“However, we have upgraded European equities because employees were furloughed and not made redundant. The region has operational leverage and it is easier for employees to come back to their jobs unlike the United States,” he said.
Willem, who chairs HSBC Private Bank's Global Investment Committee and is in frequent contact with clients, believes that there will be relatively slow recovery on the employment front.
Commenting on the economic re-opening process, he said it will be slow, volatile and uneven. “Customers will act slowly and there is an uncertainty for cyclical progress; market volatility will increase and some markets will open too soon and might have to close down again; also companies are at different stages of stability which will make the impact of re-opening uneven,” he said.
The global market strategist expressed optimism in terms of investing opportunities for three sectors in the near-term – healthcare, online and automation businesses.
BUSINESS OWNERS ARE BEARISH
Speaking about the investor’s sentiment, Willem said his clients are both bullish and bearish about the markets. “There is low conviction among clients because of lack of clarity on the COVID-19 situation. Investors who own businesses are more bearish while the investors who are not business owners are relatively bullish,” he said, adding clients are looking for long-term investments and want to build resilient portfolios and are looking at asset classes such as gold.
HSBC, which announced 48 percent decrease in profit before taxes during Q1 2020 as against the same quarter last year, recently conducted a survey of 213 investors to gauge investors’ sentiment. According to the bank’s global research more investors in emerging markets (EM) expect economic recovery in 2021 than in the second half of this year.
The bank’s inaugural EM Sentiment Survey finds that 47 per cent of investors think EM economic activity will slow over the next 12 months, compared with 37 per cent who think it will accelerate.
Although 68 per cent forecast a swift recovery in Asia, led by China, Vietnam and Korea, investors expect deceleration and higher inflation in Africa, the Middle East, and Latin America, especially Argentina, said the survey report. Inflation is expected to fall in Asia and Central & Eastern Europe, it said.
Recession was cited as the biggest risk for emerging markets, ahead of COVID-19 and a sovereign credit or liquidity crunch, and two-thirds of investors think central banks will cut interest rates further before September 2020.
Only 28 per cent of asset managers expect emerging-market currencies to strengthen over the next three months compared with 44 per cent expecting depreciation, said the bank’s research.
(Writing by Atique Naqvi, editing by Seban Scaria email@example.com)
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