HSBC Asset Management Mid-Year Outlook 2026: 1) Oil Shock to Hit Growth, 2) Emerging Market to Outperform, 3) AI Boom, 4) Demand for Semiconductor, 5) Asian Equities Supported by AI-Driven Investment Cycle & Industrial Capex, 6) Asian Fixed Income Supported by Regional Fundamentals & Attractive Carry
7th June 2026 | Hong Kong
HSBC Asset Management Mid-Year Outlook 2026 – 1) Oil shock to hit growth, 2) Emerging market to outperform, 3) AI boom, 4) Demand for semiconductor, 5) Asian equities supported by AI-driven investment cycle & industrial Capex, 6) Asian fixed income supported by regional fundamentals & attractive carry. Outlook (3/6/26): “Two Shocks and a Boom – As we are now halfway through 2026, HSBC Asset Management (“HSBC AM”) believes that the global economy is facing a complex set of supply shocks that is pulling the macro system in confusing and sometimes contradictory directions. Meanwhile, markets have shaken off geopolitical worries impressively, helped by strong corporate profits. Essentially, the economy and markets are living in “different worlds”. The world is currently witnessing “two shocks and a boom”. First, the oil shock will hit growth. Energy importers – mainly in Europe and Asia – are in more trouble. But at the same time, China’s strong export growth centred on advanced technology – the China shock 2.0 – can offset some of the inflationary impacts. Finally, the AI investment boom means that the US economy is looking increasingly “K-shaped”, with AI/tech accounting for more than half of GDP growth. Asia at the crossroads: energy pressures, AI-led tech upside, and China’s mixed picture – Asia’s macro outlook reflects these big trends. Big net-oil importers – India, South Korea, and Thailand – are facing higher energy import bills and inflation. China is also exposed, however, it is also insulated from major strategic stockpiles and a growing green energy grid. The region’s net energy exporters like Malaysia and Indonesia are beneficiaries. The good news is that the region’s tech powerhouses – South Korea and Taiwan – are clearly benefiting from the global AI boom and massive demand for semiconductors. Other economies more exposed to the global tech cycle, such as Vietnam and Malaysia, are seeing strong growth in electronic exports. India’s growth remains world beating with policy measures keeping the inflation impact limited for the time being. China still faces economic headwinds from sluggish domestic demand and a weak housing market. However, the combination of targeted fiscal stimulus and a strong export sector means the 4.5% to 5% GDP growth for 2026 will be met. While China is effectively exporting deflation, squeezing the margins of global competitors, it also provides a shock absorber for the rest of Asia against inflation. Increased trade between China and the rest of Asia is also offsetting sluggish export growth to Western markets amid tariffs. AI Profits Broaden; Emerging Markets Continue to Outperform – Impressive year-to-date market performance reflects rapid profits growth amid the AI boom, and a stable cost of capital. As the spillovers of the AI capex boom become more apparent, strong profits performance can hold, and importantly should continue to broaden “beyond borders” into non-tech sectors. Bond yields will need to be monitored, but a low volatility summer in markets is a reasonable assumption. Asian Fixed Income: Resilient Credit Carry, Tactical Local Opportunities – As we move into the second half of 2026, Asian fixed income is supported by resilient regional fundamentals and attractive carry, even as higher oil prices have lifted inflation uncertainty and market volatility. Asia USD credit continues to look well anchored: investment grade issuers show stable leverage and improving interest coverage, while in high yield, default rates are trending lower and the opportunity set is more diversified across countries and sectors. With overall spreads at multi‑year lows, returns may be more moderate, but supportive technicals in the form of ongoing regional liquidity and wealth creation will help to underpin demand. Asia local currency bonds have been more directly exposed to the oil shock through rates and FX repricing, particularly for net oil importers. However, Asia’s positive long term economic dynamics should help contain spillovers, with short term volatility creating selective entry points. Asian Equities: AI-Led Growth and Reform-Driven Opportunities Across China and India – Asian equities enter the second half on a constructive footing, despite near-term uncertainty from geopolitical tensions. AI remains a key structural driver: the investment cycle is supporting demand across the technology hardware supply chain, of which a significant share is manufactured and assembled in Asia. Beyond AI, the region is moving into a broader industrial capex upcycle, underpinned by the energy transition and rising defence outlays. Together, these forces should support employment, wage growth and consumption, widening the opportunity set beyond technology. In parallel, shareholder-value initiatives across the region are strengthening governance and increasing cash returns, helping narrow valuation discounts versus global peers and creating opportunities for companies best positioned to benefit from these reforms. In China, growth is shifting away from property and towards innovation-led sectors. A mild reflationary backdrop in the coming quarters could support earnings stabilisation and enhance the relative appeal of Chinese equities. Policy priorities are increasingly focused on advancing hard technology, accelerating AI adoption and localisation, and deepening capital-market reforms, which should be supportive for sentiment and longer-term productivity. Biotechnology is also an increasingly compelling area: AI is revolutionising drug discovery, and Chinese companies are rapidly closing the gap with global leaders, with growing potential to develop first-in-class assets alongside continued momentum in out-licensing. In India, near-term performance will be influenced by developments in the Middle East and the trajectory of energy prices. We continue to remain positive on medium- to long-term opportunities, particularly in financials, infrastructure and consumption-related sectors, supported by resilient domestic inflows and the potential for renewed foreign participation once macro headwinds recede. Conclusion: Emerging Markets and Income in Focus – The oil shock is a significant headwind to the global economy in 2026. However, markets are in a “different world” with the AI boom significantly boosting profit growth. EM is set to be a major winner, amid an improving structural backdrop and greater resilience – a “different world” versus the era of US exceptionalism. The era of higher and more volatile inflation also implies a role for income-focussed strategies to hedge portfolios.”
“ HSBC Asset Management Mid-Year Outlook 2026: 1) Oil Shock to Hit Growth, 2) Emerging Market to Outperform, 3) AI Boom, 4) Demand for Semiconductor, 5) Asian Equities Supported by AI-Driven Investment Cycle & Industrial Capex, 6) Asian Fixed Income Supported by Regional Fundamentals & Attractive Carry “
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Joseph Little, Global Chief Strategist, HSBC Asset Management: ”We think emerging markets are still very well positioned to outperform. North Asia benefits hugely from the AI megatrend, and Latin America from the materials boom. These different drivers imply portfolio diversification, alongside cheaper valuations and the potential for a weaker dollar. We are also in a “different world” of improved policy frameworks and bigger domestic investor bases that means EM assets exhibit lower volatility during risk-off episodes … … Fiscal policy has entered a “different world” – one defined by higher government spending on defence, renewables, and energy security. Combined with a fractured geopolitical landscape and persistent supply-side disruptions, inflation is higher and more volatile, and stock/bond correlations have turned positive. This is a very “different world” to the “2010s” and requires a broader approach to portfolio diversification. We think the best approach is to focus on active bond strategies (e.g. short duration, 30-year Gilts, or linkers), lower beta equity strategies (equity income, real estate and infrastructure), or a range of public and private credit market strategies.”
Elizabeth Allen, Head of Asia Fixed Income, HSBC Asset Management: We are looking to generate steady returns from Asia USD credit bonds, focusing on issuers whose financial health are still improving. We’re also targeting specific sources of alpha, notably Asia technology/AI-linked investment grade corporates, as well as subordinated financials where capital metrics are strengthening. With credit spreads historically tight, we stay selective in our positioning. In Asia local currency bonds, we are using recent oil-driven volatility to be tactical across rates and currencies, with active country allocation. The aim is simple: capture carry, add diversification, and keep risk tightly controlled through disciplined bond selection.”
Beth Wong, Senior Investment Specialist, Asia Equities, HSBC Asset Management: ”We see Asian equities entering the second half on solid footing—supported by an AI-driven investment cycle, a broader industrial capex upturn tied to the energy transition and defence spending, and improving shareholder returns. In China, innovation-led growth and reform momentum could help stabilise earnings, while India’s medium-term outlook remains underpinned by domestic demand and investment.”
HSBC Asset Management – HSBC Asset Management, the investment management business of the HSBC Group, invests on behalf of HSBC’s worldwide customer base of retail and private clients, intermediaries, corporates and institutions through both segregated accounts and pooled funds. HSBC Asset Management connects HSBC’s clients with investment opportunities around the world through an international network of offices in 20 countries and territories, delivering global capabilities with local market insight. As at 31 March 2026, HSBC Asset Management managed assets totalling US$863bn (excluding HSBC Jintrust Fund Management Company Limited) on behalf of its clients.
HSBC Holdings – HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in 56 countries and territories. With assets of US$3,306bn at 31 March 2026, HSBC is one of the world’s largest banking and financial services organisations.
HSBC Asset Management Mid-Year Outlook 2026: 1) Oil Shock to Hit Growth, 2) Emerging Market to Outperform, 3) AI Boom, 4) Demand for Semiconductor, 5) Asian Equities Supported by AI-Driven Investment Cycle & Industrial Capex, 6) Asian Fixed Income Supported by Regional Fundamentals & Attractive Carry
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