Multi-Asset Outlook — May 2026

Global markets gradually stabilized as tensions in the Middle East eased, with market focus shifting back to corporate earnings and trends in artificial intelligence (AI)-related capital expenditures. The US stock market saw a significant rebound supported by strong Q1 earnings, while AI-related technology and hardware sectors continued to outperform global markets.

Within Asia, Taiwan and South Korea's stock markets remained leading performers, benefiting from robust AI-related profit growth and their dominant position in the global AI hardware supply chain. However, high retail investor participation kept market volatility at elevated levels.

By contrast, Hong Kong and mainland China’s stock markets underperformed relatively. Nevertheless, China's A-shares demonstrated better resilience supported by improving inflation trends, strong new energy exports, and expectations of a gradual appreciation of the renminbi. Meanwhile, India and Southeast Asian markets continued to be weighed down by high oil prices, weak currencies, and macroeconomic challenges; on the other hand, Latin America benefited from improved performance in crude oil and agricultural exports.

In the bond market, despite lingering uncertainties around US inflation and interest rate outlooks, credit spreads for Asian credit bonds remained generally tight. As for gold, it continued to benefit from sustained demand, including from central banks such as China's.

China / Hong Kong Stocks

– Since the end of March, the US stock market has rebounded rapidly, with market focus gradually shifting from the conflict between the US and Iran to the Q1 earnings season, particularly concentrated on the performance of technology companies. Some 84% of S&P 500 index component companies reported better-than-expected earnings in Q1, marking the first time in over four years that all 11 sectors recorded positive earnings growth.

– The market is now especially focused on capital expenditure (CapEx) and future prospects of industries related to artificial intelligence (AI), and overall performance has been quite positive. Several large cloud service providers (hyperscalers) have raised their CapEx forecasts, and most tech hardware companies also reported better-than-expected results and upward revisions to their earnings guidance.

– In contrast, Hong Kong's market remains dominated by internet companies, with a lower proportion of stocks related to tech hardware. Meanwhile, profit performance of internet firms continues to be weighed down by intensified e-commerce competition and slower commercialization progress in AI investments.

– Fund managers believe that unless positions in the tech hardware sector become overcrowded, triggering a rotation of market funds back into mainland China and Hong Kong markets, global investors may continue to underweight Chinese and Hong Kong equities until then.

China A-shares

– By comparison, China's A-share market structure is more diversified, with a relatively higher allocation to tech hardware-related sectors. Market performance is currently highly polarized, with sectors tied to tech hardware continually hitting new historical highs, while traditional economy-related sectors lag behind significantly.

– However, as both China’s Producer Price Index (PPI) and Consumer Price Index (CPI) have turned positive, alongside an improving overall trend, market sentiment is expected to gradually recover. Additionally, China’s April export performance was strong, with about 40% of the growth attributed to new energy-related exports, such as electric vehicles, batteries, and wind power industries.

– Fund managers believe that as the world increasingly relies on China as a key source in the new energy supply chain, demand for the yuan is also expected to rise further, leading to a gradual appreciation trend for the currency, which will help support the gradual recovery of China’s consumer market.

Asia (ex-Japan) equities

– Performance across Asian markets is clearly diverging, with South Korea and Taiwan markets significantly outperforming, while India and Southeast Asia (ASEAN) markets are notably lagging.

– With the strong and ongoing demand for artificial intelligence (AI) gradually translating into real earnings growth for companies, Taiwan and South Korea’s stock markets have seen a significant rebound since the end of March. As many AI-related components remain in short supply, and Taiwan and South Korea dominate the relevant supply chains, fund managers expect these two markets to continue outperforming within Asia. This is especially true as they are now ranked sixth and seventh globally by market capitalization, respectively. However, with rising retail investor participation and a sharp increase in margin balances, volatility in these markets is expected to remain high in the short term.

– By contrast, economies such as India and Southeast Asia, which heavily rely on crude oil imports, continue to be weighed down by persistently high oil prices. The widening current account deficits, ongoing currency depreciation, and rising inflationary pressures in these countries have all added stress to their markets. Although fund managers believe that valuations in India and Southeast Asia are currently attractive, the overall macroeconomic environment remains challenging, potentially restricting upside potential in the near term.

Emerging markets (ex-Asia) equities

– Latin American markets are benefiting from high oil prices, mainly because most countries in the region are oil exporters. As the market increasingly expects high oil prices to persist over the longer term, coupled with support from both oil and agricultural exports, fund managers believe that the macroeconomic environment in these countries could continue to improve.

Japanese equities

– After the US Dollar briefly breached the 160 level against the Japanese Yen, the Bank of Japan (BOJ) intervened in the market, causing the exchange rate to retreat to between 156 and 158. Meanwhile, with local inflation continuing to rise, expectations for a rate hike by the BOJ in June are gradually building.

– However, heightened volatility in the Yen and uncertainty regarding interest rate trends are likely to continue dampening market sentiment. Additionally, there is noticeable divergence in Japan’s stock market, with tech and AI-related firms continuing to attract capital inflows while traditional economy-related sectors are being weighed down by weak consumer spending.

Asian Investment Grade Bonds

– US Treasury yields have continued to fluctuate recently, driven by the market reassessing both short-term and medium- to long-term inflation and interest rate outlooks. April’s core CPI in the US came in higher than expected, primarily due to rising rents, airfares, and hotel prices rather than a significant rebound in core goods prices.

– Nonetheless, the market will keep a close eye on medium- to long-term inflation trends. At present, the market has almost entirely ruled out the possibility of the Federal Reserve cutting rates this year, with some even beginning to price in a potential rate hike next year. Additionally, uncertainty remains around Kevin Warsh's future stance on interest rate policy as he prepares to take over as Fed Chair.

– Fund managers indicate that duration has remained a key factor affecting the performance of Asian investment-grade bonds. Looking ahead, long-term US Treasury yields are expected to remain range-bound as the market continues to weigh inflation and interest rate outlooks alongside the expanding fiscal deficit.

Asian High Yield Bonds

– Amid persistently low new bond issuance, credit spreads for Asian high-yield bonds remain far below historical averages. Following improved market sentiment after the Iran-US ceasefire, investor demand for high-yield bonds has remained robust.

– However, fund managers warn that recent potential pressures in the US private credit and bank loan markets may still lead to higher default rates and wider credit spreads in the US high-yield bond market, continuing to pose external risk factors for the Asian high-yield bond market.

Emerging Market Bonds

– Credit spreads for emerging market bonds remain tight, but investor demand continues to be strong. The Latin American market is benefiting from high oil prices, mainly because most countries in the region are crude oil exporters. As markets increasingly expect high oil prices to persist for a longer period, fund managers believe that the macro environment of related countries is expected to continue improving, supported by both crude oil and agricultural exports.

Gold

– In the short term, gold prices will likely remain range-bound due to the continued strength of the US dollar and the market’s near-complete dismissal of the possibility of Federal Reserve rate cuts. However, most central banks, including China’s, continue to increase their gold reserves to diversify away from reliance on US Treasuries.

– Particularly in China, a significant increase in gold reserves was observed in March and April. Fund managers believe that as the trend towards ‘petro-yuan’ accelerates further, future demand for gold is also expected to continue rising. Meanwhile, institutional investors’ current overall allocation to gold remains low, indicating potential for further increases in holdings.

Multi-asset

Compared to single assets or traditional balanced portfolios, multi-asset strategies can offer lower volatility. However, the correlation between risky assets such as equities, corporate bonds, and commodities has significantly increased recently. Amid high levels of uncertainty in the current market environment, stable sources of income will be a key driver of investment returns.

Source: Bloomberg, as of April 30, 2026.

Learn more about Value Partners' latest multi-asset outlook: Value Partners | Multi-Asset Outlook — May 2026

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