HSBC Private Banking described upcoming market movements as a «tug-of-war between the liquidity-driven equity rally and the challenges in the economic reopening», urging for focus on diversification and quality assets.
«In the short-term, we expect market concerns about the risk of a second wave of COVID-19 infections and the divergent paths to the reopening process in different countries will underpin an uneven and U-shaped economic recovery,» said Fan Cheuk Wan, Asia chief market strategist for the bank, adding that volatility and return dispersion would remain high.
The British private bank is forecasting a 4.8 percent global economic contraction in 2020 followed by 5.8 percent positive growth in 2021. China is expected to outpace the U.S. at 1.7 percent in 2020 and 6.5 percent in 2021 compared to the latter’s minus 7 percent and plus 7.5 percent, respectively.
Adding Risk
Despite uncertainties in the recovery, the bank is advising investors to add some risk assets after what it observed to be bottoming of key economic indicators alongside extraordinary monetary support.
«The unprecedented global central bank easing has provided a powerful backstop and liquidity driver to support asset prices,» Wan said.
Post-Lockdown Thematic Investing
In addition to a focus on quality companies with strong balance sheets and margin power, HSBC Private Banking also highlighted thematic investing.
Entitled «Re-emerging Asia», the bank underlined four major post-pandemic investment themes: digitalized businesses in emerging areas like remote working; companies in China that will benefit from post-migration supply chain environment such the semiconductor sector; major beneficiaries of stimulus such as property developers; and hard currency bonds in Asia.
