The residential market is now more clearly turning up at the margin. Both housing prices and rents have stopped falling in income-adjusted terms, and prices have rebounded slightly over the past two quarters. So there's now more evidence that Hong Kong's six-year retrenchment is truly over. Is the economy ... back?

Alas, not yet. Even within the property sector, office prices and rents are still in freefall. The tourist economy is struggling to regain pre-2019 momentum; retail sales are stagnant, the population has stopped increasing, and there's no sign of any meaningful growth in credit and lending activity. As before it's still too early to talk about a broad-based Hong Kong recovery.

This obviously brings the sustainability of the local equity rally into question. We're not negative on the market per se, and Hong Kong can continue to do well as long as China shares are rising and neighboring EM indices are booming - but if those factors fade, there's still little at home to support further upside given the price rerating of the past 12 months.