Our Mid-Year Outlook sets out to address the questions we’ve been hearing from clients in the first half of 2026. In summary, our analysts are positive about the economic outlook and the returns that AI investment is helping companies deliver. But we also recognise the likelihood of further shocks for which investors need to plan. Inflation is expected to be a challenge in the second half of this year as the Middle East conflict continues to hamper oil supplies. Bond investors appear nervous. And there are concerns about equity valuations.
Taken together, these dynamics reinforce the broader story we have been highlighting in Asia this year: one of diversification. This year’s story in Asia has been one of diversification. We predicted as much 12 months ago, but the nuance in how it has occurred is important and centres around the development of what for me is likely to be an investor base that drives the years ahead in Asian asset management.
Across the region the growth of wealth is proving a powerful driver. Rising affluence in China, Southeast Asia, and India is creating a larger and more sophisticated investor base, one that is increasingly seeking a broader range of geographies, currencies, and asset classes. While individual markets remain at different stages of development, the common trend is clear: Asian investors are turning more international in their outlook and more active in their portfolio construction.
The focus has shifted from maximising returns to building more resilient portfolios capable of navigating a wider range of outcomes
Hong Kong’s recent rise to become the world’s largest cross-border wealth centre underscores the scale of the shift and the growing importance of Asian wealth in the global financial system. China is an important part of this story. While authorities continue to maintain tight oversight of cross-border capital flows, recent regulatory actions suggest a desire to channel overseas investment through formal and regulated pathways rather than restrict diversification altogether. As a result, outbound Chinese wealth continues to find its way into regional and global markets, increasingly through established financial centres such as
Hong Kong and Singapore. However, the trend extends well beyond China and reflects a wider regional desire for global investment exposure.
This broad picture shows up in more specific stories. As I wrote last June, Asian investors, like their European counterparts, are asking increasingly harder questions of the traditional weighting of their investment towards the United States, the dollar, and US Treasuries.
The search for income remains a particularly persistent theme. Amid the uncertainty around interest rates, fiscal policy, and geopolitics that my colleagues from our investment teams discuss in this Outlook, the focus has shifted from maximising returns to building more resilient portfolios capable of navigating a wider range of outcomes. In our conversations, global short-duration strategies are particularly relevant, offering attractive yields with lower sensitivity to interest-rate movements and greater liquidity. More broadly, investors are favouring high-quality fixed income and diversified solutions that can provide steady dividend or coupon payments, downside protection, and global diversification without requiring a large directional bet on rates or markets.
This focus on resilience does not mean that investors are not interested in growth. But many are adopting a more balanced approach, pairing income-generating core allocations with selective exposure to long-term opportunities. Demand for AI- and technology-related investments remains strong, particularly in markets benefitting from the AI value chain. Among high-net-worth investors, private assets and semi-liquid strategies are increasingly being used to diversify return streams and access longer-term growth opportunities. We are also seeing growing adoption of ETFs and systematic strategies.
Taken together, these trends suggest is that Asian investors are not taking a more conservative approach; they are becoming more sophisticated. Rather than choosing between growth and resilience, many are constructing portfolios designed to deliver both. The world we are living in demands it.
