2026 Mid-year outlook: Greater China Equities

Greater China equity markets showed divergent trends in the first half of 2026, with China A-shares and the Taiwan Taiex index registering strong gains, driven by resilient technology exports amid global demand for artificial intelligence (AI). Meanwhile, the MSCI China Index pulled back, weighed by commerce subsidies amid fierce competition in food delivery and rising AI capital expenditure, which we believe have already been priced in. In this Mid-Year Outlook, we highlight five positive drivers for China and Hong Kong equities in the second half of the year. Furthermore, the team explains why it believes the Taiwan region’s technology sector should continue to enjoy positive growth.

Summary:

1. The Chinese Mainland’s economy should continue to recover on the back of strong export growth, driven by advanced manufacturing product upgrades, domestic technology breakthrough and increased government and corporate investment in the Chinese Mainland’s AI and technology ecosystem.
2. The anti-involution effort, as well as improving commodity prices, is expected to drive better corporate earnings in the second half of 2026 and reflationary hopes. We anticipate that the positive earnings trend in China A-share market to continue over the next 12 to 18 months, driven by economic recovery.
3. For Taiwan region, new platform specifications undergo comprehensive upgrades, the embedded value of components should rise in tandem, benefiting the Taiwan region’s technology supply chain.