HSBC expects U-shaped recovery

MANAMA: HSBC Private Banking expects a U-shaped recovery and recommends investment in resilient portfolios over the short term to weather the conditions caused by Covid-19.

The complexities involved in countries reopening their economies, the upcoming US election, continued trade tensions and an uncertain oil price outlook will all be contributing factors to sustained uncertainty.

Global real GDP is expected to fall by 4.8 per cent in 2020, and HSBC Private Banking also projects US GDP to drop by 7pc, before recovering to a growth of 6pc in 2021.

“Amid high volatility and low growth, we think three useful investment strategies are sticking to quality assets, to limit the cyclicality of sector exposure, and diversifying with gold and alternative assets,” said HSBC Private Banking global chief market strategist Willem Sels during an online Press conference.

In low growth, high debt environments, the bank does not expect to see much investment spending with the exception of automation.

“Companies will want to make their supply, production and distribution chains more secure and safer for their customers as well as their employees. There is a geopolitical aspect to this as well, with countries and companies wanting to bring some production back home,” explained Mr Sels.

In technology, HSBC Private Banking expects the growth of the online economy to support the Cloud, the telecom companies and 5G.

Another growth area will be healthcare. As the pandemic has highlighted the importance of environmental, social and governance (ESG) aspects, the bank believes that investors will continue to show increasing interest in ESG and sustainability.

Despite the double whammy of Covid-19 and the slump in oil prices, HSBC Private Banking sees structural growth opportunities for the long-term in emerging markets and Asia.

The bank remains focused on longer-term investments that are grounded in evolving technologies that are driving fundamental changes in many aspects of our daily lives, both at work and at home.

This includes AI, deep learning, lithium ion batteries and quantum computers.

Sustainability is another key theme, according to HSBC Private Banking, which sees a reallocation of capital to companies deemed more climate resistant.

Water treatment, recycling, clean energy generation and transmission are all interesting growth opportunities, in its view.

Finally, the bank believes that today’s low yield environment is likely to continue, and sees the best opportunities in emerging markets hard currency bonds.




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