Investment Monthly: Diversifying further amid evolving geopolitical risks

Key takeaways

Geopolitical tensions have increased market volatility, with recent developments around Greenland and Iran adding to the complexity. However, we anticipate that any sell-off will be less severe than that of last April. Our investment strategy aims to capture the broadening opportunities driven by AI-led innovation while navigating geopolitical uncertainties through multi-asset diversification, including increased exposure to alternatives and gold.

While we remain positive on global and US stocks and continue to position in Asia for geographical diversification, we have adjusted our equity allocation by upgrading Materials across regions and underweighting Europe ex-UK stocks after taking profits on European peripheral markets. UK Gilts have performed well since the Autumn Budget and benefit from favourable tailwinds, supporting our upgrade to overweight, and aligning with our investment grade credit positioning. We also upgrade Japanese government bonds to neutral following the recent sell-off.

Asia’s growth drivers remain robust, underpinned by resilient domestic demand and strong AI-related exposure, along with solid upstream industrial activity. Fiscal stimulus, supportive monetary measures and investment boosts outlined in China’s 15th Five-Year Plan provide a positive backdrop for the equity market. Hong Kong benefits from an improving property market outlook and strong capital inflows. Japan’s expansionary policy and solid earnings growth, South Korea’s rising memory-chip cycle, and Singapore’s safe-haven appeal add to Asia’s allure for investors.

https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/diversifying-further-amid-evolving-geopolitical-risks/

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Publish Date: Fri, 30 Jan 2026, 12:02 PM

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