Chinese Stocks Reach Over Three-Year Highs; Hong Kong Up 0.2% on Domestic Momentum Despite Services Slowdown

Chinese markets began the week on a positive trajectory, buoyed by strong momentum in local equities and cautious optimism about the economic outlook, despite signs of slowing activity, particularly in the services sector.

In Hong Kong, the Hang Seng Index rose by 0.2% to 26,393 points during morning trading, marking its highest level in seven weeks and extending gains for a second consecutive session. The advance was supported by robust mainland stocks and renewed optimism about China's artificial intelligence sector, following official signals of more stimulative economic policies in 2026. Technology shares led the rally, with Kuaishou Tech surging over 10%, alongside gains for Chow Tai Fook, SMIC, and China Hongqiao.

On the mainland, the upward momentum continued as the Shanghai 50 Index reached 3,083 points, its highest level since June 2022, bringing its annual gains to more than 19% and signaling improved investor confidence in leading Chinese stocks.

Economically, data painted a more balanced picture. The RatingDog Composite PMI rose to 51.3 in December 2025, the seventh consecutive month in expansion territory, supported by improved services activity and a return to growth in industrial production. However, the pace of new order growth slowed to a six-month low amid persistent weakness in external demand and declining export orders, while employment continued to shrink for the fifth straight month.

These developments highlight a clear paradox in China: strong, policy-driven stock markets versus a real economy still contending with external demand pressures and labor market challenges, leaving the recovery path heavily reliant on government policy and investor confidence going forward.