Investors should increase their stock holdings and lower bond positions this quarter, as advanced economies stay on the path toward economic recovery, which is favorable for risky assets, HSBC Bank Taiwan said yesterday.
The British banking group’s local branch made the recommendation after the US Congress passed a measure to reopen the US federal government and ended a prolonged fiscal crisis that gripped the country and threatened the world economy.
“We believe mature markets, namely the US and the eurozone, are poised for economic comebacks as their fiscal debt problems have stabilized, which indicates less drag on GDP growth,” HSBC Bank Taiwan senior vice president Steve Chuang (莊懷德) told a media briefing.
Global bourses can refocus on fundamental issues now that the US drama has ended, he added.
Chuang suggested investors raise their stock holdings to 70 percent of their portfolio going forward, from 60 percent last quarter, and cut bond investments to 30 percent from 40 percent over the same period.
However, the analyst had a negative view of emerging market stocks, saying they are expected to remain under pressure from soft private consumption in the US and the eurozone.
HSBC expects the greenback to strengthen against other currencies as the US’ improving economy outweighs its quantitative easing scheme, Chuang said, adding that he is also positive on the yuan.
Despite a slowdown, China may continue to achieve GDP growth of between 7 percent and 8 percent in the next five years, HSBC Fund Management Co’s Beijing-based head researcher Quentin Cao (曹慶) told a press conference in Taipei on Wednesday.
While the EU may benefit from an economic rebound, the euro and the British pound are likely to trade within a tight range for the foreseeable future, HSBC said.
Investors may want to trim holdings in the Australian dollar and Brazilian real, given weakening demand for commodities and raw materials, Chuang said.
HSBC offered a “neutral” rating for gold, which is likely to trade at between US$1,250 and US$1,450 toward the end of the year, Chuang added.