by ZHANG Xiaoyun

Standard Chartered recommends overweighting China equities in 2026, citing targeted policy support, improving earnings momentum linked to artificial intelligence and relatively low valuations, according to its Global Market Outlook for 2026, released on Jan 6.

At a media briefing the same day, WANG Xinjie, chief investment strategist for wealth management at Standard Chartered China, said investors should focus on technology, healthcare and communications within the China market.

China strategy: barbell across A- and H-shares

Standard Chartered maintains an overweight call on China stocks, saying further targeted stimulus is likely in 2026. China's upcoming five-year policy plan also favors continued investment in advanced technologies, which could support corporate earnings growth, Wang said.

For portfolio construction, the bank recommends a barbell approach across A-shares and H-shares, balancing growth and defense. On the growth side, A-shares are seen as the core exposure for technology and so-called hard-tech names, particularly recent IPOs and companies with higher AI exposure. On the defensive side, the bank prefers healthcare and high-dividend stocks. In Hong Kong, state-owned enterprises with high payout ratios are viewed as offering relatively attractive income.

Utilities are underweighted on valuation grounds, with Wang saying other sectors currently offer better risk-return profiles within the bank's allocation framework.

Foreign inflows hinge on dollar and US equities

On capital flows, Wang said a weaker US dollar could open the door to renewed foreign interest in A-shares. However, he cautioned that any rotation away from US assets is unlikely to be rapid.

As long as US policy rates remain higher than those of other major economies and US equities continue to rise, capital is likely to stay anchored in dollar assets, he said. A more meaningful reallocation would likely require US equity gains to stall, even if markets merely move into a range.

China equities still trade at a discount to global peers, even after a recent rebound, Wang said. Given the much smaller size of Asia-Pacific equity markets relative to the United States, even modest reallocations could have a noticeable impact on China markets.

He added that large global asset managers expect inflows into A-shares in 2026. So far, however, foreign positioning has mainly shifted from underweight to near-benchmark levels, with outright overweight allocations yet to materialize.

Global view: equities and gold favored

Globally, Standard Chartered recommends overweighting equities and gold, with a preference for the United States and Asia excluding Japan. US equities are supported by solid earnings growth, easing geopolitical risks and a more accommodative Federal Reserve, which together point to a soft-landing scenario, the bank said. Asia ex-Japan is expected to lead major regions in earnings growth, with India upgraded to overweight on improving fundamentals and valuations.

In fixed income, the bank views government bonds as core holdings, favoring them over corporate credit as sovereign yields remain attractive. It recommends overweighting emerging-market US dollar and local-currency government bonds, which could benefit from benign inflation, more dovish monetary policy, improving fiscal positions and a weaker dollar. Developed-market investment-grade and high-yield corporate bonds are underweighted.

In commodities, Standard Chartered set gold targets of $4,350 an ounce over three months and $4,800 over 12 months, citing sustained central bank demand and a supportive macro backdrop. For oil, NYMEX crude is expected to trade around $61 a barrel over three months and $60 over 12 months, with ample supply likely to cap any price gains triggered by geopolitical risks.