HSBC supports Chinese assets: Overweight on AH shares, "Long on RMB" as one of the top macro strategies for the year

HSBC clearly expressed its optimistic stance on Chinese assets in its latest annual macro strategy report, recommending investors to increase their holdings in mainland China and Hong Kong stocks by 2026 and to establish long positions in the renminbi. The bank emphasized that, in the face of potential market volatility, the investment focus in Asian markets should shift towards assets supported by domestic demand.

According to a report released by HSBC strategists Herald van der Linde and Joey Chew on January 13, based on China's agenda of industrial upgrading, technological self-reliance, and renminbi internationalization, it is expected that the renminbi may appreciate slowly and steadily. HSBC recommends "selling Swiss francs and buying offshore renminbi," listing the Swiss franc, US dollar, euro, and Japanese yen as potential funding currencies.

Meanwhile, HSBC adjusted its allocation recommendations for other Asian markets, suggesting to reduce holdings in the crowded South Korean stock market due to the AI boom, while overweighting stocks in mainland China, Hong Kong, India, and Indonesia. The bank believes that although AI and interest rate cuts will be the main drivers of the Asian market in 2026, fiscal pressures and crowded trades mean that market performance will not be smooth that year.

HSBC also specifically mentioned that while some Asian central banks have room to cut interest rates to boost the stock market, the Federal Reserve's slowing pace of interest rate cuts may limit the release of this space. Investors will next focus on assessing the sustainability of AI-driven growth and the risks posed by overcrowded stock market trading.

Overweight China and Indonesia, Underweight South Korean Stocks

In terms of stock strategy, HSBC recommends that investors adopt a more defensive and domestically-focused allocation approach. The strategists suggest maintaining an "overweight" rating on stocks in 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 attitude towards export-oriented markets, recommending a "underweight" rating on stocks in South Korea and Thailand. This adjustment reflects a reassessment of the sustainability of the AI-related rally and concerns about overcrowded trading in some markets. HSBC warns investors to be cautious of the risk of a pullback in the South Korean market after experiencing a round of AI-led market movements.

Bullish on Renminbi, Bearish on Swiss Franc

In the foreign exchange market, HSBC lists "going long on the renminbi" as one of its top macro strategies for the year. HSBC suggests: sell Swiss franc against offshore renminbi (Sell CHF/CNH).

For other Asian currencies, the bank is tactically bullish on the Indian rupee (INR) in the first quarter of 2026, citing the narrowing seasonal trade deficit and potential progress in US-India trade negotiations, recommending selling US dollars against the rupee (Sell USD/INR). Additionally, HSBC believes that the South Korean won (KRW), as a high-beta currency, is prone to overshooting, and given that South Korea has begun to resist significant depreciation of its currency, the won is expected to rebound in the coming months, thus recommending selling US dollars against the won On the contrary, due to rising political uncertainty and Thailand's recent tightening of scrutiny on capital inflows, HSBC holds a cautious attitude towards the Thai Baht (THB). At the same time, the bank recommends hedging exposure to the Indonesian Rupiah (IDR), believing that its forward foreign exchange levels currently appear too low.

Bond Strategy and Interest Rate Outlook

In the fixed income sector, HSBC recommends starting the new year with a "Curve Steepeners" strategy. In terms of country selection, the bank favors bonds from India and the Philippines over those from Thailand and Indonesia.

The report analysis points out that several Asian central banks, including Indonesia, the Philippines, and India, still have room for interest rate cuts if needed, which could support local stock markets. However, strategists also warn that as the pace of interest rate cuts by the Federal Reserve slows, the policy maneuvering space for central banks in Asia may be limited, which will be a macro variable that investors need to closely monitor in the coming year.

Risk Warning and Disclaimer

Markets are risky, and investments should be made with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk.