The global private bank has four investment priorities for the fourth quarter:
- Lock in bond yields of medium duration quality credit
- Broaden the opportunity set in equities
- Position for the structural shift towards sustainability
- Manage risks through uncorrelated assets and volatility strategies
Rate hikes: an end in sight
HSBC Global Private Banking believes the Federal Reserve has finished hiking rates, and that the European Central Bank and Bank of England will soon follow suit. The end of the Fed's hiking cycle provides supportive conditions for bond markets, and therefore HSBC Global Private Banking keeps high quality medium-duration credit and US Treasuries as its largest overweight positions.
Equity opportunities: unusual suspects
The environment of peak rates has also been a significant support for growth stocks, particularly the technology mega caps in the US. As the US economy remains resilient, HSBC Global Private Banking believes this sets the scene for a broadened equity rally beyond those 'usual suspects'. While maintaining an overweight on US technology, it sees additional opportunities in US industrials, financials, consumer discretionary and healthcare.
This view applies to country allocations as well, with the team taking a positive stance on stocks in India, Indonesia, Mexico and Brazil - beyond its overweight on the US. The cyclical outlook is supportive in India and Indonesia, which benefit from supply chain diversification, as well as the rapid digitalisation of India's economy.
Thematically, HSBC Global Private Banking has added two new US themes to its existing consumer-focused American Resilience theme, specifically: US Industrial Resurgence and Innovation & Opportunities in US Healthcare. These additions demonstrate the global private bank's broad optimism on US stocks and its willingness to look beyond the usual suspects.
Positioning for the structural shift towards sustainability
Significant investments in the net zero transition are a positive across the Asia region as well, speaking to the ongoing investment priority of positioning for economic shifts towards long-term sustainability. High conviction themes include energy transition and independence, investing in biodiversity and Asia's green transformation.
Navigating volatility
To complete its approach, HSBC Global Private Banking adds hedge funds and volatility strategies, to take advantage of dispersion and to temper any volatility from temporary regime shifts.
Willem Sels, Global Chief Investment Officer at HSBC Global Private Banking and Wealth added: "After the Fed stops hiking, both bonds and equities tend to do well. So we continue to advocate that people invest their cash. But we really emphasise quality, both in terms of bond ratings and quality earnings, and clear differentiation on that basis. Thematically, we continue to strongly believe in the structural growth in Asia, the digital economy and the sustainability revolution. These trends intersect and reinforce each other, which is why we continue to look for the best ways to invest in them."
Cheuk Wan Fan, Chief Investment Officer for Asia at HSBC Global Private Banking and Wealth noted: "Capturing Asia's structural growth opportunities, we adopt a diversified and thematic approach with focus on idiosyncratic drivers and growth differentials to seek for excess returns. We stay mildly overweight Emerging Markets Asia equities with strong preference for India and Indonesia due to their promising structural and cyclical outlook, as captured by our theme on Asia's Rising Tigers. We find compelling Asian growth opportunities from the powerful structural shifts driven by rising middle class consumers, supply chain reorientation, technological innovation and green transformation. Last month we moved our position in mainland China and Hong Kong equities to neutral and turned more selective in sector positioning. Riding on the service consumption driven recovery in the region, we position in the mainland China internet, Asian airlines, travel, consumer discretionary and Macau gaming sectors under our new theme on Asia's Consumer Spending Boom."
Source: HSBC
