HSBC: "Maintain Risk Appetite"…Raise Weightings in Equities, High Yield and Emerging Markets

HSBC has said global investors should stick with a strategy of maintaining or increasing exposure to risk assets. In its view, the key drivers moving markets are not geopolitical factors but the trajectory of US interest rates and growth.

According to Walter Bloomberg, an overseas economy breaking-news channel, on the 27th HSBC said: “Stay all-in on risk,” adding that investors should increase allocations to equities, high-yield bonds, emerging-market bonds and gold, while keeping lower weightings in government bonds, investment-grade corporate bonds and crude oil.

On the market backdrop, HSBC assessed that “financial markets are currently being driven not by geopolitical issues but by US rates and growth,” and that “market expectations for corporate earnings are still excessively low.”

On investment strategy, it said “a rotation is needed away from rate-sensitive high-beta equities toward mega-cap tech,” adding that “interest-rate volatility is likely to remain within a controlled range, extending a supportive backdrop for risk assets.”

By region, it added that it remains positive on the outlook for US equities, Japan, euro area banks and emerging-market assets, saying these markets will benefit from a risk-on environment.

Meanwhile, the “risk-on” cited by HSBC refers to an investment stance that, when expectations for an economic recovery rise, favors assets with higher volatility but greater return potential—such as equities, high-yield bonds and emerging-market assets.