HSBC Global Asset Management's Quarterly Outlook: Has The Developed World Gone Ex-Growth?

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May 16, 2013, 03:00 ET

DUBAI, UAE, May 16, 2013 /PRNewswire/ --

Emerging markets have become the engines of global growth as their global influence increases, leaving developed markets in their shade, according to HSBC Global Asset Management.

In its latest IQ (Investment Quarterly) global market outlook, HSBC Global Asset Management indicates that post-crisis growth is likely to remain subdued for the next few years as there will be a structural overhang on growth from developed world leverage and population ageing. Compounding the problem, monetary policy has lost much of its power to stimulate in this balance-sheet constrained world and the need for fiscal consolidation will also limit the policy response.

Specific challenges include the on-going euro zone crisis, US fiscal adjustment and risks to China's growth outlook.

Philip Poole, Global Head of Macro & Investment Strategy at HSBC Global Asset Management, says: "The conclusion that the developed world is most likely locked into low growth for an extended period has far-reaching implications for developed world monetary policy.

"For central banks, targeting lower inflation seems to be out the window, at least for now. The focus is on generating growth and employment.

"Meanwhile, emerging economies are likely to grow more rapidly than the developed world but will also face challenges. Growing pains are likely to include asset price bubbles from excesses that will inevitably get in the way from time to time."

Dan Rudd, Regional Head of MENA Wholesale, HSBC Global Asset Management, says: "The oil producing countries in MENA are continuing to benefit from triple digit prices in oil, supporting the economic growth and further investment projects. Phil correctly mentions the concerns of asset price bubbles with emerging markets but the GCC expansion is comparing very well against its peers, given the solvency of the local governments and deflation in asset markets could prove more supportive."

This quarter's Investment Quarterly also examines:

- Long-term investment implications - the trend of bonds out-performing equities in recent years may be coming to an end, and over the long-term, given current valuations, the expectation is equities will once again comfortably out-perform bonds, which could produce zero or even negative real returns over the next 10 years;

- Frontier markets - those countries with stock markets that are 'verging on emerging' status either now or at some point in the future;

- The global FX market - establishing fair value for a currency gives a basis for forecasting future currency movements, and how, it can be difficult to get a reliable handle on currency valuations.

Philip Poole commented: "Currencies that look cheap relative to their fair value adjusted PPP rates include the Indian rupee, the Taiwanese dollar, the Korean dollar and Malaysian ringgit. Indeed, the US dollar itself looks undervalued.

"By contrast, some developed market currencies including the Swiss franc, the Japanese yen, the Australian dollar and the Canadian dollar look expensive."

Investment Risks

The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Many expats are looking to the services of multinational banks as they expand into new markets, from business credit cards to current accounts. Where overseas investments are held the rate of currency exchange may also cause the value of such investments to fluctuate. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. The views contained in this were correct at the time of this media release and given in good faith. They are subject to change at any time and do not constitute investment advice.

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Notes to editors:

HSBC in the MENA Region

HSBC is the largest and most widely represented international banking organisation in the Middle East and North Africa (MENA), with a presence in 14 countries across the region. HSBC has operations in the United Arab Emirates, Egypt, Qatar, Oman, Bahrain, Kuwait, Jordan, Lebanon, Pakistan, Algeria and the Palestinian Autonomous Area. In Saudi Arabia, HSBC is a 40% shareholder of Saudi British Bank (SABB), and a 49% shareholder of HSBC Saudi Arabia for investment banking in the Kingdom. In Iraq, HSBC holds a majority shareholding in Dar Es Salaam Investment Bank. HSBC also maintains a representative office in Libya.

This presence, the widest reach of any bank in the region, comprises some 295 offices and around 12,000 employees. In the three quarters of the year ending on 30 September 2012, HSBC in the MENA region made a profit before tax of US$1,048m.

HSBC Global Asset Management

HSBC Global Asset Management, the core investment management business of the HSBC Group, manages assets totalling more than US$428bn. HSBC Global Asset Management has a worldwide client base of private clients, intermediaries, corporates and institutions invested in both segregated accounts and pooled funds. HSBC Global Asset Management fulfils its purpose of connecting these customers with investment opportunities through an international network of offices in approximately 30 countries, delivering global capabilities with local market insight. (All figures as at 31 December 2012). For more information see http://www.assetmanagement.hsbc.com

HSBC Holdings plc

HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 6,600 offices in 81 countries and territories in Europe, the Asia-Pacific region, North and Latin America, and the Middle East and North Africa. With assets of US$2,693bn at 31 December 2012, the HSBC Group is one of the world's largest banking and financial services organisations.

HSBC Global Asset Management should be referred to in full at all times to avoid confusion with any other financial services firms.

The information contained in this press release does not constitute an offer or solicitation for, or advice that you should enter into, the purchase or sale of any security or fund. Any views expressed are subject to change at any time.

SOURCE HSBC