Islamic Funds Monthly Market Overview - June
Monthly Market Overview - Equities
- Global equities delivered solid gains in May as investors took comfort from robust earnings and ongoing momentum in technology. The strongest support continued to come from the rapid expansion of AI-related investment, which has kept demand for semiconductors elevated and underpinned expectations for further profit growth. Risk appetite also improved as markets judged that Middle East tensions were less likely to spill over into broader economic disruption
- Equity market gains remained concentrated in tech-heavy markets such as the US and, within emerging markets, South Korea and Taiwan. In the second half of the month, participation broadened, pointing to a potential widening of the rally beyond the AI leadership. Japan also performed strongly, supported by AI-related technology names, while the UK lagged other developed markets due to its lower exposure to the sector. Emerging markets outperformed developed markets, driven by the tech-heavy Asian markets
- Within Islamic global equities Technology was the largest contributor while Energy detracted slightly. Region wise, North America drove performance during the month, while EMEA and Asia also contributed to performance. Within specific stock names, Micron Technology, Apple and SK Hynix drove returns, while Walmart and Alphabet weighed on performance
- Within Islamic EM equities, South Korea and Taiwan, contributed the most to performance. IT drove performance from a sector perspective, while Consumer Staples were a drag on returns. Within specific securities, SK Hynix and Samsung drove returns, while Xiaomi Corporation and Reliance Industries weighed on performance
Chart 1: 1 Year Fund performance (Gross of fees)
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Past performance does not predict future returns. Source: Bloomberg, LSEG Refinitiv, HSBC Asset Management as of 31 May 2026. Past performance is shown gross of fees, meaning any potential returns will be reduced by the deduction of investment management fees and any other expenses incurred. Returns denominated in USD and may vary with fluctuations in the exchange rate. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Shariah investment restrictions may result in the funds performing less well than funds with similar objectives which are not subject to these restrictions. The views expressed above were held at the time of preparation and are subject to change without notice
Fixed Income / Sukuk
- Across global fixed income markets, yields remained volatile amid shifting expectations around a potential US–Iran peace agreement but growing optimism around an eventual resolution appeared to support a gradual decline in rates towards month-end. Credit markets were positive for the month, and spreads tightened due to investors focusing on growth remaining resilient despite inflation concerns
- The US 10-year Treasury rose over the month by 7bps at 4.44 per cent in May, the German Bund fell by 10bps to 2.94 per cent and the UK 10-year Gilt also fell by 20bps to 4.81 per cent. Investment grade global corporate spreads tightened by 5bps at 0.76 per cent, global high yield corporate spreads tightened by 11bps to 2.77 per cent
- The FTSE IdealRatings Sukuk Index holds investment grade Sukuks, with an average coupon of 4.69 per cent and average maturity of 5.83 years. Top exposures are to Saudi Arabia, UAE and Indonesia
- Sukuk issuance continues to be strong in 2026
- Sukuk issuance continues to grow steadily, signalling growing interest in the asset class. Issuance growth rates are expected to moderate this year as investors keep a close eye on developments on the Middle East war
Chart 2: Country exposure (Top 5)
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Chart 3: Market Value continues to grow
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Commodities
- In commodity markets, brent crude fell by nearly 20 per cent—its steepest monthly decline since March 2020—despite the ongoing geopolitical stalemate in the Middle East. Gold prices also fell for a third consecutive month, weighed down by a stronger US dollar and shifting interest rate expectations
Currencies
- The US dollar strengthened against both Sterling and the euro, supported by shifting expectations for the Fed, resilient US economic data, and intermittent geopolitical tensions. Ongoing concerns about slowing growth and higher inflation in the Eurozone weighed on the euro, while domestic political uncertainty pressured Sterling
Past performance does not predict future returns. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. The views expressed above were held at the time of preparation and are subject to change without notice. Shariah investment restrictions may result in the funds performingless well than funds with similar objectives which are not subject to these restrictions. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index.
Source: Bloomberg, LSEG Refinitiv, HSBC Asset Management as of 31 May 2026.
Multi Asset Investment Team Views and Portfolio Positioning
- Outlook: While there are signs of progress towards reopening the Strait of Hormuz, geopolitical risk remains elevated. With oil prices still elevated and supply constraints for some other commodities, inflation pressures are likely to persist, acting as a headwind to growth. However, the situation remains fluid with potential for wide ranging outcomes. Our baseline scenario is for more balanced, trend-like US economic growth. Policy uncertainty remains high and real household income growth is weak, which should weigh on demand. Despite this, we do not anticipate a sharp slowdown, as investment in AI-related capital expenditure continues to provide strong support. We assume the oil price shock moderates, although tariffs could still add inflation pressure in the US and we expect global growth to converge, with inflation falling further outside the US
- Portfolio Positioning: Markets remain supported by strong corporate profits and AI-related investment, but the Middle East energy shock and a more volatile interest rate outlook keep macroeconomic risks elevated. Given this backdrop, we keep overall equity exposure close to neutral at this stage
- We prefer higher gold exposure, as we view the recent headwind in gold price as temporary and used the weakness to add exposure at more attractive levels. We remain overweight emerging markets equities, where we further added in May, as our indicators for the region have improved more, helped by supportive financial conditions and continued strength in parts of Asian technology markets (e.g., Korea and Taiwan). During the month we also moved underweight Europe, due to sentiment being weighed down by higher oil prices and likelihood of rate hikes. We prefer Japanese equities, where we remain focused on its resilient economic growth and the potential for fiscal stimulus to boost growth
- In May we also closed the underweight to US equities, as we become less pessimistic on the region, with indicators for the region strengthening, including momentum, economic growth and labour market. During the month we reduced the gold overweight on weaker momentum
HSBC Islamic Product Suite - Returns (Gross of Fees per cent)
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Past performance does not predict future returns. . For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. The views expressed above were held at the time of preparation and are subject to change without notice. Past performance is shown gross of fees, meaning any potential returns will be reduced by the deduction of investment management fees and any other expenses incurred. Returns not denominated in GBP may vary with fluctuations in the exchange rate. Shariah investment restrictions may result in the funds performing less well than funds with similar objectives which are not subject to these restrictions.
Source: HSBC Asset Management as of 31 May 2026.
HSBC Islamic Product Suite - Rolling 1 Year Returns (Gross of fees per cent)
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Key Information
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Past performance does not predict future returns. Past performance is shown gross of fees, meaning any potential returns will be reduced by the deduction of investment management fees and any other expenses incurred. Returns not denominated in GBP may vary with fluctuations in the exchange rate. Shariah investment restrictions may result in the funds performing less well than funds with similar objectives which are not subject to these restrictions.
Source: HSBC Asset Management as of 31 May 2026.
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Content ID: D073914 ; Expiry Date: 31.12.2026