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Our House Views


Investment Monthly - March 2023

The Investment Monthly discusses key issues facing investors and offers the latest HSBC house & sector views.

Key Takeaways

  • Although stronger-than-expected economic data have triggered the bond markets to price in more Fed rate hikes to combat inflation, we maintain our view that the Fed will keep rates at 5% until Q2 2024. We continue to favour quality bonds amid rate and growth uncertainty and have extended US and European IG duration to 5-7 years to lock in decent yields for a longer period.
  • As equity markets have rebounded rapidly on recent good news, we expect to see some short-term consolidation. We stay overweight on US equities but keep US technology neutral due to mixed earnings prospects. Asia remains our top pick with China’s reopening being a key driver. We upgraded both Taiwanese equities and Asia technology to neutral due to the improving Asian tech cycle.  
  • We anticipate increased policy support from China’s NPC (e.g. a bigger stimulus package and continued infrastructure investment) to boost economic growth, which support our overweight on Chinese equities and our upgrade of China’s full-year GDP growth to 5.6%, led by consumption rebound, property market stabilisation and pro-growth policy support.


Read our topics for this month

1.  What is the latest economic data telling us?

  • The US and European economies are slowing but the slowdown is less fearful than expected (e.g. stronger than expected US payroll and retail sales data; improving PMI in Europe). Recent data suggest that a deep recession in these markets is unlikely.
  • However, the strong US employment data have led to bond markets being concerned about more Fed rate hikes to bring down wage inflation and raising their peak rate assessment to 5.25% or even 5.5%. As inflation continued to fall in January and we believe rental should start to ease, we hold the view that the Fed will make a final hike of 0.25% in March and keep the policy rate at 5% until Q2 2024.
  • Bonds continue to offer attractive carry opportunities and we continue to favour quality credit to mitigate rate and growth uncertainty. Given that developed market rates have now reached the upper-end of their trading ranges, we have extended duration positioning on US and European investment grade corporate bonds to 5-7 years to lock in the pickup in yields.

Source: HSBC Global Private Banking as at 15 February 2023.

2.  Is recent equity rally sustainable?

  • Equity markets see the better data as a good reason to push up cyclicals but further surprises on the upside are challenging. The gap between the price/earnings and Treasuries’ real yield has increased, suggesting that equity valuations may have bounced too quickly. Following the recent equity rally and the sharp sell-off in the US dollar, we expect to see some short-term consolidation for both.
  • We remain overweight on US equities due to its tight job market, easing inflation and peaking policy rates, and have added more cyclical exposure to our sector stance but remain neutral overall. The recent rally of US technology was driven by OpenAI’s ChatGPT innovation and AI-related opportunities, as well as cost cutting measures by some big tech companies. Nevertheless, we remain neutral on US technology due to its mixed earnings prospects.
  • Geographically, Asia remains our top pick boosted by China’s reopening. As the Asian tech cycle should improve and a gradual recovery in semiconductors globally is expected, we upgrade Taiwanese equities and Asia technology to neutral.  

Source: Bloomberg, HSBC Global Private Banking as at 15 February 2023. Past performance is not a reliable indicator of future performance.

3.  What to expect from China’s National People’s Congress?

  • The rebound in PMIs and stronger total credit growth for January, as well as a significant increase in travel and mobile data usage during the holiday seasons showed signs of normalisation in China.
  • We expect to see more government support on both the fiscal and monetary fronts from the National People’s Congress (NPC) to be convened on 5 March. These include continued infrastructure investment through special local government bond issuance of RMB4trn and a bigger stimulus package leading to a national general budget deficit of 3.2% in 2023. Recently, it has also been announced that private equity funds are allowed to invest in residential and commercial properties, as well as infrastructure projects.
  • We remain overweight on Chinese equities and selective on China’s property credit with a preference for state-owned enterprises, TMT (technology, media and telecom) and Financials. We expect China’s growth to accelerate from 2.2% y-o-y in Q1 to 7.4% in Q2, and have lifted the full-year growth forecast to 5.6% (from 5%) on a speedier recovery driven by consumption rebound, property market stabilisation and pro-growth policy support. 

Source: China Tourism Academy (Data Center of the Ministry of Culture and Tourism), HSBC Global Private Banking as at 30 January 2023.

HSBC Perspective

Shaping your investment portfolio

Investment themes for Q2 2023

  • Lock in attractive yields on quality medium-term bonds
  • Ride the reopening tailwinds in Asia
  • Capture the upside in sectors with the best fundamentals
  • Power your portfolios with ESG rising stars


Read our full report to access more on these themes, key data to watch and regional views across the world.


Read our investment themes

1. Lock in attractive yields on quality medium-term bonds

Amid rate and growth uncertainty, investment grade bonds still offer attractive yields and carry opportunities as yields are near multi-year highs. Moreover, as we expect inflation to decline and policy rates to stabilise, we prefer medium-term maturities to lock in decent yields for a longer period of time.

  • Investment-grade bonds offer attractive returns and are likely to be less volatile than equities in the current environment
  • We favour 5-7 years maturities for the US, UK and EUR investment grade bonds amid a high for longer rate outlook

2. Ride the reopening tailwinds in Asia

We see more upside in Asia than elsewhere with China’s faster-than-expected reopening fuelling market optimism. Mainland China’s reopening bodes well for its neighbouring markets in the region. ASEAN markets have strengthened their fundamentals through financial deleveraging and infrastructure development over the past decade.

  • Mainland China’s reopening is set to benefit Asian (ex Japan), mainland Chinese and Hong Kong equities. We’re especially optimistic about consumer-facing sectors, such as retail, e-commerce, hospitality, entertainment and travel
  • We also see value in Southeast Asia as trade and travel normalise across the region. Thailand and Indonesia are our top picks within ASEAN

3. Capture the upside in sectors with the best fundamentals

With all major markets now having reopened after the pandemic, the consumer discretionary and communications services sectors are set to thrive on pent-up travel and consumption demand. It’s sensible to adopt a more balanced approach to capturing the upside of both the cyclical and defensive sectors.

  • With risk appetite recovering, investors can consider a more balanced allocation between cyclical and defensive sectors
  • We favour energy, healthcare, consumer discretionary and communication services in most regions

4. Power your portfolios with ESG rising stars

The Russia-Ukraine war has brought energy security concerns to the fore, with many governments accelerating plans to invest in clean energy infrastructure to achieve energy efficiency. Biodiversity is another key trend not to be missed, and we see abundant opportunities in near future transition.

  • We continue to like long-term structural trends in renewable energy, green infrastructure and energy efficiency
  • Investors can also consider sustainable agriculture, responsible forest management and circular economy themes as awareness of biodiversity issues increases