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HSBC Private Banking Positions For "U-Shaped" Recovery

Tom Burroughes, Group Editor, 26 June 2020

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Investors will need to be selective about specific sectors, the bank says, because it predicts that the world economy is not going to recover fast. As its favoured letter of the alphabet, it is going for a "U".

HSBC Private Banking recommends that clients hold selective investments in emerging market sectors in Asia, as well as tech sectors likely to benefit from disruption to traditional working. It is positioning for a "U-shaped" recovery rather than a fast "V-shaped" bounceback.

The bank said it predicts global real gross domestic product to slide by 4.8 per cent in 2020. It also projects US GDP to drop by 7 per cent and China's GDP growth to slow to 1.7 per cent this year, before recovering to a growth of 6 per cent and 7.5 per cent in 2021, respectively.

Investors should create "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," HSBC said in an update on its thinking.

“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,” Willem Sels, global chief market strategist, HSBC Private Banking, said.

“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,” Sels said.

Regarding technology, HSBC said that it expects the growth of the online economy will support cloud computing, telecom companies and 5G phone and internet systems. It also predicts that healthcare will be a growth area as a result of the pandemic.

Emerging markets
HSBC noted that sliding oil prices have hit emerging markets - as many of them are energy exporters, but there are specific sectors that can thrive, such as  e-commerce, infrastructure and real estate in China, and the wellness and healthcare sectors in the region.

"We remain 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, FG, lithium ion batteries and quantum computers," it added.

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