ASIA’S AI INVESTMENT POTENTIAL

WITH geopolitical tensions and supply chain disruptions continuing to cloud the global investment landscape, investors are increasingly concerned about where to position their portfolios for long-term growth.

Despite the uncertainty, the newly appointed HSBC Asia private bank and premier wealth chief investment officer, Desmond Kuang, believes that Asia remains well positioned for growth.

Backed by more than two decades of banking experience, Kuang identified Japan, South Korea, mainland China and Singapore as four markets offering some of the region’s most promising investment opportunities.

“Investors can find a broadening set of opportunities through the income potential of bonds, alongside continued improvements in corporate governance reforms across Japan, South Korea, mainland China and Singapore.”

He added that Asia’s high-quality credit market has remained resilient over the past few years despite external shocks, attributing its strength to two factors: a shorter duration profile and a more measured issuance profile.

“Asia’s investment-grade bond market has experienced lower volatility when compared with its US counterpart,” Kuang said.

“In Asia, it is important to adopt a bottom-up strategy to tap into the opportunities available, not only in innovation, but also in income.”

Guided by this investment philosophy, Kuang leads the development of regional investment strategies and themes across all asset classes for HSBC’s private banking and premier clients across Asia, excluding Hong Kong.

He also serves on the bank’s Global Investment Committee and Asia Regional Investment Committee.

His current tenure also as a chief investment officer for the China office has also offered Kuang a unique understanding of the new investment opportunities in the Chinese market.

He pointed out that China’s economy is characterised by two distinct segments: the traditional economy – driven by construction, property and consumer markets – and a fast-growing new economy powered by artificial intelligence (AI) and advanced manufacturing.

“For example, in China’s AI sector, there has been a surge in daily AI token consumption, rising from US$2 trillion in the second half of 2024 to US$140 trillion in March this year, representing exponential growth.

“In advanced manufacturing, Chinese supply chains across electric vehicles renewable energy and the chemicals industry are benefitting from global reindustrialisation and the energy transition trend.”

He noted that selective Producer Price Index improvements are taking place across areas including semiconductors, manufactured goods and materials.

“Therefore, having exposure to Chinese AI and advanced manufacturing companies is a good way to participate in China’s ongoing economic transition.”

JP Morgan Asset Management managing director and Asia Pacific chief market strategist Tai Hui shared a similarly positive outlook to Kuang, maintaining an optimistic view despite ongoing global uncertainties.

Both Kuang and Hui were part of a panel of experts that presented their views during HSBC Malaysia’s 2026 Premier Investment Market Outlook Event on July 1 in Kuala Lumpur.

Centred on the theme, “Navigating Market Crosswinds: Distraction or Direction”, the event featured insights from the bank’s global wealth specialists and leading international asset managers, equipping clients with timely perspectives to navigate an evolving investment landscape.

Investment in AI

Zeroing in on AI, Kuang said the industry is set to remain a key driver of investment opportunities, particularly across Asia.

“As investment in AI accelerates globally, Asia is well placed to benefit given its leadership in semiconductors and rapid progress in large language models,” he said.

Echoing Kuang, Schroders Asia ex-Japan Equities investment director Dionne Cheung noted that global spending on AI and data centres has benefitted Asian semiconductor and hardware companies, supporting their earnings and share price performance.

“Asia’s stock market make-up is heavily tilted towards the information technology industry, which is the largest sector in MSCI Asia ex-Japan.”

The positive investment outlook for AI is supported by strong capital inflows, with global corporate investment in the sector reaching US$1.6 trillion between 2013 and 2024, according to a report by Stanford University.

Additionally, Gartner, a business and technology insights company, forecasted that worldwide AI spending is projected to reach US$2.5 trillion in 2026, a 44% increase from 2025.

While investment in the AI industry continues to accelerate, investors must remain conscious of key risks, including interest rate pressures, the sustainability of AI spending, elevated valuations and heightened market volatility.

Despite these uncertainties, HSBC private bank and premier wealth global chief investment officer Willem Sels highlighted the opportunities presented by AI, noting that capital should continue to flow towards emerging areas driven by innovation.

“We believe the headwinds created by market uncertainties are offset by the structural tailwinds from innovation and AI.

“The tailwind from AI is going to reinvigorate our economies.

“We are asked whether AI is a little overhyped, but we actually think it may still be underhyped,” he said.

Sels remains optimistic about AI because of its ability to boost productivity, which in turn supports stronger economic growth, corporate earnings and profit margins.

“AI is increasing earnings, and we’re already seeing this reflected in the stock market and in the corporate earnings reported by companies in the United States and around the world.

“The growth in earnings has pushed the equity market forward and the valuation multiples investors have to pay for those earnings have dropped. This is a very favourable combination.”

Offering his perspective on sectors poised to benefit from the AI boom, Hui highlighted robotics and autonomous driving as key technologies that will help broaden AI adoption in the years ahead.

He added that investors should also pay close attention to companies that are applying AI to accelerate research and development, particularly in fields such as software engineering, biosciences and chemical engineering.

Beyond AI itself, Sels said the rapid expansion of the technology is creating significant investment opportunities across the energy and infrastructure value chain, as growing demand for computing power drives the need for reliable electricity generation and distribution.

“AI has substantial energy needs. It relies on data centres, which in turn require large amounts of electricity.

“In the United States, electricity demand is expected to rise significantly over the next five years as AI adoption accelerates.

“Similarly, in China, rising demand from advanced manufacturing will also require considerable amounts of energy, driving investment in both electricity generation and grid infrastructure.”

He noted that sectors such as renewable energy, power grids, nuclear power, battery technologies and energy infrastructure could become valuable assets within a diversified multi-asset portfolio.

Summing up his outlook at the panel discussion, Sels said, “We are living in a world that is fundamentally changing, and while that can feel uncomfortable and unsettling, we need to embrace this new reality.

“It is a structural shift that also creates significant opportunities, and that’s what we want to tap into.”

Client engagement

The investment outlook event, organised by HSBC’s international wealth and premier banking division, was held in Kuala Lumpur, Penang on June 29, and Johor on July 14.

More than 800 HSBC Premier and Premier Elite clients participated in the series, gaining insights into the forces shaping today’s markets and how to navigate an increasingly fragmented investment landscape.

The sessions explored whether recent market volatility reflects short-term uncertainty or signals a clearer direction for investors.

The series also reinforced HSBC’s role as a trusted wealth manager and investment solutions provider by leveraging its international network and on-the-ground expertise across major markets.

Setting out the objective of the event, HSBC Malaysia international wealth and premier banking country head Linda Yip said the session was designed to help clients look beyond short-term market movements and focus on the long-term trends shaping investment decisions.

“In an environment where growth, policy expectations and market leadership are no longer moving in the same direction, it’s easy to be pulled from one headline to the next.

“The goal is to step back from the day-to-day noise and focus on the longer-term themes that matter for portfolio positioning – what is really driving markets, where opportunities may be emerging and how investors can remain resilient through periods of volatility,” she pointed out.

Yip added that preserving and growing wealth during periods of market volatility requires disciplined diversification and timely, well-informed investment decisions.

With attendees coming from three cities, the event underscored the bank’s ability to connect Malaysian clients with its global network, bringing international and regional market insights closer to home through in-person engagement.