7 May 2024
During China’s National People’s Congress in March, the authorities showed their determination to support the economy and the property market. However, in the absence of large-scale stimulus policies, China and Hong Kong equities have shown signs of bottoming out. Their outlook may depend on the scale of future stimulus policies and the development of the domestic property market. For investors, instead of waiting for the China and Hong Kong stock markets to rebound, it might be better to diversify and seek opportunities in other Asian countries, like Japan, India and South Korea.
The Bank of Japan (BoJ) raised interest rates in March as expected, but the policy dovish stance sent Japanese equities higher. In fact, the Nikkei Index has risen by 13% YTD and once surpassed its record high in 1989. HSBC believes the following three factors may continue to support Japanese equities:
Due to these factors, HSBC expects earnings per share of Japanese companies to increase by 9.9% YoY, and therefore we stay overweight on Japanese equities.
The Indian Manufacturing Purchasing Managers' Index (PMI) stayed at a 16-year high of 59.1 in April. Its underlying indices retreated but were still in expansion zone. The Services PMI rose further to 61.7 in April and its composite new export orders gained at the fastest pace since September 2014, indicating strong confidence in the economic outlook.
Looking ahead, HSBC has raised its GDP growth forecast for India from 6% to 6.3% this year and from 6.3% to 6.6% next year in anticipation of higher government capex and fixed asset investment related to renewable energy, AI and semiconductors.
In the longer term, HSBC believes India is undergoing an industrial renaissance, driven by high-tech services, digital start-ups and services exports. In addition, many multinational companies are willing to build outsourcing centres to support HR, audit, R&D and legal functions, which may lead to an increase in exports from the service sector, supporting India’s potential growth to reach 6.5% YoY over the next 10 years, above the 6% average before the pandemic. Although the general elections in mid-April to early-June may lead to temporary volatility, HSBC remains overweight on Indian equities due to the upbeat economic outlook.
South Korea’s exports YoY in March slowed from 4.1% to 3.1%, of which preliminary semiconductor exports YoY fell to 35.7% from 66.7% in February, mainly due to the high base effect.
The recovery of global demand for electronic products has stalled which may limit the upside of semiconductor exports. However, in the long run, AI has already become a trend of the future and according to a WTO report last year, South Korea's memory chip production in 2019 accounted for 40% of the world's output. The construction of AI and related hardware products will drive the demand for memory chips higher. In addition, as stimulus measures from China may soon take effect and the European economy is bottoming out, global exports are likely to rise by 2.5% this year from a 0.5% decline last year, and accelerate to 3.4% next year. HSBC favours South Korea equities on expectations of further gains in semiconductor exports.
Since we see upside potential in Japan, India and South Korea equities, and since Hong Kong and China equities may have bottomed out already, HSBC also favours Asian equities. If investors have concerns about individual countries, they may consider diversifying their investments across the Asian region to avoid concentrating in a single market.
Source: HSBC, Bloomberg, data as of 29 April 2024.
Investment involves risk. Past performance is no guide to future performance. For details of the investment products, their related fees and charges and risk factors, please refer to the individual product materials.
In the worst case scenario, the value of the investments may be worth substantially less than the amount originally invested (and in an extreme case could be worth nothing).
The investment decision is yours but you should not invest unless the intermediary who sells it to you has explained that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.
Investors should not base on this marketing material alone to make investment decisions.
Issuer's Risk – you rely on the issuer's creditworthiness. Bonds are subject to both the actual and perceived measures of creditworthiness of the issuer. There is no assurance of protection against a default by the issuer in respect of the repayment obligations. In the worst case scenario (eg insolvency of the issuer), you might not be able to recover the principal and interest/coupon, if applicable, and the potential maximum loss could be 100% of the invested amount and no coupon received.
Please also refer to the additional risk disclosures set out below.
The information in this document does not constitute a solicitation for the making of any deposit or investment in any products referred to herein.
This document has been distributed by The Hongkong and Shanghai Banking Corporation Limited (the 'Bank') in the conduct of Hong Kong regulated business. It is not intended for anyone other than the recipient and should not be distributed by the recipient to any other persons. It may not be reproduced or further distributed.
The information set out in this document is meant for general reference only. Whilst every care has been taken in preparing this document, the Bank makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Except as specifically indicated, the expressions of opinion are those of the Bank only and are subject to change without notice.
The information contained in this document has not been reviewed in the light of your personal financial circumstances. The Bank is not providing any financial or investment advice. The information is not and should not be construed as an offer to sell or a solicitation for an offer to buy any financial products, and should not be considered as investment advice.
Investment involves risk, the value of any investment may move up or down, and the investment may become valueless. Investors should carefully consider whether any investment products or services are appropriate for them in view of their investment experience, objectives, financial resources and relevant circumstances. The relevant product offering documents should be read for further details, including risk factors.
Currency conversion risk – the value of your foreign currency and RMB deposits will be subject to the risk of exchange rate fluctuation. If you choose to convert your foreign currency and RMB deposits to other currencies at an exchange rate that is less favourable than the exchange rate in which you made your original conversion to that foreign currency and RMB, you may suffer loss in principal.
Companies within the HSBC Group and/or their officers, directors and employees may have positions in any financial instruments mentioned in this document and may from time to time add to or dispose of any such financial instruments.
The above information is for indication only and is subject to related terms and conditions; please contact our branch staff in Hong Kong for details.
The contents of this document have not been reviewed by the Securities and Futures Commission of Hong Kong or any regulatory authorities in Hong Kong.
In the worst case scenario, the value of the funds may be worth substantially less than the original amount you invested (and in an extreme case could be worth nothing).
Funds which are invested in certain markets and companies (eg emerging markets, commodity markets and smaller companies) may also involve a higher degree of risk and are usually more sensitive to price movements.
Credit Risk/Interest Rate Risk – a fund that invests in fixed income securities may fall in value if interest rates change, and is subject to the credit risk that issuers may not make payments on such securities. Price of the fund may have a high volatility due to investment in financial derivative instruments and may involve a greater degree of risk than is the case with conventional securities.
Counterparty Risk – a fund will be exposed to credit risk on the counterparties with which it trades in relation to financial derivative instrument contracts that are not traded on a recognised exchange. Such instruments are not afforded the same protections as may apply to participants trading financial derivative instruments on organised exchanges, such as the performance guarantee of an exchange clearing house. A fund will be subject to the possibility of insolvency, bankruptcy or default of a counter party with which a fund trades such instruments, which could result in substantial loss to a fund.
Investment involves risk. You should carefully consider whether any investment products or services mentioned herein are appropriate for you in view of your investment experience, objectives, financial resources and relevant circumstances. The price of stocks securities may move up or down. Losses may be incurred as well as profits made as a result of buying and selling stocks securities.
The Bank does not provide investment advice. Investment involves risk. The price of stocks may move up or down.
Losses may be incurred as well as profit made as a result of buying and selling stocks.
Issued by the Hongkong and Shanghai Banking Corporation Limited
