[ET Net News Agency, 9 January 2018] Synchronised global recovery, stabilisation of
China's growth, steady earnings improvement, ample global liquidity and a gradual approach
of central banks towards policy normalisation provide a risk-on investment environment in
2018, according to HSBC Private Banking.
HSBC maintained an overweight allocation to global equities, USD credit and emerging
markets (EM) hard currency bonds, with "Pivot to Asia" to capture attractive cyclical and
structural growth opportunities in the region.
"After the strong rally in 2017, many investors worry about high valuations. But in our
view, record-high equity index levels are not a good enough reason to stay on the
sidelines. With global leading indicators continuing to surprise on the upside and
corporate earnings momentum staying positive, we expect the equity bull market to continue
in 2018. We anticipate global equities to outperform global credit this year," said Fan
Cheuk Wan, Head of Investment Strategy and Advisory Asia, HSBC Private Banking.
As the equity rally is entering a more mature stage, market volatility and return
dispersion will likely increase in 2018. The question of how to invest will be as
important as the question of what to invest in for investors. Two major structural shifts
in the global landscape underpin the regional and sector preferences of HSBC Private
Banking in 2018: the "Pivot to Asia" and the "Fourth Industrial Revolution".
HSBC Private Banking forecasts Asia ex-Japan to achieve well above global average GDP
growth of 6% in 2018 and 6.2% in 2019, led by robust growth in China and India. The two
Asian leaders alone are estimated to contribute half of total global GDP growth between
now and 2060.
HSBC Private Banking sees the Fourth Industrial Revolution (IR 4.0) as positive for
risky assets, as the strong pace of innovation boosts productivity gains and corporate
earnings, and fuelling investment spending and economic growth. IR 4.0 is expected to
drive promising growth of digital consumption, robotics and automation, and electric
vehicles.
"We are not that worried about high valuations of technology stocks, as we expect IR 4.0
to transform business models, create innovative solutions and opening up new markets,
supporting strong earnings growth," Fan stated.
"In the next 12 months, we expect the rally driven by IR 4.0 will likely spread from
technology companies to other companies that use technology as a business enabler.
Identifying the winners and losers of technological disruption will be the key. In our
view, IR 4.0 truly makes every company a tech company." she added. (KL)