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HSBC Private Banking in its Investment outlook forecasts a global economic slowdown in the fourth quarter of 2019 but rules out possibilities of a recession.
In its investment outlook called ‘New realities and new opportunities’, the global bank says that it is important to stay invested and find the right balance in terms of risk and portfolio allocation.
Manufacturing and investment spending will likely remain weak, but consumption has been relatively resilient and accounts for a larger share than manufacturing in most economies, the report notes.
For the MENA region, the combination of reform agendas including climate and sustainable development goals and diversification plans in general, have the potential to lift growth even in the face of a slowing external backdrop, HSBC said.
“Our 2020 growth forecast are positive for most countries in the region. However, political uncertainties and slow progress on reform will act as headwinds,” said, Willem Sels, Chief Market Strategist at HSBC Private Banking.
Investment strategy
The bank adopts a mild risk-off stance on equities with a preference for defensive sectors over cyclicals. HSBC favors relatively closed economies over manufacturing-based economies.
Structurally, HSBC Private Banking is bullish on Asia, but given the short-term uncertainties, it currently adopts a neutral stance on Asia emerging markets.
Managing elevated uncertainty
The bank calls for fiscal stimulus amid market volatility and policy uncertainty on economic growth and market risk appetite, noting that the prospect remains uncertain.
“In this environment diversification across asset classes and regions is particularly relevant, and selecting stocks and bonds with a focus on quality and resilience is important,” Sels said.
New realities, new opportunities
In fixed income, HSBC Private Banking focuses on carry strategies in investment grade, and emerging market local and hard currency bonds.
“Focusing on long-term trends can give direction to portfolio strategy, allowing investors to look through some of the noise, and to stay invested. This is generally better than sitting on low-yielding cash,” he said.
Challenges and opportunities in technology
The bank sees opportunities for investors in electric vehicles, battery innovation and the electric grid as well as in health technology.
According to Sels, winning companies in every sector will be those who can use technology in an effective manner.
(Writing by Gerard Aoun, editing by Seban Scaria)
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