HONG KONG SAR - Media OutReach Newswire - 9 June 2026 - Today, KGI has released its 2026 Mid-Year Global Market Outlook, covering markets in the US, Mainland China, Hong Kong and Taiwan. Amid US-Iran geopolitical tensions and persistent inflation, the US economy in 2H 2026 is projected to leverage AI investment to drive growth across sectors, even as the Federal Reserve holds rates steady, potentially pushing Treasury yields above 4.8%. Concurrently, mainland China and Hong Kong markets are undergoing a structural transition, with high-tech exports showing notable resilience. Against a backdrop of shifting macroeconomic policies in both nations, coupled with historically low valuations in China-Hong Kong equities, economic growth targets are expected to catalyze a market realignment. Under this backdrop, we maintain the "LEAD" strategy for the second half of 2026:

1. Liquidity Shift
2. Earnings Focused
3. Adding Credit
4. Diversified Assets

James Wey, Head of International Wealth Management at KGI, says: "In a fragmented macroeconomic environment where interest rates are plateauing and traditional asset correlations are breaking down, investors cannot afford to sit on passive cash. Our 'LEAD' framework is an active, high-conviction playbook designed for this exact environment. By transitioning liquidity into the structural growth lifecycle of AI infrastructure and unlocking predictable, institutional-grade yields in highly rated corporate credit, we are helping clients construct resilient, multi-asset portfolios. True wealth management goes beyond vanilla advisory; it requires seamlessly mobilizing resources across our fixed income, asset management, and global markets capabilities to institutionalize how private wealth navigates macro realignments." Macro & US Markets The US economy should remain resilient in 2H26F. Although consumption faces headwinds from elevated oil prices and inflation resulting from the US-Iran war, investment is the current growth driver of the US economy, in particular AI‑driven capex, rather than the consumption seen in the past. As a result, the US economy has not seen the usual effects from a softening of consumer demand. Moreover, both the US and the global economy have become less dependent on crude oil, and with the US being a net oil exporter, its vulnerability to oil‑price shocks is greatly reduced compared to other economies. We therefore maintain our forecast for US GDP growth of 2.2% in 2026F. In the eurozone, economic growth is soft amid ongoing energy price pressures and tightening credit conditions as a result of cautious policies. In Japan, domestic demand is losing steam, but external demand remains resilient, supported by the semiconductor sector. Inflation in Japan has yet to stabilize near the targeted level, prompting policymakers to maintain a steady and cautious approach toward normalization. In China, domestic demand and the property sector remain anemic. However, global AI investment is supporting external demand and emerging industries, mitigating the risk of a sharp economic slowdown. With oil prices elevated and contributing to a rising CPI in the US, and as the unemployment rate is stable, the Federal Reserve (Fed) has kept policy rates unchanged over the past three FOMC meetings. We expect the Fed to keep interest rate changes on hold through the end of this year. That said, should medium‑to long‑term inflation expectations get out of control, or should wage growth pick up pace again, the Fed could face renewed pressure to raise interest rates. As far as US stock markets are concerned, strong AI‑related capex and productivity gains have driven earnings upgrades, which now point to almost 20% YoY growth. As these benefits begin to spread beyond the tech sector, non-tech sectors will also be supported, resulting in extremely solid fundamentals. On the valuation front, although US 10‑year Treasury yields have risen alongside inflation expectations, increased profit margin has helped to keep equity risk premia at low levels. As a result, discount rates have been relatively stable, limiting the negative impact on stock valuations. Overall, with fundamentals being revised upward while valuation headwinds are contained, we raise our 2026F target for the S&P 500 index to 8,000 points. Sector-wise, in addition to AI‑driven growth stocks, cyclical sectors benefiting from the spillover effects of AI are also likely to perform well, leading to a more diversified market boom. Regarding fixed income assets, as inflationary pressure rise and rate hike expectations intensify, US 10‑year Treasury yields could potentially rise to 4.8% or higher in 2Q-3Q26F. Investors are advised to engage medium‑and...