2026 is set to be a year of recalibration for investors to strengthen portfolio resilience through multi-asset diversification to capture further upside from the global artificial intelligence (AI) boom and manage risks from policy and geopolitical uncertainties, according to HSBC Private Bank. 

In its Q1 2026 Investment Outlook – Resilience in a Transforming World, the bank expects the acceleration of AI adoption and monetisation will continue to support strong earnings growth in 2026, supporting its pro-risk stance and overweight on global equities. The bank complements its US equity overweight with positive views on mainland China, Hong Kong, Singapore, South Korea, and Japan. It enhances portfolio diversification through overweight positions on global investment grade bonds, quality Asian and emerging market credit, gold and hedge funds, together with core allocation to private equity, private credit and infrastructure.

HSBC Private Bank’s four investment priorities for Q1 2026 are:

1. Look across and beyond AI for equity returns: While the global AI investment boom is expected to continue driving strong earnings growth in 2026, it is prudent for investors to diversify beyond Mega Tech to mitigate valuation and concentration risks. Utilities stocks benefit from fast growing electricity demand of data centres, while industrials and financials stocks offer good value and positive earnings outlook.

2. Manage market dips with alternatives and multi-asset strategies: Short-term market volatility may arise due to concerns over government debt issues, potential AI bubble risks, and uncertainty around the Fed policy. These can be managed through a multi-asset approach, including gold, hedge funds and private market investments to enhance portfolio resilience.

3. Unleash the power of income for portfolio strength:  Within fixed income, global investment grade bonds offer more compelling income opportunities compared to high yield with tight credit spreads. Emerging market hard currency corporate bonds and local currency debt offer attractive carry potential. Private infrastructure investments can provide stable income and a partial inflation hedge.

4. Capture diversification opportunities from Asia’s innovation and income: Adopt a barbell strategy with overweight on equities in mainland China, Japan and South Korea for exposure to the AI boom and corporate governance reforms, while seeking income through overweight positions in Hong Kong and Singapore equities which deliver attractive value and high dividend yields.

Cheuk Wan Fan, Chief Investment Officer, Asia at HSBC Private Bank and Premier Wealth, said: “We maintain our mild risk-on investment strategy as corporate earnings outlook remains strong in 2026 with support of innovation-driven productivity gains and favourable policy initiatives. We see attractive diversification opportunities across geographies, sectors, styles, and asset classes that can help investors manage valuation and concentration risks in Mega Tech.”

“We don’t think AI is in bubble territory. Most of the US equity market returns this year have come from earnings growth rather than P/E multiple expansion. The robust US earnings growth stands in sharp contrast with other regions, especially Europe, where equity returns have been led by multiple expansion. We see upside potential for the S&P 500 index to reach new high of 7,500 by the end of 2026. We expect the Fed will likely stay on hold in 2026 after the December rate cut due to resilient economic growth. Hence, we expect short-term market dips triggered by tech valuation concerns and the Fed pause should be mild and temporary, as the economic cycle and innovation continue,” noted Fan.

“Being the world’s technology hardware powerhouse, largest consumer and manufacturer, Asia stands out as a geared beneficiary of the new wave of AI capex spending and rapid adoption. We see compelling diversification opportunities from Asia’s vast and fast-growing AI ecosystem while the region’s resilient domestically oriented economies offer diverse sources of enduring income. Hence, our barbell strategy balances our preference for tech innovation champions with strong focus on high dividend stocks and quality bonds in Asia,” added Fan.

HSBC Private Bank builds out its high conviction themes around the rising trend of Asia in the New World Order. These themes capture structural growth and income opportunities from the region’s innovation-focused policy priorities, domestic stimulus, massive AI capex spending and corporate governance reforms.

Patrick Ho, Chief Investment Officer, North Asia, HSBC Private Bank and Premier Wealth, said: “Our theme of China’s Innovation Champions underscores our preference for leading companies across the AI ecosystem, including those in semiconductors, AI cloud and agents, software, physical AI and AI-enabled biotechnology. China’s 15th Five-Year Plan (2026-2030) prioritises technology self-sufficiency and innovation-led growth, supercharging a new wave of AI investment across multiple industries,” added Ho.

“We have launched a new theme around Asia’s Data Centre Boom that captures exciting growth opportunities from the rapid buildout of data centres across the region. Data centre capacity growth in Asia is projected at 13.1 per cent compound annual growth rate over 2025-2030, ahead of 9.2 per cent in North America and 5.3 per cent in Europe. Asia commands competitive advantages over the US in the data centre buildout due to strong government policy support, competitive energy costs, land availability and manufacturing proximity. We favour Asian chipmakers, semiconductor equipment manufacturers, power equipment and smart grid suppliers,” noted Ho.

“Under the barbell strategy, our Power Up Asian Shareholder Returns theme targets quality companies that are enhancing return on equity through higher dividends, increased share buybacks and value-adding M&A. Consensus estimates project MSCI Asia’s return on equity to surge steadily from 10.4 per cent in 2024 to 12.1 per cent in 2027, underpinned by corporate governance reforms,” stated Ho.

“Our theme of High Quality Asian Credit rides on recent Fed rate cuts, local disinflation, solid credit fundamentals, and monetary easing by Asian central banks. We are overweight Chinese hard currency bonds, Indian local currency debt, as well as Japanese and Australian investment grade corporate bonds and financials credit,” said Ho.

“We are constructive on the return outlook for the Hang Seng Index, with a target of 31,000 by end-2026, driven by positive liquidity and earnings trends. China’s focus on boosting domestic consumption should benefit corporate margins and drive earnings improvement in 2026. Hong Kong’s recovery in retail spending, stabilising residential real estate market, increased tourist activities, a robust IPO pipeline and positive wealth effects from the stock market rally are all supporting consumption recovery,” added Ho.

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