Some thoughts on 2026 risks ahead, this time from Sun Life Asset Management in Asia;
Macroeconomic uncertainty is set to become the norm in 2026.The global economy is likely to display modest imbalances in the early part of the year, but fiscal expansion policies are expected to deliver tangible results, while the effects of tariffs may gradually subside. Meanwhile, artificial intelligence (AI) remains one of the most influential structural investment themes of 2026, further bolstering sustained economic momentum, with related investment opportunities spreading across the entire value chain.
Substantial capital expenditures by technology firms worldwide on chip research and development, as well as data center infrastructure, coupled with the growing adoption of AI across enterprise workflows, bode well for the earnings outlook of associated companies. Sun Life Asset Management (Hong Kong) Limited (“Sun Life Asset Management”) believes that elevated valuations highlight the critical need for diversified risk management strategies. In this volatile environment, maintaining composure, focusing on economic fundamentals, and enhancing the resilience of investment portfolios will be key for investors.
AI Investment Boom Far From Over
Roger Lau, Chief Executive Officer of Sun Life Asset Management (Hong Kong) Limited, said, “We believe the AI boom is not over, nor is it in a bubble phase, as AI-related industries are benefiting from positive spillover effects. Looking ahead, the impact of tariffs on the global economy will remain a key focus. We expect the market to be highly sensitive to related developments, which may contribute to increased volatility. Global equity valuations are significantly higher than they were at the time reciprocal tariffs were first announced. we maintain a neutral stance on global equities Dover the next 12 months and remain cautious about sudden market fluctuations driven by trade negotiations and geopolitical events.”
In the context of de-globalization, investors are increasingly prioritizing diversification across regions, with anticipated capital inflows favoring Europe, Asia, and emerging markets. Artificial intelligence (AI) is expected to remain a structural growth theme in Asia, although some export-oriented countries in the region continue to face challenges stemming from Trump-era tariff policies. Additionally, fluctuations in the US dollar are likely to contribute to short-term volatility in regional stock markets. South Korea and Taiwan are benefiting from robust hardware demand driven by AI advancements, particularly in high-bandwidth memory (HBM) and semiconductors, which has supported a revaluation of their equity markets. The outlook for technology stocks in the region remains positive.
Remaining Neutral on Hong Kong Equity
Ada Kung, Chief Investment Strategist of Sun Life Asset Management (Hong Kong) Limited, said, “China’s 15th Five-Year Plan focuses on high-level technological self-reliance and accelerating the application of AI across economic and social sectors, benefitting industries such as technology, healthcare, and non-ferrous metals. Earnings revisions in the technology sector continue to expand, while the semiconductor industry is supported by capital expenditures driven by AI demand, as well as rising domestic substitution demand. Additionally, the trade truce between China and the US has reduced geopolitical risks, while liquidity injections are expected to have a positive impact on the Chinese and Hong Kong stock markets. As such, we maintain a neutral outlook on Hong Kong equities over the next 12 months.”
On ESG investments, governments worldwide reached a consensus at COP30 and pledged to significantly increase investment in clean energy and a low-carbon economy. According to the International Energy Agency (IEA), the total global investment in energy transformation in the future is expected to be calculated in tens of trillions dollars, which will greatly promote the development of industries such as renewable energy, energy storage technology and electric vehicles. With increasing volatility in the investment market, low-carbon strategies provide higher downside protection and relatively better returns compared to traditional equity strategies. Sun Life Asset Management maintains a “positive” rating on ESG (low-carbon) investments.
Please refer to the December 2025 Market Outlook for more detailed analysis:
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