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Hong Kong investors lead Asia in their ambition to beat markets, yet their return expectations are more conservative than those of their regional counterparts, according to a survey conducted by Natixis Investment Managers. An overwhelming 95% of the 750 Hong Kong respondents aimed to outperform the market, surpassing the regional average of 85%.

Hong Kong investors forecasted long-term returns of 12.3% above inflation, a figure considerably lower than the regional average of 17.3%. This modest outlook was evident across Asia, as the survey found that investors in Japan, Singapore, South Korea, and Taiwan also expected returns below their actual performance.

The survey's findings contrast with the 18-month AI-driven rally that inflated expectations. Financial advisers in Hong Kong, however, painted a more realistic picture, predicting long-term returns of 8.8% above inflation, a gap of only 16% with the investors' expectations. This narrower divergence was attributed to the strength of the local equity market and the improving real estate sector, which helped temper investor enthusiasm over the AI supercycle.

Natixis Centre for Investor Insight executive director Dave Goodsell noted that investors often extrapolate market trends, believing that continued growth is inevitable.

Despite the overall optimism, the Hang Seng Index's 28% gain in 2025 and the subsequent 8% decline this year have tempered investor sentiment. Hong Kong's broader economic indicators have shown signs of stabilization, with the initial public offering market raising HK$388 billion (US$49.4 billion) in the first nine months of the year and residential property prices up by 7% through August.

The primary concern among Hong Kong investors, according to Goodsell, was a potential market downturn, followed by inflation and interest rates. US long-term bond yields reached their highest level since 2002, which Financial Secretary Paul Chan Mo-po attributed to dampening sentiment in the Hong Kong stock market.

Despite these challenges, Natixis maintained a positive outlook on risk assets, raising its allocation to US equities to the maximum permitted within its model portfolios. This decision was driven by the start of the third-quarter earnings season and continued support from the AI sector. However, the firm highlighted the unusual correlation between the surge in bond yields and equity prices, attributing it to recency bias in return expectations.

Goodsell emphasized that 73% of Asian investors considered themselves conservative or moderate, with 76% preferring safety over performance, highlighting a disconnect between their expectations and risk tolerance.