HSBC Eyes Asia and Quality Credit for 2026 Growth

HSBC Global Private Banking expects 2026 to be shaped by resilient credit markets, accelerating Asian innovation, and an expanding global AI infrastructure while urging investors to stay diversified and brace for volatility.

Speaking at the bank’s annual Investment Outlook media briefing, Willem Sels, global chief investment officer for private banking and wealth, said that despite concerns over potential “credit stress,” the data tells a more benign story. “Bank loan provisioning has not really substantially increased,” he said, citing Federal Reserve figures. “Some US banks even cut their provisioning, or said it was more benign than expected. That’s partly because of interest-rate cuts, and partly because of a resilient economy.”

Credit: Favouring Quality While Avoiding High Yield

Sels said the bank is holding a clear underweight on high-yield bonds. “When you map high-yield spreads with default rates which should remain benign, people are still not adequately compensated,” he explained. “We would rather be in great credit.”

HSBC continues to favour investment-grade bonds while becoming more optimistic about emerging-market debt, particularly local-currency bonds. These, according to Sels, assist investors "diversify that US-dollar exposure," particularly those primarily invested in US shares.

Asia: The Innovation Powerhouse

Fan Cheuk Wan, chief investment officer for Asia, underlined Asia’s position as a global technology and AI hub. “Asia is the world’s technology hardware powerhouse,” she said. In the 2025 Global Innovation Index, she noted, “South Korea is rated fourth, followed by Singapore. China stands at ten, Japan at twelve, and Hong Kong at fifteen.”

HSBC is maintaining a “barbell strategy” in Asia focusing on innovation leaders such as Korea, China, Singapore, Japan and Hong Kong on one end, and income-generating assets on the other.

Fan highlighted the boom in AI-driven infrastructure. Data-centre build-out in Asia is projected to grow at 13% annually through 2030, far outpacing the US (9%) and Europe (5%). “This is driven by strong government support, competitive electricity prices, land availability and manufacturing proximity,” she said. “It underpins newly rising growth opportunities in the Asian tech sector.”

Valuations, Earnings and Structural Reform

Corporate governance reforms in markets such as Japan and South Korea are strengthening shareholder returns through rising buybacks and dividend payouts. Earnings momentum also remains strong across the region: emerging Asia is forecast to deliver 20% earnings growth in 2026.

China, said Fan, is entering an innovation-driven growth phase. The 15th Five-Year Plan has attached “strong policy priority to technology, self-sufficiency and innovation.” AI computing power in China is projected to expand at a 40% CAGR through 2028. “We expect the innovation-led equity rally in China to have more to go,” she said.

Hong Kong has also been upgraded to overweight, buoyed by a strong IPO pipeline and liquidity inflows. “There’s been US$170bn inflow of Chinese liquidity into Hong Kong equities,” Fan said, citing demand from mainland investors seeking diversification amid low domestic rates.

AI: Winners, Losers and the Case for Hedge Funds

In the Q&A session, Sels cautioned that the AI boom will not lift all stocks equally. “Across the AI spectrum there are winners and losers,” he said. “It’s why we’ve upgraded hedge funds, to tap into AI in a way that lets us pick winners and short losers.”

He added that firms with strong balance sheets and visionary management will be best positioned to benefit. Infrastructure, especially data centres, stands out: “We will have demand for data centres independent of who the AI winners are. If one tenant doesn’t do well, you get another.”

Sels rejected suggestions that disappointing market reactions to strong earnings, such as Nvidia’s signal an AI bubble. Instead, he framed recent volatility as profit-taking and sentiment shifts. “Unprofitable tech was outperforming profitable tech, that was a sign of froth,” he said. “But we remain optimistic about AI.”

Europe: Still Out of Favour

Client interest in European markets has faded as Germany’s fiscal stimulus has been slow to translate into productive investment. “Enthusiasm waned quickly,” Sels said. Strong US earnings have also drawn global investors back to American equities.

Fan added that while Asian investors initially sought Europe as a diversification play especially during tariff uncertainty, future inflows would depend on “decisive signals of structural reform and fiscal spending”.

Building Resilience for a Transforming World

Both CIOs closed with a warning: volatility is likely to persist, especially in Asia as Fed policy continues to drive global risk appetite.

Fan said: “We anticipate near-term volatility… but underlying earnings acceleration and resilient economic performance will provide strong support going into the new year.”

Sels echoed this sentiment. “The most dangerous thing is to have too much volatility in the portfolio, because clients sell at exactly the wrong moment,” he cautioned. “The world is transforming in ways we don’t fully realise yet AI is driving productivity across industries. The key is to build a portfolio resilient enough to stay exposed to that exciting transformation.”

"HSBC Eyes Asia and Quality Credit for 2026 Growth" was originally created and published by Private Banker International, a GlobalData owned brand.

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