iFAST Investment Outlook 3Q 2026: Here’s what we’re buying next.

Key Points

Korea and Taiwan are upgraded to 4 stars as HBM and foundry earnings prove out; the Global X Asia Semiconductor ETF (HKEX: 3119) remains our preferred vehicle.
Energy, food, and memory chip prices are driving inflation simultaneously — the Iran ceasefire addresses only one of the three, and only partially.
Short-duration bonds replace medium-term bonds as our fixed income conviction call, as the Fed removes rate cuts from its base case.
Japan, Malaysia, and Europe are downgraded on currency, valuation, and macro grounds respectively, while India remains Underweight on monsoon and AI-exposure risk.
Asian equities trade at 15.9x forward earnings versus 22.0x for the S&P 500 — a valuation gap that funds our highest-conviction call this quarter.

Let us start with what we got right — and how early we got it right

Asian markets were in freefall earlier this year, and the consensus was to reduce Asia exposure. We argued the opposite — that Korea and Taiwan were being mispriced because the market was confusing energy exposure with earnings exposure, and recommended the Global X Asia Semiconductor ETF (HKEX: 3119) at the height of the sell-off. That call has since delivered strong returns through two KOSPI circuit-breaker events, a second wave of US-Iran strikes, and every headline that should have made investors question it. The returns were not delivered in a straight line. They were delivered because the analytical framework was right: structural earnings matter more than geopolitical headlines, and the AI supply chain running through Korea and Taiwan could not be substituted regardless of what happened in the Gulf.

The data since has made the case better than we could have argued it ourselves. Taiwan grew 14.6% in Q1 with Hormuz closed. Singapore grew 6.0%. China grew 5.0%. Japan's semiconductor exports rose 61.2% year-on-year. At the company level, Samsung's Q1 operating profit grew more than eightfold, and SK Hynix posted a 72% operating margin — an all-time record. We said rate cuts were off the table — confirmed. We said gold was not a reliable safe haven — it has continued to fall since we made that call. Our central call — Asia over the US, structural earnings over geopolitical headlines — has held.

The deal is fragile — and the inflation problem was never just about oil

Eight days after the MoU was signed at Versailles, the US and Iran were exchanging strikes again. By Sunday evening, both sides had agreed to stand down. Markets have largely concluded the crisis is over — Brent settled at USD 72.92 on Tuesday, within a band that reflects neither full crisis pricing nor genuine normalisation. We do not share that conclusion.

The diplomatic record does not support it either. Iran's Foreign Ministry spokesman has stated plainly that the country has “not yet entered the negotiation phase for a final agreement” — the MoU's own terms condition any final deal on prior implementation of the Hormuz, naval blockade, and sanctions provisions it set out, none of which has happened. Iran's Deputy Foreign Minister has separately hardened Tehran's position on Hormuz oversight ahead of talks scheduled in Doha, warning that other countries “have no right to interfere” if Oman declines to mediate.

Even if a deal is eventually reached, the inflation problem does not go away. Three separate forces — energy, food, and memory chips — are driving prices higher simultaneously, and the Iran situation addresses only one of them, partially, and only if it resolves.

Energy prices face physical constraints a signed document cannot fix: war risk premiums remain at 2–3% of hull value versus 0.25% before the conflict, Qatar's LNG facilities lost 17% of export capacity with repairs running three to five years, and ADNOC's CEO has confirmed full supply recovery is not before mid-2027. Food costs are rising from fertiliser disruption and El Niño conditions that will not peak until late 2027 — NOAA has confirmed a 63% probability of a very strong El Niño by year-end, and ECB research estimates global food commodity prices could rise by up to 9% at peak. And memory chip prices have surged as AI data centres consume supply faster than the industry can build capacity to replace it — Apple raised MacBook prices by up to USD 300 and iPad prices by USD 150, with oil having nothing to do with it.

Minneapolis Fed President Neel Kashkari was pencilling in a rate cut as recently as March. In late June, he revised his call to a rate hike by year-end — citing fertiliser costs and AI chip prices specifically. The Bank for International Settlements reinforced the point in its annual report, warning that delay will only make the necessary adjustments more costly. The rate cycle that turned in April stays turned. The sectors most exposed — long-duration bonds, REITs, and emerging market debt — remain the ones to reduce.

The valuation gap between Asia and the US is the opportunity

Here is the question worth asking before you adjust a single position: what are you actually paying for?

Asian equities trade at 15.9x 2026 estimated earnings. The S&P 500 trades at 22.0x — above our own fair PE of 20x. The earnings growth on the cheaper side of that gap is comparable to, and in several markets superior to, what the US offers. The AI supply chain runs through Asia — TSMC holds approximately 70% of leading-edge foundry share with no credible alternative at scale, and SK Hynix and Samsung supply the high-bandwidth memory that every AI accelerator in the world requires before it can function. You are paying a 38% premium to own that story in the S&P 500 when Asia offers the same structural earnings drivers at a steep discount.

The valuation gap has a further dimension worth understanding. China's re-rating is underway, though it remains uneven — the Xi-Trump summit in May anchored US tariffs at the Kuala Lumpur ceiling, and the geopolitical discount that depressed Chinese equity multiples for three years is partially unwinding. The most recent manufacturing PMI returned to expansion, but the strength is concentrated in AI-related exports and tariff-driven frontloading ahead of the Section 301 tariffs expiring in late July — the broader manufacturing sector has actually slipped back into deflation on factory gate prices. We read this as a near-term air pocket within a structurally improving picture, not a reversal of the re-rating thesis.

The technology composition of both MSCI Asia ex-Japan and MSCI EM is broadening, with higher weights in Korea and Taiwan reflecting the AI supply chain's centre of gravity. On these grounds, we upgrade our fair PE for MSCI Asia ex-Japan from 13.5x to 14.5x, and for MSCI EM from 12x to 13.5x — both moving toward historical averages as the structural case strengthens. Our target for the MSCI Asia ex-Japan Index is USD 1,401, implying 22.5% upside, and for MSCI EM, USD 1,979, implying 14.9% upside.

Table 1: Market Attractiveness Summary

Region / Sector	Rating	Stance	Key Theme
Asia Semiconductors	Very Attractive	Overweight	Upgraded to 4.5 stars; structural AI-semi demand; 61.0% upside
Taiwan	Very Attractive	Overweight	Upgraded to 4 stars; TSMC pricing power under-monetised
South Korea	Very Attractive	Overweight	Upgraded to 4 stars; HBM contracted; AI broadening beyond memory
Singapore	Very Attractive	Overweight	Maintained 4.0 stars; EQDP & SGX reforms; Gulf wealth inflows
China	Very Attractive	Overweight	Deflation ended; tariff ceiling holding; oil shock = capex tailwind
China Tech	Very Attractive	Overweight	Rebalancing to frontier AI leaders; HKD 6,708 target; 50.0% upside
Hong Kong	Very Attractive	Overweight	China re-rating feeding through; IPO pipeline rotating to AI
Digital Economy (Internet)	Very Attractive	Overweight	Hyperscaler capex driving margin expansion; DCA/RSP advised
Malaysia	Attractive	Overweight	Downgraded to 3.0 stars; net energy exporter; EPCC anchoring earnings
Japan	Attractive	Overweight	Downgraded to 3.0 stars; BOJ at 1.0%; prefer small caps
Asia ex-Japan	Attractive	Overweight	PE upgraded to 14.5x; 22.5% upside
Emerging Markets	Attractive	Overweight	PE upgraded to 13.5x; prefer IG-rated EM sovereigns; 14.9% upside
Semiconductors	Neutral	Neutral	Memory supercycle structural; prefer Asian over US semis
Healthcare	Neutral	Neutral	MFN/patent cliff largely priced in; M&A +65% YoY; 8.4% upside
US	Not Attractive	Underweight	S&P at 22.0x vs 20x fair PE; positive on digital economy only
Europe	Not Attractive	Underweight	Downgraded to 2.0 stars; stagflation base case; EUR 690 target
India	Not Attractive	Underweight	El Niño & energy inflation; limited AI exposure; 8.8% upside
ASEAN	Not Attractive	Underweight	Positive on Singapore & Malaysia only

Table 2: MSCI Asia ex-Japan Index valuation table

MSCI Asia ex-Japan Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	21.2	15.9	13.4	11.8
Earnings Growth	10.3%	33.2%	18.8%	13.2%
Earnings Per Share	54.0	71.9	85.4	96.6
Dividend Yield	1.7%	2.0%	2.1%	2.3%
Target Price (USD) (Based on fair PE ratio of 14.5X)				1,401
Upside Potential				22.5%
Each fiscal year ends 31 March. FY26 refers to the 12-month period ended 31 March 2026. Source: Bloomberg Finance L.P., iFAST Estimates. Data as of 30 June 2026.

Chart 1: Share price vs. EPS — MSCI Asia ex-Japan Index

Table 3: MSCI Emerging Markets Index valuation table

MSCI Emerging Markets Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	19.8	16.0	13.6	11.8
Earnings Growth	8.6%	23.9%	17.2%	15.9%
Earnings Per Share	87.1	107.9	126.5	146.6
Dividend Yield	1.9%	2.0%	2.1%	2.2%
Target Price (USD) (Based on fair PE ratio of 13.5X)				1,979
Upside Potential				14.9%
Each fiscal year ends 31 March. FY26 refers to the 12-month period ended 31 March 2026. Source: Bloomberg Finance L.P., iFAST Compilations. Data as of 30 June 2026.

Chart 2: Share price vs. EPS — MSCI Emerging Markets Index

US equities: Underweight the index. Own the digital economy.

The US is the largest equity market in the world, and our view on it is specific — which matters, because the specificity is where the returns are.

S&P 500 earnings grew 28.8% year-on-year in Q1 — more than double the 13.1% consensus expectation, and the strongest growth rate since 2021 — yet that strength is concentrated. Technology, communication services, and materials drove the beat; healthcare was the only sector to post a decline, weighed down by drug pricing headwinds. Real personal consumption expenditures rose 2.1% YoY in May. However, a three-year low personal savings rate of 3.0% and flat real disposable income growth point to growing consumer headwinds. The US economy remains K-shaped, with higher-income households continuing to spend on the back of equity market wealth while lower-income consumers pull back. At 22.0x 2026 estimated earnings versus our fair PE of 20x, the index has priced in the strong quarter without pricing in the divergence underneath it. We maintain our Underweight.

The index and the opportunity are not the same thing. Hyperscalers — Amazon, Meta, Microsoft, and Alphabet — are projected to spend approximately USD 725 billion on capex this year, up 77% from 2025, and that spending is converting into earnings: Microsoft's cloud business and Alphabet's TPU sales are both seeing what one CEO called “parabolic” demand. That spending flows directly into the digital economy names we favour, where AI disruption fears have proven largely overstated and valuations have yet to catch up with earnings resilience.

The same is true in chips, but with a sharper valuation argument. Recent volatility — a Korea-led leverage unwind, rising rate expectations — triggered a broad semiconductor selloff, but Micron's results during that window confirmed AI memory demand remains ahead of supply, with tight conditions expected to persist beyond 2027. We remain Neutral on US semiconductors: US names trade at roughly 33.6x forward earnings versus just 15.4x for Asian semiconductors — the same AI story, at half the price. Within the US, we favour financially strong hyperscalers — Alphabet, Microsoft, and Amazon — whose balance sheets provide the flexibility to fund AI investment through rising rates. We are more cautious on names where the valuation depends on a low-rate world that is not coming back.

Our preferred vehicle for internet exposure, the Invesco NASDAQ Internet ETF (NASDAQ: PNQI), implies upside of approximately 49% from current levels.

Table 4: S&P 500 Index valuation table

S&P 500 Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	25.4	22.0	19.1	17.1
Earnings Growth	12.5%	26.4%	14.9%	11.9%
Earnings Per Share	269.2	340.4	391.0	437.5
Dividend Yield	1.1%	1.1%	1.2%	1.4%
Target Price (USD) (Based on fair PE ratio of 20X)				8,750
Upside Potential				16.9%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 3: Share price vs. EPS — S&P 500 Index

Korea and Taiwan: The AI supply chain runs here, not around here

We said in our April outlook that Korea and Taiwan were structural winners of the AI cycle. The evidence has continued to accumulate — and we are upgrading both markets to 4 stars Very Attractive.

Korea's 23 June selloff — the KOSPI fell 9.5% in a single session, circuit breakers triggered twice — was a positioning event, not an earnings event. A regulator-approved wave of leveraged single-stock ETFs linked to Samsung and SK Hynix grew 241% in a month before unwinding violently once the regulator publicly expressed regret over approving them. Micron's earnings two days later confirmed AI memory demand was accelerating, not slowing. The lesson: avoid leveraged semiconductor products. The opportunity is real; leveraged exposure is not how to capture it.

On fundamentals: Samsung and SK Hynix hold 79% of global HBM share, with multi-year contracts locked and new capacity — SK Hynix P&T7 in 2027, Samsung P5 in 2028 — converting capex into durable earnings. SK Hynix posted a record 72% operating margin in Q1, with shortages potentially extending into 2027. The FactSet Asia Semiconductor Index is estimated to deliver ~169% earnings growth in 2026 — the selloff did not change a single one of those earnings; it made the entry point better. The opportunity is also broadening beyond memory — Jensen Huang visited Korea in June specifically to spotlight AI applications beyond semiconductors, from Hyundai's robotics push to LG's home AI integration. We also expect the Korea Discount to compress structurally as mandatory value-up disclosure and the dual-listing ban remove the governance overhang that has historically suppressed KOSPI multiples. Our KOSPI target is KRW 10,958, implying 29.3% upside.

Table 5: KOSPI Index valuation table

KOSPI Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	34.1	13.5	10.8	10.1
Earnings Growth	19.4%	152.2%	25.4%	7.1%
Earnings Per Share	249	628	787	843
Dividend Yield	0.8%	2.0%	2.5%	2.7%
Target Price (KRW) (Based on fair PE ratio of 13X)				10,958
Upside Potential				29.3%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 4: Share price vs. EPS — KOSPI Index

Taiwan's story is exports finally catching up to fundamentals, and buyers that can actually pay. 1Q26 exports hit USD 195.7 billion, up 51.1% year-on-year — a record quarter — with April marking the 30th consecutive month of export growth and orders guided toward USD 91.5 billion in May. Consensus expected base effects to cool this growth. The data refuted it emphatically.

The deeper question is why TSMC has not repriced to match. Memory prices have risen roughly sixfold and GPU rental rates are up 47% from their February 2025 low — yet TSMC and NVIDIA, the two genuine bottlenecks in the AI chip chain, have barely moved their pricing. That restraint is a choice, not a constraint: TSMC is raising prices step by step rather than all at once — 3nm up to 15% in 2H2026, another 5–10% in 2027 — its second hike this year. Multi-year contracts and joint chip design mean customers cannot walk away, and NVIDIA's Rubin platform, launching 2H2026, has already locked up scarce TSMC wafers. The AI share of TSMC's N3 production is expected to rise from roughly 60% today to 86% by 2027.

The moat is completeness, not any single company. Three science parks anchor the island — Hsinchu alone accounts for roughly 60% of output value across 189 related firms — and any two TSMC fabs sit within three hours of each other, a density no other location has replicated. TSMC's own Arizona fab proved the point in reverse, halting briefly in 2025 over gas purity issues and paying roughly five times Taiwan's price for sulfuric acid. Foreign chipmakers are voting with their feet instead: Micron bought Powerchip's Tongluo fab for USD 1.8 billion in early 2026, and AMD pledged over USD 10 billion across Taiwan's ecosystem in May — its largest-ever commitment. ASE, the world's leading packaging firm, is taking over 70% of the advanced packaging work TSMC outsources. We have raised our fair PE for Taiwan from 17x to 20x — still far cheaper than US semiconductors at over 30x for the same AI earnings growth. Our TWSE target is NTD 64,456, implying 39.7% upside.

Table 6: TWSE Index valuation table

TWSE Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	30.9	22.0	16.6	14.3
Earnings Growth	-	40.6%	31.9%	16.3%
Earnings Per Share	1,494.5	2,101.0	2,770.9	3,222.8
Dividend Yield	1.51%	1.88%	2.27%	2.40%
Target Price (TWD) (Based on fair PE ratio of 20X)				64,456
Upside Potential				39.7%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 5: Share price vs. EPS — TWSE Index

Singapore, China, and Hong Kong: Structural cases executing, not just intact

We maintained our overweights on Singapore, China, and Hong Kong through the worst weeks of the war. We maintain all three at Very Attractive going into the second half.

Singapore grew 6.0% in Q1 2026 with Hormuz closed — the earnings thesis does not depend on the deal. Gulf wealth that can no longer treat Dubai as a stable base is finding its way to Singapore, and this is a structural reallocation, not a short-term flow — DBS, OCBC, and UOB are already seeing it in wealth management fee income. Nvidia's choice of Singapore as its regional research hub adds a further dimension to the story: AI-driven capital expenditure across the electronics and precision engineering clusters is already showing up in the export data, positioning Singapore as a genuine, if often overlooked, beneficiary of the same AI infrastructure buildout driving our Korea and Taiwan calls.

MAS has steepened the S$NEER appreciation path, reinforcing SGD as the primary policy tool and making Singapore equities additionally attractive at exactly the moment capital is in motion. The EQDP has SGD 2.6 billion remaining for 2H2026 deployment, and the Nasdaq-SGX dual-listing bridge is a further re-rating catalyst. Beyond the large caps, small- and mid-cap names — concentrated in semiconductor supply chains, data centres, and construction — are seeing stronger earnings growth than the broader STI, with market revitalisation initiatives continuing to narrow the valuation gap to large caps. Our STI target is SGD 5,987, implying 15.8% upside, alongside a 4.4%–4.6% dividend yield.

Table 7: Straits Times Index valuation table

Straits Times Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	15.2	15.2	14.1	13.0
Earnings Growth	6.2%	11.9%	7.3%	9.0%
Earnings Per Share	305.0	341.3	366.2	399.1
Dividend Yield	4.7%	4.4%	4.6%	4.6%
Target Price (SGD) (Based on fair PE ratio of 15X)				5,987
Upside Potential				15.8%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 6: Share price vs. EPS — Straits Times Index

China's economy grew 5.0% in the first quarter, exports hit a record USD 376.8 billion in May, and high-tech manufacturing value-added rose 15.1% year-on-year, with the storage price index up more than 70% year-to-date — evidence AI demand is converting into real earnings. Consumption remains the soft spot, with retail sales down 0.6%, but this looks largely priced in and leaves room for upside as stimulus measures work through the economy. The oil shock has instead become a structural tailwind, as China manufactures 70–90% of the solar panels, batteries, and EVs the world is now installing.

We see this best expressed as two separate trades.

Trade one is Hang Seng Tech — a value and earnings-recovery play, not a broad index call. The index has fallen as much as 18% even as individual AI names rallied hundreds of percent. Alibaba Cloud grew 38%, with AI now 30% of external cloud revenue and guided past 50% within a year; Tencent's Q1 profit grew 21% on AI-powered ad targeting and cloud demand. The June 8 rebalancing added Minimax and Zhipu while dropping legacy names — our preferred vehicle is the iShares Hang Seng Tech ETF (HKEX: 3067), target HKD 6,708, 50.0% upside.

Table 8: Hang Seng Tech Index valuation table

Hang Seng Tech Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	17.8	17.3	16.5	15.0
Earnings Growth	2.8%	2.6%	4.8%	10.2%
Earnings Per Share	251.5	258.1	270.5	298.1
Dividend Yield	2.2%	2.3%	2.4%	2.4%
Target Price (HKD) (Based on fair PE ratio of 22.5X)				6,708
Upside Potential				50.0%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 7: Share price vs. EPS — Hang Seng Tech Index

Trade two is the CSI All-Share Information Technology ETF — our highest-conviction AI infrastructure play, backed by a USD 295 billion national data-centre buildout and structural policy support for onshore semiconductor and AI hardware development. Target HKD 17,224, 22.0% upside.

Table 9: CSI All-Share Info Tech Index valuation table

CSI All-Share Info Tech Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	68.0	66.4	54.0	45.0
Earnings Growth	45%	70%	23%	20%
Earnings Per Share	0.69	1.16	1.43	1.72
Dividend Yield	-	-	-	-
Target Price (CNY) (Based on fair PE ratio of 55X)				17,224
Upside Potential				22.0%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 8: Share price vs. EPS — CSI All-Share Info Tech Index

Hong Kong itself remains attractively valued independent of its tech constituents. The Hang Seng Index trades at 10.1x forward PE, in line with its 10-year average, leaving room for re-rating as China's earnings recovery feeds through. The market's composition is shifting in our favour too: IPO fundraising is increasingly concentrated in semiconductor, AI, and biotech — a structural diversification away from the financials and property weighting that has historically capped the index — at exactly the moment global capital is seeking AI exposure at a discount to the US. Southbound Stock Connect flows continue absorbing new supply at record pace, a structural and growing feature of the market rather than a sentiment indicator.

Table 10: Hang Seng Index valuation table

Hang Seng Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	10.6	10.1	9.0	8.5
Earnings Growth	2.1%	5.3%	12.2%	6.0%
Earnings Per Share	2,150	2,265	2,541	2,693
Dividend Yield	3.01%	3.65%	3.88%	4.19%
Target Price (HKD) (Based on fair PE ratio of 11X)				29,600
Upside Potential				29.0%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 9: Share price vs. EPS — Hang Seng Index

The downgrades: what changed and why

Not every market benefits from the same structural forces. Intellectual honesty requires us to say so plainly.

Japan: downgraded to 3.0 stars Attractive

Japan is downgraded from 3.5 to 3.0 stars Attractive — and this is important to understand, because the downgrade is not a statement that the reform thesis has broken down. The BOJ raised its policy rate by 25bps to 1.0% in June, corporate reforms continue to improve ROE and P/B ratios, and Prime Minister Takaichi's stimulus measures are expected to transmit increasingly into small caps. The Nikkei is on pace for its sharpest quarterly gain since 1965, driven by a tech rebound — but two factors temper our enthusiasm at current levels.

First, roughly 70% of Japan's year-to-date gains have been driven by multiple expansion rather than earnings growth, leaving limited re-rating room and valuations susceptible to a pullback if energy cost transmission becomes more visible in 2H2026.

Second, the yen has weakened to 162.27 against the dollar — its weakest level since 1986, and on track for a fourth consecutive quarterly decline. The Finance Ministry has signalled readiness for “decisive action,” but we do not expect intervention to meaningfully reverse the broader trend; the move reflects the structural US-Japan rate differential, not a transient dislocation, and consensus forecasts point toward USD/JPY 164 by early 2027. For investors holding unhedged yen exposure, that currency drag works against the equity rally.

We remain constructive — we simply prefer small caps, which offer ~21.8% projected upside, over the Nikkei 225 at ~9.6%, and would consider hedging yen exposure for unhedged large-cap holdings. Our Nikkei target is JPY 76,820.

Table 11: Nikkei 225 Index valuation table

Nikkei 225 Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	30.1	25.8	21.0	18.2
Earnings Growth	28.7%	16.8%	22.4%	15.4%
Earnings Per Share	2,329	2,720	3,329	3,841
Dividend Yield	1.1%	1.3%	1.3%	1.4%
Target Price (JPY) (Based on fair PE ratio of 20X)				76,820
Upside Potential				9.6%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 10: Share price vs. EPS — Nikkei 225 Index

Malaysia: downgraded to 3.0 stars Attractive

Malaysia is downgraded from 3.5 to 3.0 stars Attractive. As a net energy exporter, Malaysia benefits directly from elevated oil and gas prices — a structural advantage that buffers the economy at exactly the moment the rest of the region is under pressure. Data centre EPCC and grid capex anchor near-term earnings visibility, and the My Value Up programme provides a medium-term re-rating catalyst. The downgrade reflects softer earnings breadth, not a structural deterioration. Selectivity is warranted. Our KLCI target is MYR 1,900, implying 14.2% upside.

Table 12: KLCI Index valuation table

KLCI Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	16.1	14.8	13.7	13.1
Earnings Growth	-6.0%	8.1%	8.0%	4.3%
Earnings Per Share	103.0	112.5	121.5	126.7
Dividend Yield	4.0%	4.3%	4.6%	5.0%
Target Price (MYR) (Based on fair PE ratio of 15X)				1,900
Upside Potential				14.2%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 11: Share price vs. EPS — KLCI Index

Europe: downgraded to 2.0 stars Unattractive

Europe is downgraded to 2.0 stars Unattractive. We said in April that Europe was being downgraded to neutral as energy vulnerability and hawkish central banks delayed the earnings recovery. The data since then has moved in the wrong direction: inflation rose from 1.7% to 3.2%, growth forecasts were cut to approximately 0.9% from pre-war estimates of 1.2–1.4%, and services PMI fell to 46.4 from 50.2. ECB President Lagarde defended the June rate hike at Sintra as substantively justified rather than a precautionary “insurance hike,” and ECB board member Schnabel reiterated that inflation risks remain “tilted to the upside” despite falling energy prices. The macro starting point in 2026 is materially weaker than 2022 — before the Ukraine war, the eurozone was running above-trend growth with a strong post-pandemic buffer. That buffer does not exist today. Stagflation is no longer a tail risk; it is the base case.

We do not recommend broad European index exposure. Our Stoxx 600 target is EUR 690, implying just 7.5% upside. The one position we would hold selectively is the WisdomTree Europe Defence UCITS ETF – EUR Acc (LSE: WDEF) for European defence rearmament. Rheinmetall's 19% single-day plunge on a cancelled warship contract was a market overreaction — Germany simply reassigned the order to TKMS and deepened its commitment elsewhere, taking a 40% stake in KNDS the same day. With US weapons supply constrained and NATO allies winning export orders from Saab and others, Europe's rearmament story remains intact, and the sell-off has pushed the entry point lower still. This is a multi-year position: revenue from defence contracts is recognised slowly, and orders placed today convert to earnings over three to five years.

Table 13: Stoxx 600 Index valuation table

Stoxx 600 Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	18.0	16.4	15.4	14.0
Earnings Growth	0.3%	9.4%	6.4%	10.6%
Earnings Per Share	35.8	39.1	41.6	46.0
Dividend Yield	3.01%	3.19%	3.46%	3.75%
Target Price (EUR) (Based on fair PE ratio of 15X)				690
Upside Potential				7.5%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 12: Share price vs. EPS — Stoxx 600 Index

India: Underweight — unchanged from our prior view

India remains Underweight — unchanged from our prior view. The India Meteorological Department has lowered its 2026 monsoon forecast to 90% of the long-term average — consistent with NOAA's 63% probability of a very strong El Niño — and elevated energy prices are compressing household consumption at the same time. India has relatively limited exposure to the global AI supply chain compared with North Asia, meaning the semiconductor earnings cycle driving Korean and Taiwanese outperformance is largely bypassing India. At 19x fair PE and 8.8% projected upside, the risk-reward does not justify an overweight.

Table 14: SENSEX Index valuation table

SENSEX Index	FY25	FY26E	FY27E	FY28E
PE Ratio (X)	21.7	20.4	19.0	17.5
Earnings Growth	14.2%	-4.7%	7.3%	8.9%
Earnings Per Share	3,932.5	3,747.7	4,021.3	4,379.2
Dividend Yield	1.3%	1.8%	1.8%	2.1%
Target Price (INR) (Based on fair PE ratio of 19X)				83,204
Upside Potential				8.8%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 30 June 2026

Chart 13: Share price vs. EPS — Sensex Index

Fixed income: Short-duration is the conviction call

This is the most significant evolution from where we stood in our December 2025 outlook — and we want to be explicit about why it has changed.

In December, we recommended favouring medium-term bonds as rate cuts extended into 2026 and yield curves steepened. That call has moved: three inflation waves are now running simultaneously, the Fed has removed rate cuts from its base case, and Neel Kashkari has explicitly called for a hike. Medium-term bonds carry meaningful duration risk in an environment where the direction of travel has shifted.

Short-duration bonds are now our conviction call — not as a defensive position to hide in, but as the right investment for the environment we are actually in. When rates are rising, short-duration bonds mature quickly and return capital that can be reinvested at higher prevailing rates. If central banks hold at elevated levels rather than hike, you collect a real yield without the mark-to-market risk of longer paper. You are paid to wait on either outcome.

On credit: we remain positive on investment-grade bonds, where aggregate yields of approximately 4.7% remain above historical averages and fundamentals are resilient. High yield: selective — spreads have tightened from their crisis-period widening and offer limited cushion if growth disappoints, so focus on issuers with strong balance sheets and stable cash flows. Emerging market debt: neutral to slightly negative — the energy-driven inflation that has stalled the easing cycle was the primary driver of EMD returns through 2025, and it has not been resolved. Within EMD, prefer IG-rated EM sovereigns with strong external balances over HY-rated credits.

Gold and currencies: Energy repricing is driving the divergence

Gold failed its most important test

The Iran war was precisely the scenario gold bulls had spent years describing — a geopolitical rupture, energy disruption, surging inflation, and mounting fiscal stress. Gold lost 11.7% during the conflict, underperforming even US equities. Rising real yields, a record USD 12 billion in monthly ETF outflows in March 2026 alone — the largest on record according to the World Gold Council — and record central bank selling delivered an unambiguous verdict: gold's reputation as a crisis hedge is conditional, not structural.

Our stance is unchanged: 0–10% of portfolio for diversification only, via SPDR Gold MiniShares (NYSE: GLDM). For capital preservation, short-duration bonds and money market instruments are more dependable — and they actually pay you to hold them.

Currencies: two changes since April

Energy repricing has created a clear divergence between net energy exporters and importers — and that divergence is the frame for all our views. The SGD remains our top currency pick: MAS has steepened the S$NEER appreciation path, Singapore's persistent current account surplus provides structural support, and Gulf safe-haven inflows are an additional tailwind that did not exist before the conflict.

Two changes since April: the CNH is upgraded to Slightly Positive, supported by de-dollarisation momentum and a record export surge that is providing sustained upward pressure on the currency — and the CHF is downgraded to Neutral, as the SNB keeps rates unchanged relative to the US, widening rate differentials and capping any significant CHF appreciation. GBP remains our most cautious view — twin deficits, a persistent current account shortfall, and real yields below US levels are a combination that is genuinely difficult to argue against.

Table 15: iFAST Currency Views — June 2026

Currency	View	Change
SGD	Positive	Maintained — top pick
CNH	Slightly Positive	Upgraded — de-dollarisation, export surge
JPY	Slightly Positive	Maintained — intervention risk caps downside
USD	Neutral	Maintained
HKD	Neutral	Maintained — follows USD trend
AUD	Neutral	Maintained
MYR	Neutral	Maintained
CHF	Neutral	Downgraded — widening rate differential
EUR	Slightly Negative	Maintained — energy vulnerability
GBP	Negative	Maintained — twin deficit, weak growth

What to do now

The three inflation waves we have described are not going away because both sides agreed to stand down. With central banks around the world signalling that rates are likely to rise further, the case for repositioning your portfolio has not changed. But none of that is a reason to sell everything.

In 2022, the Fed's most aggressive hiking cycle in four decades drove the S&P 500 down 18.1%. The two years that followed delivered back-to-back returns of 26.3% and 25.0% — one of the strongest recoveries on record. More recently, stock markets rebounded strongly in April even as the war continued. Uncertainty is not the signal to exit. It is the signal to make sure you own the right things.

First, reduce the rate sensitivity of your portfolio. Three inflation waves are running, the Fed is signalling hikes, and central banks around the world are moving in the same direction. That is not an environment that is kind to assets whose valuations depend on low interest rates. Loss-making technology companies, REITs, and high-multiple growth stocks are the most vulnerable — their valuations rest on distant future cash flows that become less attractive as rates rise. High-quality technology names with strong balance sheets and resilient earnings are a different story. The distinction matters: it is not about avoiding technology, it is about owning the part of it that does not need cheap money to justify its price. Rotate toward quality. Rotate away from names where the valuation is an act of faith in a low-rate world that is not coming back.

For fixed income, short-duration bonds are not the place to hide — they are the place to invest. When rates are rising, long-duration bonds suffer as their prices fall with every upward move in yields. Short-duration bonds mature quickly and return capital that can be reinvested at the prevailing — and rising — rate.

Second, stay overweight Asia. The case for Asia has never been about Hormuz — and the escalation does not change it. When global markets are at or near all-time highs, the first thing to look at is valuations — and the first place to look for opportunities is Asia. You are getting comparable earnings growth at a steep discount. At 15.9x forward earnings, Asian equities are not pricing in perfection. The S&P 500 at 22.0x is.

Taiwan grew 14.6% in Q1 2026, Singapore 6.0%, and Japan's semiconductor exports rose 61.2% year-on-year — all with the strait closed. Samsung's Q1 operating profit grew more than eightfold; SK Hynix posted a 72% operating margin, an all-time record. These are real earnings from real deliveries, not projections that depend on a peaceful world.

Within Asia, we believe the AI trade is still intact. The best way to express it is through the Global X Asia Semiconductor ETF (HKEX: 3119), which captures the full Asian semiconductor supply chain at a fraction of the valuation of its US peers. Beyond semiconductors, China and Singapore remain among our highest-conviction ideas — markets where the structural case has strengthened, not weakened, through this crisis. The case for Asia is stronger today than it was before the war. The valuation gap makes it one of the most compelling opportunities in global markets right now.

Third, keep your regular savings plans running. A regular savings plan — same amount, every month, through the noise — works regardless of how the next few weeks play out. The investors who benefit most from the recovery are the ones who stayed invested in the right places through the uncertainty. You do not need to predict what happens next. You just need to make sure you are positioned to benefit when it does.

Table 16: Recommended Products

Market / Sector	Recommended Product(s)
Asia Semiconductors	Global X Asia Semiconductor ETF (HKEX:3119)
South Korea	JPMorgan Korea (acc) – USD Global X Exchange Traded Funds Series OFC - Global X Asia Semiconductor ETF (HKEX:3119)
Taiwan	Manulife Global Fund - Taiwan Equity Fund (USD) AA Franklin FTSE Taiwan RIC Capped Index ETF (NYSE: FLTW) Global X Exchange Traded Funds Series OFC - Global X Asia Semiconductor ETF (HKEX:3119)
Singapore	iFAST-Amova Singapore Equity A SGD Amova Singapore STI ETF (SGX:G3B)
China	Fidelity China Focus A-SGD T. Rowe Price Funds SICAV - China Evolution Equity A USD
China Tech	iShares Hang Seng Tech ETF (HKEX:3067) GF CSI All-Share Information Technology ETF (SZSE:159939)
Hong Kong	PineBridge Hong Kong Equity Fund (HKD) Standard Units iShares Hang Seng TECH ETF (3067.HK) Tracker Fund of Hong Kong (HKEX:2800)
Japan	Eastspring Investments - Japan Dynamic AS SGD Amova Japan Equity SGD (formerly Nikko AM) Xtrackers Nikkei 225 UCITS ETF 1D (LSE: XDJP)
Japan Small Cap	Janus Henderson Horizon Japanese Smaller Companies A2 USD BNP Paribas Japan Small Cap Classic Cap SGD iShares MSCI Japan Small Cap ETF (NYSE: SCJ)
Europe Defence	WisdomTree Europe Defence UCITS ETF – EUR Acc (LSE: WDEF)
Internet / Digital Economy	Invesco Nasdaq Internet ETF (NASDAQ:PNQI) United Global Transformation Fund Principal Islamic Global Technology Fund
Gold (diversifier only)	SPDR Gold MiniShares (NYSE: GLDM)

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.