Economists predicted on Wednesday that Hong Kong’s economy will maintain its growth momentum in the second half of 2024, buoyed by improving exports and a stabilizing asset market.

The Bank of East Asia expects the city’s economy to expand 3.3 percent for the full year, with growth drivers shifting from the release of pent-up consumer demand and tourism recovery last year, to improved trade and ongoing tourism expansion this year.

Exports to the Chinese mainland, the United States, the European Union, and other major Asian markets all saw growth, with the mainland and the US being the most significant

Taking a relatively cautious view, Dah Sing Bank forecasts a yearly growth of 3.1 percent, mainly driven by the recovery in export demand.

READ MORE: Chan: Hong Kong’s economy to grow further in next 6 months

Both forecasts fall within the range of 2.5 percent to 3.5 percent growth predicted by Financial Secretary Paul Chan Mo-po in February.

“As the global and mainland economies grow steadily, and major central banks worldwide begin to cut interest rates, external demand is rebounding, so we expect international trade to be the main driver of Hong Kong’s economic growth this year,” BEA Chief Economist Ricky Choi said.

According to data released by the government of the Hong Kong Special Administrative Region on Tuesday, the city’s export value rose nearly 15 percent year-on-year in May. Exports to the Chinese mainland, the United States, the European Union, and other major Asian markets all saw growth, with the mainland and the US being the most significant.

Moreover, economists forecast the Federal Reserve may cut interest rates once or twice this year, likely starting in November, a move that could provide a tailwind for Hong Kong equities in the second half of 2024.

“If the outlook of corporate earnings grows more promising and the US’ central bank does implement rate cuts, the Hang Seng Index — a benchmark of Hong Kong’s stock market — could return to the level of 20,000 points in the second half,” said Gary Wan, principal economist and strategist at Dah Sing Financial Group.

BEA Chief Investment Strategist Frank Lee held a similar view, noting that “The implementation and enhancement of policy measures by the Chinese mainland authorities for stabilizing growth could result in upgrades of earnings forecasts for listed companies, providing support for Hong Kong stock.”

Lee forecasts the Hang Seng Index could reach 19,900 points in the second half, with a special focus on State-owned enterprises stocks with high dividend yields, sectors like utilities and telecommunications that would benefit from any US interest rate cuts, technology stocks, as well as stocks like new energy and industrial equipment that are major beneficiaries of central government’s policies.

The Hang Seng Index closed at 18,089 on Wednesday, up 17 points or 0.1 percent.

Singapore-based United Overseas Bank this month revised upward its forecast for Hong Kong’s full-year economic growth to 2.9 percent from 2.5 percent, citing the economy’s improved performance in the first quarter

Hong Kong’s economy is not without challenges. “A slowdown in the number of visitor arrivals and growing outbound travel by Hong Kong people could weigh on the retail sector for some time,” Wan said.

In addition, the recovery of private consumption and investment are lagging under high interest rates, Choi noted.

READ MORE: HKU: Hong Kong’s economy expected to grow by 1.7% in Q2

But Choi said he believes the impact on overall consumption can be offset by a robust labor market, as the unemployment rate holds steady at around 3 percent, almost full employment, and median employee incomes saw sound growth in the first quarter of this year.

Singapore-based United Overseas Bank this month revised upward its forecast for Hong Kong’s full-year economic growth to 2.9 percent from 2.5 percent, citing the economy’s improved performance in the first quarter.

The Bank of East Asia and Dah Sing Bank forecast economic growth for the mainland of 5 percent and 4.7 percent respectively in 2024, in line with the central government’s target of around 5 percent announced in March.

Contact the writer at irisli@chinadailyhk.com