HSBC has explicitly expressed a bullish stance on Chinese assets in its latest annual macro strategy report, advising investors to increase their holdings of mainland Chinese and Hong Kong stocks in 2026 and establish long positions in the Renminbi. The bank emphasized that amidst potential market volatility, the investment focus in Asian markets should shift towards assets supported by domestic demand.
According to a report released on January 13 by HSBC strategists Herald van der Linde and Joey Chew, the Renminbi is expected to appreciate slowly and steadily, based on China's agenda of industrial upgrading, technological self-reliance, and RMB internationalization. HSBC recommends "selling Swiss Francs and buying offshore Renminbi," listing the Swiss Franc, US Dollar, Euro, and Japanese Yen as potential funding currencies.
Simultaneously, HSBC adjusted its allocation recommendations for other Asian markets, suggesting a reduction in the crowded South Korean stock market—driven by the AI frenzy—and shifting to an overweight position on stocks in mainland China, Hong Kong, India, and Indonesia. The bank believes that although AI and interest rate cuts will be key drivers for Asian markets in 2026, fiscal pressures and crowded trades indicate that the year's market performance will not be smooth.
HSBC also specifically noted that while some Asian central banks have room to cut interest rates to boost their stock markets, the slower pace of US Federal Reserve rate cuts could limit the availability of this policy space. Investors will next focus on assessing the sustainability of AI-driven growth and the risks associated with excessively crowded equity trades.
Overweight China and Indonesia, Underweight South Korea In terms of equity strategy, HSBC advises investors to adopt a more defensive, domestically-demand-focused allocation approach. The strategists recommend maintaining an "Overweight" rating on stocks from mainland China, Hong Kong, India, and Indonesia. The report points out that India and Indonesia stand out in the region due to their earnings growth potential and policy support.
In contrast, HSBC holds a cautious view on export-oriented markets, recommending an "Underweight" rating for stocks in South Korea and Thailand. This adjustment reflects a market reassessment of the sustainability of the AI-related rally and concerns over excessively crowded trades in some markets. HSBC cautions investors to be wary of correction risks in the South Korean market following a round of AI-led gains.
Long Renminbi, Short Swiss Franc In the foreign exchange market, HSBC lists "Long Renminbi" as one of its top annual macro strategies. HSBC suggests: going short on the Swiss Franc against the offshore Renminbi (Sell CHF/CNH).
For other Asian currencies, the bank is tactically bullish on the Indian Rupee (INR) for the first quarter of 2026, citing seasonal narrowing of the trade deficit and potential progress in US-India trade talks, recommending selling the US Dollar against the Rupee (Sell USD/INR). Furthermore, HSBC views the Korean Won (KRW) as a high-beta currency prone to overshooting; given that South Korea has begun resisting significant currency depreciation, the Won is expected to rebound in the coming months, hence the recommendation to sell the US Dollar against the Won.
Conversely, due to rising political uncertainty and Thailand's recent tightening of scrutiny on capital inflows, HSBC is cautious on the Thai Baht (THB). Meanwhile, the bank recommends hedging exposures to the Indonesian Rupiah (IDR), considering its forward FX levels currently appear too low.
Bond Strategy and Interest Rate Outlook In the fixed income space, HSBC recommends starting the new year with a "Yield Curve Steepeners" strategy. For country selection, the bank favors bonds from India and the Philippines over those from Thailand and Indonesia.
The report analysis indicates that, if needed, several Asian central banks—including Indonesia, the Philippines, and India—still have room to cut interest rates, which could support local stock markets. However, the strategists also warn that as the pace of Fed rate cuts slows, the policy maneuvering room for Asian central banks may become constrained, a key macro variable investors will need to monitor closely in the coming year.
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