HSBC has adjusted its regional equity recommendations in its latest Asia Equity Insights Quarterly, lifting Indian equities to neutral from underweight and leaving overweight ratings unchanged for mainland China, Hong Kong and Singapore.
The bank cited several drivers behind its upgrade for India: weaker energy prices that reduce pressure on corporate margins, resilient domestic consumer spending and stronger credit growth. HSBC also highlighted renewed foreign inflows following measures aimed at stabilizing the rupee, while noting that sustaining those overseas investments will be important as investor focus re-centers on AI-related opportunities.
Conversely, HSBC took a more cautious posture across parts of ASEAN. The bank moved Malaysia and the Philippines to underweight, joining existing underweight views on Indonesia and Thailand. It blamed weak earnings growth, policy uncertainty and the limited presence of AI-related investment opportunities for the constrained outlook across much of the region.
HSBC warned that the earlier momentum behind Asia's AI-boosted equity rally could encounter headwinds. The bank said investors are increasingly questioning whether the recent surge in spending on artificial intelligence infrastructure could create excess capacity. It identified rising leverage, concentrated investor positioning and the risk of expanding memory supply as factors that could amplify volatility in markets where AI and semiconductor-related investment is concentrated.
Within Korea, HSBC continues to view the earnings backdrop as strong, supported by robust memory-chip demand and persistent spending from U.S. hyperscalers. At the same time, the bank flagged the risk that growing supply and heightened leverage could render returns and price action more volatile.
For China, HSBC sees selective opportunities across several sectors. The bank pointed to potential value in banks, property developers, internet companies, pharmaceuticals and energy storage. It expects earnings growth in 2026 to outpace that of the prior year and said that prospective reforms to the household registration system could gradually bolster domestic consumption. HSBC also noted that improving bank margins and a selective recovery in property could present attractive valuations despite continued softness in consumer spending.
On India, HSBC said the outlook has brightened as lower oil prices ease the risk of earnings downgrades. The bank prefers private banks, consumer discretionary, real estate, commodities and selected industrial names within India, reflecting the combination of easing input-cost pressure, resilient consumer demand and an uptick in foreign portfolio flows.
Index targets and market implications
HSBC refreshed its end-2026 index targets across a range of Asian benchmarks. The bank put the Sensex at 84,000, the Hang Seng at 27,000, the KOSPI at 8,000, Taiwan's TAIEX at 49,000 and Singapore's STI at 6,100. These projections imply an average upside of about 9% across the markets covered.
The bank reiterated an overweight stance on Singapore within ASEAN, citing its combination of quality, yield and relatively attractive valuations, even as it turned more cautious on other regional markets.
Bottom line
HSBC's report signals a recalibration of regional exposure: a more constructive view on India amid easing cost pressures and policy moves to stabilize the currency, continued conviction in select Chinese sectors despite weak consumption, and growing skepticism about the sustainability of AI-driven market gains if infrastructure spending outpaces demand. At the same time, weaker macro trends leave several ASEAN markets at the back of the pack in the bank's regional stance.