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KGI 2026 Mid-Year Global Market Outlook: Beyond the Mist, First Light Appears
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:
- Liquidity Shift
- Earnings Focused
- Adding Credit
- 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 long‑term US Treasuries and investment‑grade US corporate bonds with higher credit ratings during periods of yield spikes. At the same time, given the deteriorating fundamentals of poorly-rated US issuers and their vulnerability to elevated oil prices, we advise against US high‑yield corporate bonds rated CCC/Caa or below.
James Chu, Chairman at KGI Investment Advisory, says: “Although the US economy continues to face pressure from higher oil prices and inflation, AI-related capital expenditure has become the primary growth driver, reducing the economy’s reliance on consumer spending and energy demand while supporting resilience in both economic activity and corporate earnings. We maintain our 2026 US GDP growth forecast of 2.2% and raise our S&P 500 target to 8,000, as we expect the benefits of AI investment to continue spreading across a broader range of industries.”
Mainland China and Hong Kong Markets
Market focus has shifted from “growth magnitude” to “policy and earnings visibility.” Despite tepid PMIs, positive signals are emerging: easing deflation, narrowing housing price drops, recovering consumer confidence, and a robust trade surplus supporting the RMB despite U.S. tariffs. Bolstered by monetary easing, accelerating corporate profits, and RMB 1.3 trillion in special government bonds, China’s economy is stabilizing. In this “tepid yet highly visible” environment, we recommend focusing on structural growth across four key themes:
Theme 1: U.S.-China Trade Volatility Offers Accumulation Opportunities
Tariff negotiations will peak between September and November. Initial aggressive tactics will likely yield to partial agreements, as full decoupling remains unfeasible. The resulting market volatility creates excellent long-term accumulation opportunities.
Theme 2: AI Monetization Highlights High-Tech and Robotics
With Q1 high-tech exports up 39.2% and AI token consumption surging, we favor downstream AI applications, cloud computing, and humanoid robotics. LLM-capable tech giants and core robotics manufacturers will be the primary beneficiaries.
Theme 3: Green Supply Chain Thrives Amid Energy Crisis
Geopolitics and elevated oil prices continue to drive global renewable energy demand. Avoid the saturated solar sector; instead, target wind energy for its expanding margins and tier-one lithium battery makers with next-gen technology and overseas growth.
Theme 4: State-Owned Banks Offer Defensive and Dividend Value
Slower rate cuts have eased net interest margin (NIM) pressures. Supported by economic stabilization and falling NPL ratios, large state-owned banks with high CET1 ratios and growing non-interest income are poised for robust earnings recovery.
Cusson Leung, Chief Investment Officer, International Wealth Management at KGI, says: “As China’s economy bottoms out, investors should capitalize on four core opportunities driven by policy support and easing deflation: (1) Accumulate during trade negotiation volatility, (2) Invest in AI-driven tech giants and robotics innovators, (3) Favor wind energy and lithium battery leaders over solar, (4) Leverage large state-owned banks for defensive yield. In summary, investors should utilize “technological innovation” and “green energy” as growth engines, anchored by “stable financials” to navigate volatility and achieve resilient returns.”
Taiwan Market
Benefiting from the continued acceleration of the AI infrastructure race and upward revisions to supply chain earnings momentum, we currently set our peak target for Taiex at 50,000 points this year, implying approximately 25% upside from current levels. This target is derived based on a 21x forward P/E multiple on next year’s earnings.
Taiex has delivered strong performance year-to-date, particularly since April. Despite rising geopolitical risks in the Middle East and potential supply disruptions in the Strait of Hormuz, the market has demonstrated notable resilience. The key driver behind this strength lies in the AI supercycle, which has effectively overshadowed short-term negative factors and supported market sentiment.
The latest global technology earnings season reinforces a critical message: AI is no longer merely a valuation narrative, but has evolved into a tangible driver of corporate earnings growth and capital expenditure expansion. For Taiwan’s supply chain, as AI applications extend from the cloud to edge devices and agentic AI, major cloud service providers (CSPs) are facing increasingly urgent compute demand, leading to broad-based upward revisions in capex guidance during this earnings cycle.
Supported by continued order expansion, earnings expectations for Taiwanese corporates have been revised upward accordingly. We now forecast overall Taiwan market earnings growth of 40% this year, significantly higher than our earlier estimate of 20% at the start of the year and 30% prior to the earnings season. Despite the high base, earnings growth is expected to remain solid at around 25% next year, suggesting the AI-driven earnings cycle remains durable.
Overall, we maintain a positive view on Taiex, with the structural bull trend intact. However, in the near term, two key risks warrant attention: first, escalating geopolitical tensions may push up oil prices and disrupt market confidence; second, any resurgence in inflation could alter the Federal Reserve’s policy trajectory. Given that Taiex are currently trading at elevated levels, a materialization of these risks could lead to increased volatility and potential technical corrections.
James Chu, Chairman at KGI Investment Advisory, says: “Driven by the surge in computing demand from the rise of agentic AI applications, global computing capacity remains in a clear state of undersupply. Major cloud service providers continue to raise capital expenditure, further driving upward revisions to earnings expectations across the AI infrastructure supply chain. At the same time, spillover effects from capacity constraints are broadening the range of beneficiaries. This AI investment cycle-driven bull market in Taiwanese equities represents a structural growth trend, rather than a traditional consumer electronics replacement cycle, and is likely to extend through 2027.”
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About KGI
KGI* has been a leading financial institution in Asia since 1997. Our scope of business encompasses Wealth Management, Global Markets, Asset Management and Global Sales & Prime Services. We are committed to offering a comprehensive range of financial products and services to corporate, institutional, and individual clients throughout Asia. Backed by KGI Financial Group, we have a robust footprint in Asia, covering Taiwan, Hong Kong, Singapore, Indonesia, and Thailand^.
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^an investee enterprise of KGI Securities, not a subsidiary
Disclaimer
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The rapid adoption of AI tools without sufficient verification, contextual understanding, or critical oversight is contributing to a growing “Human Critical Thinking Gap”.
Recent research from Professors Rick Dakan and Joseph Feller also corroborates this; only 8.7% of participants consistently verified high-stakes AI-generated claims before accepting them.
Beyond the Prompt: The Human-Centric Shift
While prompt engineering remains a foundational skill for today’s workforce, OOm Institute suggests the discipline must evolve beyond simple input mechanics.
“We are entering a false competence trap,” says Ian Cheow, CEO at OOm Institute. “People are learning how to prompt, but they aren’t learning how to make the right decisions. If you cannot spot when an AI’s logic fails, you aren’t using a tool, you are delegating your intelligence.”
The Warning: If You Let AI Think for You, You “De-skill”
Professionals who rely heavily on AI without developing critical evaluation skills risk “de-skilling”, where domain expertise erodes over time due to over-dependence on automated systems.
The concept of AI Fluency is built around three core capabilities:
- Decision to Correct: The ability to determine when AI-generated output is sufficient and when it poses a risk that requires human revision or rejection.
- Contextual Sovereignty: Ensuring human oversight remains central so AI outputs align with Singapore’s cultural, commercial, and ethical contexts.
- Critical Inquiry: Moving beyond prompting to actively question assumptions, logic, accuracy, and completeness in AI-generated responses.
Real-World Practice vs Theory
As AI tools evolve rapidly, practitioners argue that effective AI capability cannot rely solely on static classroom theory. Real-world usage often involves changing workflows, unpredictable outputs, and context-specific decision-making that require continuous practical application and human judgment.
Maintaining AI fluency increasingly requires learning from practitioners actively applying these tools in commercial environments.
“At OOm Institute, our focus is on building practical decision-making in AI usage,” Mr Cheow added. “Our goal is to help professionals use AI with stronger critical thinking, clearer accountability, and practical business understanding.”
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Media OutReach
Suanova, a Subsidiary of Yeebo, Signs Comprehensive Strategic Cooperation Agreement with InfiX.ai
Advancing Deployment of Training and Inference Integrated AI Platforms in Healthcare Applications, Powered by Domestic High-Density Computing Infrastructure
HONG KONG SAR – Media OutReach Newswire – 10 June 2026 – Yeebo (International Holdings) Limited (“Yeebo”; Stock Code: 00259.HK, together with its subsidiaries, the “Group”) is pleased to announce that its wholly-owned subsidiary, Suanova Technology Limited (“Suanova”), has entered into a comprehensive strategic cooperation agreement with InfiX.ai, a global leader in enterprise-grade generative AI (GenAI) infrastructure solutions. Leveraging Suanova’s Shanghai Cube, a domestically developed high-density computing infrastructure, the two parties will jointly advance the deployment of training and inference integrated AI platforms with continuous self-learning capabilities in healthcare applicatoins. As part of this collaboration, Suanova will contribute its expertise in domestic computing infrastructure by providing the core computing power and foundational support.
With healthcare as the initial focus, the two parties have already collaborated with leading medical institutions to conduct clinical validation in areas such as cancer GenAI, foundational medical Large Language Models (LLMs) and personalized cancer treatment planning.
Building Integrated Infrastructure for Medical AI with Shanghai Cube as the Foundation
The training and inference integrated AI platforms deployed under this collaboration are powered by Shanghai Cube, combined with InfiX.ai’s training, inference and multimodal AI capabilities. This integration delivers a truly unified hardware-software infrastructure tailored for medical AI applications.
Shanghai Cube, developed with the participation of Suanova, was among the earliest of its kind in China and is currently the highest-density domestically developed GPU supernode product. It adopts a high-density deployment architecture featuring 128 GPUs per rack with liquid cooling, enabling compact and efficient deployment of large-scale computing clusters. Shanghai Cube integrates a range of domestically produced core components, including liquid-cooling systems, high-performance parallel storage systems, retimers and motherboard capacitors. It provides a one-stop, highly efficient solution for the large-scale deployment of domestic computing systems and models.
Partnering with InfiX.ai to Build Enterprise-Grade AI Infrastructure
InfiX.ai is a research-driven AI infrastructure company serving global markets, with capabilities spanning IaaS, PaaS and MaaS. The company is building a Decentralized Co-GenAI Network that connects computing power, models, platforms and intelligent applications, with the aim of helping enterprises and organizations train, deploy and own their domain-specific AI based on proprietary data, expertise and business workflows.
InfiX.ai brings together world-class talent in AI research and industry deployment. The company is led by its Founder and Chief Scientist, Prof. Hongxia Yang, with Co-Founder and Vice President Haiqing Chen and Chief AI Architect Jianmin Wu forming the core management and technology team. Prof. Yang is also a Chair Professor at The Hong Kong Polytechnic University and is a globally recognized leader in artificial intelligence, with extensive experience spanning both academia and industry. She previously served as Head of LLMs in the at ByteDance (U.S.), AI Scientist and Director at Alibaba Group, Chief Data Scientist at Yahoo!, and Research Staff Member at IBM T.J. Watson Research Center. Prof. Yang has published more than 150 papers and holds over 50 patents. She has also received numerous international honors, including the WAIC SAIL Award, the National Scientific and Technological Progress Award, and recognition as one of the AI 2000 Most Influential Scholars worldwide.
By integrating InfiX.ai’s training and inference algorithms with Suanova’s high-performance computing platform, the solution significantly reduces memory usage and computing resource requirements. This enables higher throughput and supports training and deployment of larger-scale models under equivalent hardware configurations. The system is also capable of continuously capturing data for incremental training, integrating user feedback for fine-tuning and reinforcement learning, thereby ensuring that model performance evolves alongside changing business needs. Furthermore, the infrastructure supports local execution of the entire AI workflow – from training and fine-tuning to inference – thereby ensuring data security by design and meeting the stringent security requirements of sectors such as healthcare, finance, and government.
Mr. Daliang Chen, CEO of Suanova, said: “This partnership with InfiX.ai represents an important milestone in Suanova’s expansion into medical AI. Leveraging the Shanghai Cube high-density domestic computing platform, we aim to accelerate the adoption of medical AI in real-world clinical settings. This collaboration not only brings together the complementary strengths of both companies from a technological perspective, but also serves as a key step in advancing the domestic computing ecosystem. Looking ahead, we will continue to work closely with our partners to drive the deep integration of artificial intelligence across diverse industries.”
Hashtag: #Yeebo
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About Yeebo (International Holdings) Limited
Founded in 1988, Yeebo (International Holdings) Limited is a diversified electronic component company with a well-established presence in the global market. The Company’s core business spans flat panel displays, computing power and capacitors, serving a broad spectrum of industrial and consumer applications. Headquartered in Hong Kong, Yeebo operates its manufacturing operations primarily in the Guangdong and Jiangsu provinces, supporting a global sales network that ensures localized service and support for its international clientele.
In alignment with its long-term strategic vision, Yeebo is leveraging its robust operational foundation to expand into the Artificial Intelligence (“AI”) compute and related sectors. This initiative reflects the Company’s commitment to innovation and technological advancement, with the objective of positioning Yeebo as a leading and influential participant in the rapidly evolving AI industry across mainland China and Hong Kong.
About Suanova Technology Limited
Suanova, under Yeebo, is an innovative technology company focused on delivering independent, efficient, and accessible domestic AI computing services. Its business spans three core areas: computing power and cloud operations, computing technology development and computing industry investment. With branches in Hong Kong and Shanghai, it provides customers with better localized services. It is committed to transforming complex AI infrastructure into simple, efficient, and cost‑effective services through continuous technological innovation, with the goal of becoming a leading “infrastructure operator” in the AI era.
Media OutReach
KAST chooses Elliptic digital asset decisioning for global AML and sanctions compliance
KAST has used Elliptic’s solutions since 2024 to screen wallets and monitor crypto transactions for indicators of financial crime as customers fund and use their KAST accounts. By integrating Elliptic’s blockchain intelligence into its risk and compliance stack, KAST has been able to identify high-risk activity in real-time, reduce exposure to sanctioned or illicit wallets and demonstrate robust controls to regulators and partners.
Founded in July 2024 by former Circle executive Raagulan Pathy, KAST provides USD-denominated accounts, global pay-ins and payouts to more than 170 countries, and a growing suite of consumer and business financial tools built on stablecoin rails rather than legacy settlement networks. With KAST, people can hold, send, and spend instantly while transacting with merchants and ATMs around the world.
Since launch, KAST has scaled to more than one million users and is processing about $5 billion in annualized transaction volume, reflecting the growing adoption of stablecoin-based financial services beyond trading and crypto-native use cases. In March, KAST announced a record $80 million Series A funding round, which is being deployed to expand across North America, Latin America and the Middle East. Elliptic’s analytics help KAST manage risk, applying a consistent, data-driven approach to AML and sanctions screening as the platform scales into new markets.
“Every time customers tap their card, send or receive transactions, they need to trust it’s safe,” said Pathy, Founder & CEO at KAST. “Our users rely on us for institution-grade security everywhere in the world. Elliptic is a key part of that promise. Their blockchain intelligence helps us detect fraud patterns, sanctioned activity and other red flags behind the scenes so that our customers feel safe and secure.”
“As stablecoin financial platforms like KAST reach more users, regulators and partners expect the same standard of financial crime controls that apply in traditional finance,” said James Smith, Co-Founder and Chief Strategy Officer at Elliptic. “KAST has been building with compliance in mind from day one. Through this partnership, we are helping to ensure the platform can scale while meeting regulatory expectations for AML and sanctions risk.”
Elliptic’s analytics now underpin KAST’s financial crime controls. Working alongside the platform’s identity, fraud and transaction monitoring solutions, Elliptic supports a consistent, risk-based approach to onboarding, funding and card usage as the platform scales.
Hashtag: #Elliptic
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About Elliptic
Our platform’s unrivalled uptime, scalability, depth and breadth of our data and intelligence means exacting organizations choose Elliptic for their compliance, risk management, intelligence operations and blockchain infrastructure needs.
Founded in 2013, Elliptic is headquartered in London with offices in New York, Washington D.C., Miami, Dubai, Hong Kong, Singapore and Tokyo. To learn more, visit www.elliptic.co and follow us on 
LinkedIn and 
X.
About KAST
KAST is a stablecoin-powered financial platform that connects digital assets with traditional finance, enabling 1 million+ people to send, receive and convert funds across borders, currencies and payment rails through a single app. The company focuses on helping individuals and businesses earn globally and spend locally by combining instant peer-to-peer transfers with compliant access to local bank payouts in supported markets. Visit www.kast.xyz.
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