KUALA LUMPUR (April 7): Investors should focus on broad diversification, rather than attempting to time market exits and re-entries that can increase execution and timing risk, HSBC Private Bank said.

In its investment outlook report for the second quarter, the private banking arm of HSBC is advising its private wealth clients to focus on building portfolio resilience as market reactions to geopolitical events are typically temporary and often reversed over time.

“Amid the rapidly shifting market conditions, it’s important not to be swayed by pessimistic or exuberant narratives and instead focus on building resilience to accumulate steadier returns,” said Willem Sels, global chief investment officer at HSBC Private Bank and Premier Wealth.

The report Changing Narratives, Continued Opportunity maintains a preference for growth-style stocks and companies with pricing power and exposure to structural growth themes, particularly in the US and Asia.

The bank also recommends its high net worth and ultra-high net worth clients consider selective allocations to hedge funds and private markets to broaden access to the opportunity set.

“Building resilient portfolios requires more than sectoral and geographical diversification,” the bank stressed, highlighting the role of bonds, currencies, commodities and multi-asset diversification in reducing concentration risk and improving overall stability.

The report comes at a time when markets were swinging wildly with the outbreak of the Iran war in March. Gold, traditionally considered a safe haven at a time of volatility, has see-sawed with the evolving geopolitical developments in the Middle East.

Malaysia, meanwhile, is expected to see moderating economic growth this year to 4.5% from 4.9% in 2025, according to HSBC’s forecast, amid near-term headwinds from elevated energy prices and the Middle East conflict.

Policy responses, including targeted subsidies and pricing controls, cushion economic impacts while “policy flexibility and medium-term regional growth prospects remain constructive”, said HSBC Private Bank’s Asia investment strategist Abhilash Narayan.

The ringgit is now “somewhat expensive relative to fundamentals” following the recent rally, and the pace of appreciation could slow down over the next six months. The house’s forecast is for the ringgit to edge towards 3.85 against the US dollar by the end of 2026.

“We are neutral on Malaysian equities over the next six months despite the strong economic outlook, as growth areas such as electronics, chips and data centres have limited representation in the stock index,” Narayan said.

Malaysian stocks are also trading at around 15 times their forward earnings, broadly in line with their five-year average, he noted.