As uncertainty continues to haunt advanced economies, HSBC yesterday recommended an overweight holding in emerging and developing economies including Taiwan, Brazil, India and China, Steve Chuang (莊懷德), senior vice president of the bank’s wealth management division, told a media briefing yesterday.
“Emerging economies and their Asia-Pacific counterparts, which have mostly rebounded from their worst [performances], will continue to experience the strongest momentum for growth among other economies, including advanced ones in the US and the Europe,” Chuang said, citing a Goldman Sachs report that forecast China would outperform the US and become the world’s largest economy in 2050.
The report projected that China’s economy will grow to US$7 trillion then, far bigger than the US economy’s US$4 trillion, he said.
In general, the market sentiment has reversed its previous bearish course and turned more optimistic, the fund manager said.
Chuang said the bank favors the TAIEX because it believes expected pacts with China will boost the local economy and capital markets.
Domestic financials and property shares will immediately benefit from closer cross-strait ties, while electronic share performance may hinge on the pace of the global economic recovery, he said.
Any downward corrections in the Brazil, India and China markets in the near future will present the best timing for investors to go bargain hunting, Chuang said.
However, the bank does not favor Russia because its oil-dependent economy is the lowest performing among BRIC (Brazil, Russia, India and China) countries and it lacks domestic demand.
Chuang further advised investors to adopt a wait-and-see approach toward Indonesia despite its recent trend-bucking economic activity.
Sector-wise, HSBC advised an overweight position on companies in relation to global resources and energy as well as gold, he said.
In terms of balanced asset allocation, Chuang recommended six-to-four holdings in securities and debt investments, which may vary with investors’ appetite for risk.
He encouraged investors to diversify their portfolios by avoiding holding more than 15 percent in a single fund because funds are expected to experience greater fluctuations.
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