The “Top Questions from our Clients” publication is a monthly periodical that posits the most important questions, answers, and portfolio implications curated from across different regions. The December edition addresses the below topics:

• Question 1: Has the AI bubble sufficiently deflated for me to re-enter AI-related stocks? The recent repricing reflects profit taking and markets accounting for more risk scenarios. However, the bullish long-term AI trend remains intact. The next leg of growth should come from the infrastructure buildout and broader enterprise adoption. Hence we stay invested in AI but diversify across the ecosystem and regions. We recently trimmed our US overweight, broadening Asian exposure, and favour Tech, Industrials and Utilities
• Question 2: Can cyclicals continue to outperform defensives in 2026? Yes. Resilient growth in the US and China, improving momentum in Europe and Japan, and loosening global monetary conditions support further cyclical leadership. Earnings should remain solid, while AI scaling, data-centre CAPEX, industrial automation, and re-onshoring trends provide powerful tailwinds. We favour Financials, US and Asian TMT, US and European industrials, while staying cautious on Consumer Staples and Energy
• Question 3: Post the recent rally, what is driving our Chinese equity overweight? MSCI China has risen 34 per cent YTD, far outpacing expected earnings growth of 2 per cent for this year. Domestically driven tech and innovation leaders have been the primary contributors to this rally and should continue to lead this momentum into 2026, reinforcing our mild overweight stance on Chinese equities. Despite the rise in valuations, they remain reasonable: the 12-m fwd PE at 12.3x stays well below the S&P 500's 22.0x
• Question 4: If the Fed delays its December cut or halts easing, can US equities still rally? Yes. A slower Fed should not derail the US equity outlook. While it may cap P/E multiples, earnings growth should push equities higher as profit momentum is healthy and broadening. Earnings are helped by AI adoption, re-onshoring, fiscal spending and the recent depreciation of the US dollar. We stay overweight US equities with trimmed exposure, prefer US IG credit over HY, and manage near-term volatility with hedge funds
• Question 5: With the UK Budget behind us, has the outlook for UK markets improved? The Budget has reduced near-term volatility, reinforcing confidence in the government's fiscal stability. Markets reacted positively too as gilt yields fell while the pound rose. However, in the long term, economic momentum remains fragile, with limited catalysts for strong performance in UK equities. In contrast, gilts and UK IG bonds are more attractive given the falling yields amid persistent uncertainty and further fiscal tightening
• Question 6: What drives our preference for Japan over the UK or Europe within DM equities? Japan offers the strongest upside. A large JPY21.3 trillion stimulus, improving wages and solid reflation momentum support growth, while corporate governance reforms and a sideways JPY enhance earnings. With reduced US-Japan trade uncertainty and resilient domestic demand, Japan’s outlook exceeds its European peers. We overweight Japanese equities and prefer domestic reflation plays in Technology, Financials, and Consumer