Global economic recovery prospects are boosted by the rollout of vaccines. Policy remains supportive, not least the prospect for further major US fiscal stimulus, while global geopolitical uncertainty has edged lower
US indices’ exposure to big tech companies and quality names is beneficial in our view. Cyclical parts of the market could benefit from fresh government stimulus measures and an economic rebound in 2021
We see scope for the region’s markets to play catch up following last year’s underperformance. A strong cyclical recovery later in 2021, a dovish ECB and generous government income support schemes are also positives
An improving global economic outlook is likely to benefit UK indices’ heavy exposure to cyclical sectors which have lagged in their performance over the past year. The UK’s immunisation programme is progressing rapidly
Japanese equities are attractively valued but we think there are challenges in unlocking this value potential. Economic growth is structurally weak and Bank of Japan policy space is constrained
We think the outlook for EM asset classes remains broadly positive amid a backdrop of global economic recovery and US dollar weakness. The bright spot is EM Asian markets which can benefit from China’s strong recovery
EMs outside of Asia can perform well in a backdrop of global economic recovery and higher commodity prices, but new virus variants and slow vaccine rollout remain key challenges
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
While a cautious Fed in the US is positive for the asset class, Asian bond spreads look particularly tight compared with other EM regions, reducing their relative attractiveness
North Asia is “first-in-first-out” of the crisis and continues to benefit from a V-shaped recovery in China. Tech sector bias remains favourable
China’s economic recovery is strong and broadening out across sectors that have lagged such as services. The dual circulation strategy and focus on quality growth create long-term structural growth opportunities
Macro activity rebound supports an earnings recovery amid lower costs of capital. Covid-19 virus concerns have lessened; while an expanded government budget and focus on structural reforms add to tailwinds
Hong Kong remains an attractive listing hub underpinned by greater primary and secondary market activity; the prospect of a vaccine rollout improves the outlook for border reopening; HK benefits from strong Chinese growth
Singapore stands to benefit from a global rotation into cyclical sectors with the potential for a travel/tourism revival following vaccine rollout; the city state can attract higher FDI* amid regional supply chain shifts
Strong 2021 earnings growth is expected given Korea’s robust recovery. Its global tech/digital leadership and broader sector exposures are positives. Korea is a key RCEP beneficiary
Taiwan’s economic growth profile has been robust and benefits from a strong cyclical and structural tech story, with the recent recovery broadening beyond tech and supported by private-sector/government investment (e.g. 5G)
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
Government bond prospective returns look very low. Governments are increasingly dependent on targeted fiscal measures to support growth, which may deteriorate the diversification properties of bonds
Prospective returns are low. The US government remains in fiscal policy loosening mode. There is uncertainty if Treasuries can act as an effective diversifier asset
Prospective risk-adjusted returns continue to look very poor to us. The UK government’s borrowing requirements remain substantial
Valuations look unattractive and governments are issuing high levels of fresh debt. The Covid crisis has highlighted limited diversification benefits
Japanese government bonds (JGBs) are overvalued, in our view
Prospective returns are relatively high, although this is mainly due to declines in most EM currencies. The potential for further dollar weakness in 2021 supports the outlook for this asset class
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
Spreads have come down materially over the last few months. Prospective returns have become unattractive, particularly for longer-duration bonds. We maintain a defensive positioning
Valuations are relatively unattractive, especially for longer-duration bonds. US IG may come under pressure from any unexpected
worsening of corporate fundamentals
Spreads are at historically tight levels. It will be important to monitor trends in corporate fundamentals
There is a valuation gap versus DM counterparts, while Asian corpo-rates may outperform due to relatively robust economies in the region.
USD weakness is a positive for corporates with USD-denominated debt
Valuations still look reasonable despite high default rates, and income return is relatively attractive. Fed and ECB actions are supporting the market. We continue to prefer Asia credits to DM
Prospective risk adjusted returns are consistent with our overweight position. The Fed has enacted measures to support the market
Monetary policy is ultra-accommodative, with the ECB introducing measures to support the market. However, valuations are consistent
with a neutral position
Asia HY can benefit from policy support in China and an emerging V-shaped recovery in Asia. Default rates should remain low and spreads look attractive relative to other global opportunities
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
| Alternatives(＞12 months) |
Gold has performed very well over the past year amid pandemic uncertainty and lower real interest rates. The environment of “lower-for-even-longer” interest rates remains a very favourable backdrop. Gold can also offer reasonable diversification benefits to multi-asset portfolios in a world of low bond yields and where bonds are potentially losing their diversification properties
However, further upside could be limited as economies recover, geopolitical tensions ease, and uncertainty falls
Having lagged wider equities at the start of the pandemic, real estate equities rebounded strongly on news of successful vaccine trials. Despite recent outperformance, dividend yields from the sector still offer a significant premium over wider equities and developed market government bonds. For investors able to accept continued high volatility, we believe prospective long-run returns imply a sufficiently attractive premium over extremely low policy rates
Valuations are consistent with a neutral position. Near-term macro and virus headwinds are offset by a positive longer-term outlook amid vaccine rollout and a rebound in global growth
Copper and other industrial commodities could benefit from a rollout of vaccines and a rebound in global growth in 2021. USD weakness would also be a tailwind. Cuts to miners’ exploration budgets and Covid-19 related disruptions also mean that new supply is limited. However, valuations are consistent with a neutral positioning
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
Global economic recovery prospects are boosted by the rollout of vaccines. Policy remains supportive, not least the prospect for further major US fiscal stimulus, while global geopolitical uncertainty has edged lower
US indices’ exposure to big tech companies and quality names is beneficial in our view. Cyclical parts of the market could benefit from fresh government stimulus measures and an economic rebound in 2021
We see scope for the region’s markets to play catch up following last year’s underperformance. A strong cyclical recovery later in 2021, a dovish ECB and generous government income support schemes are also positives
An improving global economic outlook is likely to benefit UK indices’ heavy exposure to cyclical sectors which have lagged in their performance over the past year. The UK’s immunisation programme is progressing rapidly
Japanese equities are attractively valued but we think there are challenges in unlocking this value potential. Economic growth is structurally weak and Bank of Japan policy space is constrained
We think the outlook for EM asset classes remains broadly positive amid a backdrop of global economic recovery and US dollar weakness. The bright spot is EM Asian markets which can benefit from China’s strong recovery
EMs outside of Asia can perform well in a backdrop of global economic recovery and higher commodity prices, but new virus variants and slow vaccine rollout remain key challenges
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
While a cautious Fed in the US is positive for the asset class, Asian bond spreads look particularly tight compared with other EM regions, reducing their relative attractiveness
North Asia is “first-in-first-out” of the crisis and continues to benefit from a V-shaped recovery in China. Tech sector bias remains favourable
China’s economic recovery is strong and broadening out across sectors that have lagged such as services. The dual circulation strategy and focus on quality growth create long-term structural growth opportunities
Macro activity rebound supports an earnings recovery amid lower costs of capital. Covid-19 virus concerns have lessened; while an expanded government budget and focus on structural reforms add to tailwinds
Hong Kong remains an attractive listing hub underpinned by greater primary and secondary market activity; the prospect of a vaccine rollout improves the outlook for border reopening; HK benefits from strong Chinese growth
Singapore stands to benefit from a global rotation into cyclical sectors with the potential for a travel/tourism revival following vaccine rollout; the city state can attract higher FDI* amid regional supply chain shifts
Strong 2021 earnings growth is expected given Korea’s robust recovery. Its global tech/digital leadership and broader sector exposures are positives. Korea is a key RCEP beneficiary
Taiwan’s economic growth profile has been robust and benefits from a strong cyclical and structural tech story, with the recent recovery broadening beyond tech and supported by private-sector/government investment (e.g. 5G)
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
Government bond prospective returns look very low. Governments are increasingly dependent on targeted fiscal measures to support growth, which may deteriorate the diversification properties of bonds
Prospective returns are low. The US government remains in fiscal policy loosening mode. There is uncertainty if Treasuries can act as an effective diversifier asset
Prospective risk-adjusted returns continue to look very poor to us. The UK government’s borrowing requirements remain substantial
Valuations look unattractive and governments are issuing high levels of fresh debt. The Covid crisis has highlighted limited diversification benefits
Japanese government bonds (JGBs) are overvalued, in our view
Prospective returns are relatively high, although this is mainly due to declines in most EM currencies. The potential for further dollar weakness in 2021 supports the outlook for this asset class
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
Spreads have come down materially over the last few months. Prospective returns have become unattractive, particularly for longer-duration bonds. We maintain a defensive positioning
Valuations are relatively unattractive, especially for longer-duration bonds. US IG may come under pressure from any unexpected
worsening of corporate fundamentals
Spreads are at historically tight levels. It will be important to monitor trends in corporate fundamentals
There is a valuation gap versus DM counterparts, while Asian corpo-rates may outperform due to relatively robust economies in the region.
USD weakness is a positive for corporates with USD-denominated debt
Valuations still look reasonable despite high default rates, and income return is relatively attractive. Fed and ECB actions are supporting the market. We continue to prefer Asia credits to DM
Prospective risk adjusted returns are consistent with our overweight position. The Fed has enacted measures to support the market
Monetary policy is ultra-accommodative, with the ECB introducing measures to support the market. However, valuations are consistent
with a neutral position
Asia HY can benefit from policy support in China and an emerging V-shaped recovery in Asia. Default rates should remain low and spreads look attractive relative to other global opportunities
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
| Alternatives(＞12 months) |
Gold has performed very well over the past year amid pandemic uncertainty and lower real interest rates. The environment of “lower-for-even-longer” interest rates remains a very favourable backdrop. Gold can also offer reasonable diversification benefits to multi-asset portfolios in a world of low bond yields and where bonds are potentially losing their diversification properties
However, further upside could be limited as economies recover, geopolitical tensions ease, and uncertainty falls
Having lagged wider equities at the start of the pandemic, real estate equities rebounded strongly on news of successful vaccine trials. Despite recent outperformance, dividend yields from the sector still offer a significant premium over wider equities and developed market government bonds. For investors able to accept continued high volatility, we believe prospective long-run returns imply a sufficiently attractive premium over extremely low policy rates
Valuations are consistent with a neutral position. Near-term macro and virus headwinds are offset by a positive longer-term outlook amid vaccine rollout and a rebound in global growth
Copper and other industrial commodities could benefit from a rollout of vaccines and a rebound in global growth in 2021. USD weakness would also be a tailwind. Cuts to miners’ exploration budgets and Covid-19 related disruptions also mean that new supply is limited. However, valuations are consistent with a neutral positioning
Source: HSBC Global Asset Management. As at 1 February 2021. The views expressed were held at the time of preparation, and are subject to change
