positive momentum, although gains were more measured compared with North Asian markets. The Nasdaq Composite rose 3.9% in August and 13.5% year to date, supported by continued AI-related investment and strong earnings from large technology companies. The broader S&P 500 gained 2.6% during the month and 12.3% year to date, reflecting solid but less concentrated market participation.
The most compelling evidence of the AI investment cycle remains the Philadelphia Semiconductor Index. While it advanced a modest 2.0% during August, its year-to-date gain reached 62.9%, with returns exceeding 100% over the past year. Semiconductor companies remain the clearest beneficiaries of accelerating spending on AI infrastructure, cloud computing and advanced computing technologies. The extraordinary performance of the sector continues to influence global asset allocation decisions.
European markets continued to generate positive but comparatively uninspiring returns. Spain’s IBEX 35 remains the strongest performer among major European markets, up 15.4% year to date, supported by banking sector strength and resilient tourism activity. The UK’s FTSE 100 has gained 9.0%, while Germany’s DAX and France’s CAC 40 have posted more modest advances of 4.5% and 2.3%, respectively. European markets continue to face headwinds from slower economic growth and weaker industrial activity relative to the United States and North Asia.
Table 1: Global Key Benchmarks Performance
Hong Kong MPF Performance by LGC Analysis
In August, Equity Korea was the clear standout among all Lipper global classifications, gaining 8.6%, significantly outperforming every other asset class. The strong monthly advance reflects continued investor enthusiasm surrounding Korea’s dominant position in the global AI supply chain, particularly in memory semiconductors and high-bandwidth memory products. Strong earnings visibility, improving corporate governance and increasing foreign participation have collectively driven a substantial re-rating of Korean equities. This leadership is even more striking on a year-to-date basis, where Equity Korea has surged 71.6%, making it the strongest-performing Lipper equity classification by a considerable margin.
The broader Equity Asia Pacific category gained 3.9% in August and has returned 37.1% year to date, reflecting the overwhelming contribution from North Asian technology markets. A similar pattern is evident in Equity Asia Pacific ex Japan, which advanced 3.9% in August and is up 26.2% year to date. These returns illustrate how regional performance has become increasingly concentrated in Taiwan and Korea, while ASEAN markets and China have generally lagged. The dominance of semiconductor-related earnings growth continues to overshadow broader macroeconomic concerns.
Equity Japan remained another notable outperformer, rising 3.3% during August and 19.8% year to date. Japanese equities continue benefiting from a combination of structural reforms, shareholder-focused capital management and resilient corporate earnings. Unlike Korea and Taiwan, where performance is heavily concentrated in technology, Japan’s gains have been supported by a broader range of sectors including industrial automation, machinery, exporters and financials. This broader participation makes Japan’s rally appear fundamentally healthier and potentially more sustainable.
The performance of Equity US and Equity Global categories indicates continued support for developed market equities. Equity US rose 2.6% in August and has gained 11.9% year to date, while Equity Global advanced 2.3% during the month and 13.8% year to date. These results remain respectable but highlight an important trend: while U.S. markets continue to generate positive returns, they are no longer the primary source of global equity leadership. Investors have increasingly directed capital toward North Asian markets where earnings growth tied to AI infrastructure has been considerably stronger.
Among multi-asset strategies, Mixed Asset HKD Aggressive posted a gain of 1.7% during August and 10.2% year to date. The category has benefited from its relatively high equity allocation, particularly its exposure to global and Asia-Pacific equity markets. More flexible mixed-asset categories also delivered positive returns, supported by resilient equity markets and stabilizing bond performance. However, returns remain well below those achieved by pure equity strategies, highlighting the performance cost of diversification during a year dominated by a narrow group of high-growth sectors.
Fixed income categories continued to deliver modest but positive outcomes. Bond Asia Pacific Local Currency, Bond Asia Pacific Hard Currency, and Bond Global Local Currency all generated small positive returns during August, while year-to-date gains generally remained in the low single digits. The muted performance reflects a relatively stable interest-rate environment and the absence of a broad bond market rally. Investors continue to favour equity risk over duration risk, particularly given stronger earnings growth prospects in equity markets.
Money market and capital preservation categories delivered predictable but unremarkable returns. Money market classifications posted monthly gains between 0.2% and 0.4%, while year-to-date returns ranged between 1% and 3%. These categories continue to provide stability but remain significantly behind inflation-adjusted returns available in equity markets.
The weakest area of the LGC remains China-focused investing. Equity China lost 0.3% during August and remains down 2.7% year to date, making it the poorest-performing major equity classification. Despite periodic rallies and ongoing policy support, Chinese equities continue to struggle with weak domestic demand, an uneven economic recovery and lingering concerns surrounding the property sector. Investor confidence remains fragile, preventing sustained capital inflows.
Equity Hong Kong also disappointed, declining 1.1% in August and delivering only 0.2% year-to-date performance. The category has failed to participate meaningfully in the global equity rally despite attractive valuations. Market sentiment remains heavily influenced by the broader challenges facing mainland China, limiting upside potential for Hong Kong-listed equities.
Figure1：Top/Bottom 10 Hong Kong MPF Performance by LGC, August 2026
Figure2：Top/Bottom 10 Hong Kong MPF Performance by LGC, Year-to-Date (as of 26/08/31)
Outlook
Hong Kong’s economic outlook has improved noticeably as 2026 progresses. After several years of uneven recovery following the pandemic, weak property markets and China’s economic slowdown, it is finally benefiting from a combination of stronger exports, recovering domestic demand and renewed capital market activity. Economic momentum has strengthened sufficiently for the government to raise its GDP growth forecast for 2026 to 3.5%-4.5%, following stronger-than-expected growth in the first half of the year. The economy expanded 5.1% in the first half of 2026, with second-quarter GDP growing 4.3% year-on-year.
The most important change in Hong Kong’s growth profile is that the economy is no longer relying solely on tourism and reopening effects. Instead, growth is increasingly being driven by exports, financial services and technology-related trade. Merchandise exports have been exceptionally strong, supported by robust global demand for AI-related electronic products. Hong Kong’s role as a regional trading hub has allowed it to benefit indirectly from the global semiconductor and artificial intelligence boom, particularly through its integration with Mainland China’s electronics supply chain. Exports of goods rose nearly 29% year-on-year in the second quarter, while total exports during the first seven months of the year increased more than 40%.
Financial services are also regaining momentum. Hong Kong’s capital markets have experienced a significant revival in 2026, supported by a rebound in IPO activity, increasing trading volumes and improving investor sentiment toward Chinese and technology-related listings. The city has emerged as one of the world’s leading IPO fundraising centres again, while stronger market turnover has boosted activity across brokerage, asset management and wealth management businesses. This recovery is particularly important because financial services remain one of Hong Kong’s key economic pillars and account for a substantial share of corporate profitability.
However, the outlook remains uneven beneath the surface. While trade and financial services are recovering strongly, consumer-facing sectors continue to face challenges. Retail sales have improved modestly, but Hong Kong residents continue to spend heavily across the border in Shenzhen and other Greater Bay Area cities, creating structural pressure on local retail, food and beverage operators. Consumer confidence has recovered but remains below pre-pandemic levels, while employment conditions have softened in certain traditional service industries.
The property market remains the largest economic concern. Residential and commercial real estate continue to face headwinds from high vacancy rates, changing office demand patterns and a slower pace of purchasing activity. Although lower global interest rates should provide some support, property prices are unlikely to experience a sharp rebound. Instead, a prolonged stabilization phase appears more likely. Commercial property faces additional challenges as companies continue optimizing office space requirements and competition from regional business centres remains intense. The property sector may no longer serve as the primary growth engine that it was during previous economic cycles.
From an equity market perspective, the outlook has become more constructive than the underlying economic data might suggest. Hong Kong equities have significantly underperformed major global markets over recent years, resulting in attractive valuations relative to both developed markets and broader Asia. The key challenge remains investor sentiment toward China. Despite reasonable earnings growth and low valuations, Hong Kong-listed companies continue to trade at a discount because international investors remain cautious regarding China’s economic trajectory. Accordingly, the performance of Hong Kong equities will likely be determined less by local economic conditions and more by whether confidence in China’s economy improves.
This explains the sharp divergence between Hong Kong and other North Asian markets. While Korea, Taiwan and Japan have benefited directly from AI-driven earnings growth, Hong Kong has remained tied to China’s cyclical recovery story. As a result, Equity Hong Kong has delivered only marginal gains year to date while regional peers have produced double-digit or even triple-digit returns in certain sectors. Nevertheless, this underperformance creates potential upside should Mainland policy support gain traction and investor positioning begin to normalize.
Looking into 2027, three major themes will determine Hong Kong’s trajectory. First, the sustainability of global AI-related trade demand will influence exports and logistics activity. Second, the success of Mainland China’s ongoing economic stabilization efforts will significantly affect capital flows and market sentiment. Third, the pace of U.S. interest-rate easing will influence property markets, financing conditions and investment activity.
