Global Private Banking Investment Outlook Report Mildly overweight on EM Asia Maintaining our overweight in position. Therefore, while the higher Asian equity markets have seen quite the Americas inflation and rate structure will take a a disparity in terms of performance. Slower economic growth and bite out of growth and demand in the Some Southeast Asian markets have contracting margins should weigh on US, we feel that both the corporate outperformed as border reopening US earnings growth in 2023. Equity and consumer sectors remain liquid has boosted consumption and investors also continue to struggle enough to survive the downturn. shifting supply chains have lifted with the Fed’s historically aggressive Nevertheless, the weakening cycle production. In addition, food and tightening of monetary policy and means that we maintain a defensive energy producers in the region have still very high inflation. High rates are posture with overweight positions benefited from the same global particularly painful for technology, in consumer staples, energy and trends we have seen in other regions. which is a large sector in the US. utilities. Also, domestic demand has been Still, US equities remain our main In Latin America, equity markets more resilient and intraregional overweight globally as we believe have fared better than their other EM trade has kept markets buoyed the US may avert outright recession. counterparts. Central banks in the and economies have reopened. Many US companies refinanced their region tightened monetary policy Taiwan and South Korea however balance sheets and extended the earlier than others, and are now have been hit by the fading global duration of their bonds when rates more advanced, giving some like demand for semiconductors and the were still low in 2021. This implies Brazil the possibility to start cutting global competition in technology. It they do not have to refinance in the rates in Q2 2023. As China’s COVID is in China that we have made the near term, and should be good for measures are adjusted, providing big change, upgrading the market their cash levels and profitability. further stimulus for the domestic to a mild overweight after weak US stocks rallied going into the economy, Latin America, especially performance. Although we do midterm elections and a split Brazil and Chile, could benefit not see a big pickup in economic congress has traditionally been substantially from the improvement growth, we believe the downside good for US stocks. in trade flows. And in Mexico, the risk related to housing and COVID Many US consumers refinanced their near shoring theme is providing has been reduced by Beijing’s mortgages too in 2021, and many of a boost. As American companies recent policy pivot towards growth them have long maturities and fixed move supply chain management recovery. The market now expects rates, which should now help cap closer to US borders, the economy more initiatives in coming months. their debt service costs for some has already begun to see an Reduced risk coupled with time. This, combined with faster improvement due to this long- attractive valuations have made the wage growth, has put consumer term theme. market more attractive, warranting balance sheets in a fairly healthy the upgrade. China’s valuations are particularly cheap compared to other markets, and reduced downside economic risk leads us to upgrade Chinese equities to mildly overweight. 24 US rope e-U o i t hina merging ar ets a 22 s r g n i 20 n r a e / e18 c i r 16 d p r a 14 w r o h f t 12 n o m - 10 12 8 Nov-17 Nov-18 Nov-19 Nov-20 Nov-21 Nov-22 Source: Bloomberg, HSBC Global Private Banking as at 22 November 2022. Past performance is not a reliable indicator of future performance. 26