HSBC backs Chinese assets: overweight A-shares and H-shares, “long renminbi” as one of the top macro strategies for the year.

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

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

Meanwhile, HSBC has adjusted its allocation recommendations for other Asian markets, advising to reduce holdings in the crowded South Korean stock market due to the AI boom, and instead overweight stocks in mainland China, Hong Kong, India, and Indonesia. The bank believes that although AI and rate cuts will be key driving forces in Asian markets in 2026, fiscal pressures and crowded trades mean the year's market performance will not be smooth.

HSBC also specifically mentioned that while some Asian central banks have room to cut rates to boost equity markets, the slower pace of Fed rate cuts may limit the release of this space. Investors will need to focus on assessing the sustainability of AI-driven growth and the risks arising from excessively crowded stock trades.

Increase holdings in China and Indonesia, reduce Korean stocks

In terms of stock strategy, HSBC suggests investors take a more defensive and domestically focused allocation approach. The strategists recommend maintaining an "overweight" rating for stocks in mainland China, Hong Kong, India, and Indonesia. The report notes that India and Indonesia stand out in the region due to their earnings growth potential and policy support.

In contrast, HSBC remains cautious toward export-oriented markets, recommending an "underweight" rating for stocks in Korea and Thailand. This adjustment reflects a reassessment of the sustainability of AI-related rallies and concerns about overcrowded trades in certain markets. HSBC reminds investors to be wary of a correction risk in the Korean market following an AI-led rally.

Bullish on Renminbi, bearish on Swiss franc

In the foreign exchange market, HSBC lists "long Renminbi" as one of its top annual macro strategies. HSBC's suggestion: short 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 a narrowing seasonal trade deficit and potential progress in US-India trade talks, recommending to sell US dollar against the rupee (Sell USD/INR). In addition, HSBC believes the Korean won (KRW), as a high-beta currency, is prone to overshooting; given Korea's recent resistance to sharp depreciation, the won may rebound in the coming months, so it recommends selling US dollar against Korean won.

Conversely, due to rising political uncertainty and Thailand's recent tightening of capital inflow reviews, HSBC remains cautious on the Thai baht (THB). At the same time, the bank advises hedging exposures to the Indonesian rupiah (IDR), believing its forward FX levels currently look too low.

Bond strategy and interest rate outlook

In fixed income, HSBC recommends beginning the new year with "yield curve steepener" strategies. In terms of country selection, the bank favors Indian and Philippine bonds over those from Thailand and Indonesia.

The report highlights that if needed, several Asian central banks—including Indonesia, the Philippines, and India—still have room to cut rates, which could support local equity markets. However, the strategists also warn that as the Fed's rate cut pace slows, the operational space for Asian central banks may be limited, making this a key macro variable for investors to watch closely in the coming year.

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