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1、Global Emerging Markets,Multi-asset strategy,January 2013,Emerging Markets Strategist,2013 outlook:Loosen your seatbelts,We retain our positive outlook as we enter 2013:The emerging market asset class is likely,to deliver another year of strong returns,We expect ows into EM to remain solid;while low
2、 volatility is likely to continue to attract,foreign investors into debt,we expect a strong rotation toward equities,It is time to take more risk:We recommend investors increase exposure to EM equities,remain invested in hard currency bonds,and selectively extend duration and,buy ination-linked bond
3、s in local markets,By Pablo Goldberg and the Emerging Markets Research teams,Disclosures and Disclaimer This report must be read with the disclosures and analystcertications in the Disclosure appendix,and with the Disclaimer,which forms part of it,Global Emerging MarketsMulti-asset strategy,abc,15 J
4、anuary 2013Emerging markets in 2013HSBCs Emerging Markets Strategist identifies the best trading opportunities across asset classes,building on our teamsanalysis across all EM regions.Find below our key calls for emerging markets for 2013,encompassing external and localdebt,EM corporate credit,forei
5、gn exchange,and equities.We remain positive as we begin 2013,and we expect EM assets to have another year of strong returns.While markets areunlikely to completely shed“risk-on/risk-off”dynamics,we believe,these sentiment swings should be less sharp than inthe past 18 months,thus encouraging risk-ta
6、king.The risks confronting the global economy in 2012 have not disappeared.Yet conditions do not have to be perfect;justenough of a reduction of the most significant tail risks is all that is necessary for EM economies and assets to perform well.A calmer global backdrop,together with solid local fun
7、damentals,means EM funds should continue to attract inflows.Weexpect that the rotation in favor of equities that is already taking place may intensify.We expect EM economies to accelerate in 2013 to average 5.4%growth for the year versus 4.8%in 2012,accounting for85%of global growth.Yet there is no“
8、one”EM,as we expect regional and country divergence to persist.We remain bulls on China,where we expect economic growth of around 8.6%in 2013.This should lift other Asianeconomies and support commodity prices.Should external headwinds intensify,we see room for EM policymakers to take stimulus action
9、s.While inflation is likelyto remain subdued,in particular during the first half of the year,we expect to see a divergence in monetary policy in thesecond half,with some rate increases likely in Asia.As a moderate risk-on scenario is likely to put appreciation pressure on EM FX,we expect monetary au
10、thorities to keepleaning against the winds of appreciation and to tighten financial conditions if necessary through macroprudential policies,using interest rates only as a second option.We recommend investors stay fully invested in hard-currency bonds,as we expect 5-7%returns for the index,and webel
11、ieve that the aggregate yield might test the 4%level driven by crossover investor flows.Scarcity in the sovereign debt market is leading investors to take longer positions in the corporate space,which shouldremain a very fast-growing asset class after record supply in 2012.We see potential for furth
12、er positive credit rating actions in Indonesia,Philippines,Turkey,Peru,Chile,and Mexico,whileSouth Africa,Hungary,Ukraine,and Argentina could have their credit ratings lowered.Local curves might flatten even further,yet most of the return in the local markets this year should come from coupons.We ex
13、pect a return between 6-7%for bonds in local currency plus an added 1.5-2.0%from EM FX.We recommend investors increase positions in EM equities,which is the asset class we believe has the most upside.Weexpect returns close to 20%for the MSCI EM this year with reduced volatility,compared with 2012.1,
14、2,Global Emerging MarketsMulti-asset strategy15 January 2013,This page has been left blank intentionally,abc,4,1,42,42,4,42,5,43,14,44,17,44,23,19,48,47,48,25,51,26,26,27,54,54,33,28,29,30,32,34,35,34,60,60,60,38,62,62,64,38,39,65,40,40,Global Emerging MarketsMulti-asset strategy15 January 2013Conte
15、ntsEmerging markets in 2013Loosen your seatbelts2013:Another year of strong returns expectedOur investment strategy:Interplay of risk and growthMore two-way ratings dynamics in 2013Flows to EM to stay strong but rotating toward equitiesTotal return expectations2013 asset class outlooksEXD still offe
16、ring good risk-,abcEM Corporates:ValueremainsEM corporates offer attractive spread to sovereignsBalance sheet strength varies significantly across regionsIssuance should remain strong but below record highSecondary trading volumesIncreasing importance of the financials sector2013 economic outlooksAs
17、ia in 2013Back in orbit,China picks up,rewardHow much tighter?Total return scenarios for 2013EXD superior Sharpe ratioSupply-and-demand dynamicsStrategies and top tradesLocal rates:Decent carry andsome alphaOutlook and drivers for 2013Risks and scenariosStrategies to begin the yearSupply in the loca
18、l marketsBond supply summary tableEM FX:Stay long butselectively soFewer pitfalls in sightAsia:Improving,but selectivelyEM Equities:We expect astrong yearGEMs equity are cheapMSCI EM returns between 13-28%in 2013eEM consumption should remain the main catalystStrategies to begin the year,242428,Growt
19、h:Local,not globalInflation:On the risePolicy:Responding to inflationLatin America in 2013Runners versus walkersGrowth:A shrinking gapInflation:A mixed picturePolicy:Limited rates actionCEEMEA in 2013No obvious drivers of growthGrowth:Monetary stimulus may offer some helpInflation:Abating pressuresP
20、olicy:More monetary easingMiddle East and North Africain 2013The haves and have-notsGrowth:Oil or nothingInflation:Risks to the upsidePolicy:FX unchanged,fiscal tightening for oil importersEmerging markets elections calendarMulti-asset strategy summaryDisclosure appendixDisclaimer,485052525256565858
21、599296,3,Global Emerging MarketsMulti-asset strategy15 January 2013Loosen your seatbelts We retain our positive outlook as we enter 2013:Emerging marketassets appear likely to deliver another year of strong returns We expect flows into EM to remain solid;while low volatility islikely to continue to
22、attract foreign investors into debt,we expect astrong rotation toward equities It is time to take more risk:Investors should add exposure to EMequities,remain invested in hard currency bonds,and selectivelyextend duration and buy inflation-linked bonds in local markets,abc,2013:Another year of stron
23、greturns expectedIt is time to loosen your seatbelts and furtherincrease exposure to the emerging markets.Weretain our constructive bias going into 2013(seeEmerging Markets Strategist:Lets risk again,14 September 2012),and we believe that 2013could mark another year of strong returns.Ourexpectations
24、 of global appetite for risk and EMeconomic growth suggest that while markets areunlikely to completely shrug off the“risk-on/risk-off”dynamics of the past,these will be less sharpthan in the past 18 months,thus encouragingrisk-taking.The risks confronting the global economy havenot disappeared;yet,
25、things do not have to beperfect for EM economies and assets toperform well once again.Just enough of areduction of the most significant tail risks is whatis necessary for EM to have another year ofstrong performance.,The combination of an expected“calmer”external front and accelerated economicgrowth
26、 should lead to positive credit ratingmomentum and attract inflows into EM,despite valuations being more stretched than atthe beginning of 2012.In a less-riskyenvironment,the force of quantitative easing(QE)should be felt in an even stronger fashion thanbefore,especially for the riskier portion of t
27、he EMasset class:FX and equities.EM equities are the only asset class,in ourview,with the option to produce higher returnsin 2013 than last year.With global allocations toequities at a low secular point,this asset classfinds itself in a very good technical position for asustained rally.Further reval
28、uing of EM equitiesdoes not need a significant improvement ingrowth expectations but rather a reduction ofperceived risks.The upside for bonds is more limited than in2012,yet positive demand/supply dynamics,Pablo GoldbergGlobal Head,EM ResearchHSBC Securities(USA)Inc.+1 212 525 Bertrand DelgadoEM St
29、rategistHSBC Securities(USA)Inc.+1 212 525 Aaron GiffordEM Research AnalystHSBC Securities(USA)Inc.+1 212 525,appear likely to drive positive returns.EMhard-currency bonds have matured and became a4,Riskappetite,Global Emerging MarketsMulti-asset strategy15 January 2013destination for not only those
30、 searching for yieldbut also for safety.Contained global riskstranslate into lower EM FX volatility andencourage carry trades into EM local markets.Wemight see foreign participation resume anupward trend.Our investment strategy:Interplay of risk and growthSince 2011,we have been basing our cross-ass
31、et allocation selection process on ourexpectations for two variables:1.Appetite forrisk and 2.Economic growth prospects.ChartA1 shows how we rank the different assetsaccording to these two parameters and our viewon how sensitive each group is to changes in theseconditions(steeper vs flatter arrows).
32、This selection process was extremely effectivein picking winners and losers among the EMasset classes during the last two years ofalternating risk on-risk off dynamics.Chart A2shows the performance of high-grade and high-yield hard-currency bonds,short-term local rates,USD-denominated returns of loc
33、al-currencybonds,EM FX,and EM equities during differentperiods of risk-on/risk-off(eg second half of 2011 a potential Greek exit from the eurozone,andChart A1.Last year was about risk-on/risk-offGrowth,the LTRO-driven rally of 1Q12),the risk-offperiod brought by concerns about Spain(2Q12),the relief
34、 rally that followed European CentralBank President Mario Draghis“whatever it takesto save the euro”phrase on 26 July 2012,and themarket uncertainties that prevailed around the USpresidential elections.Given the dominant role of external overdomestic factors,our asset allocationpreference in emergin
35、g markets had been untillate 3Q12 to maximize risk-adjusted returns.Note how volatile EM equities and currencieshave been during the past quarters and their strongperformance when adjusted by volatility asevidenced by hard-currency bonds(especially thehigh-grade sector)and front-end local rates.Thes
36、ewere our preferred asset classes in 2012.Following recent actions to reduce tail risks,wehave adopted a more-risky stance in our assetallocation recommendation,aiming tomaximize overall performance.We have beenof the view(see Emerging Markets Strategist:Lets Risk Again,14 September 2012)thatpolicym
37、akers actions in the US and Europe havereduced the chances of a financial calamity(and asubsequent strong risk-aversion shock)andtogether with the stimulus in China,put a floorChart A2.Various EM asset classes:Total return,abc,+-,+,-,Note:Green box denotes risk-on(eg 1Q12,3Q12)and red box denotes ri
38、sk-off(eg 2H11,2Q12,4Q12).,Source:Bloomberg,Thomson Reuters Datastream,MSCI,Source:HSBC5,RiskAppetite,Global Emerging MarketsMulti-asset strategy15 January 20138nder global growth.In terms of our assetselection process,these developments are cuttingthe bottom and right areas of our Chart A3,suggesti
39、ng a more risk-on stance:the center ofgravity for returns moving toward less-conservative investments.We recommend investors:Add overall exposure to emerging markets.Cut longstanding underweight positions inEM equities(see page 38).Stay invested in EM hard currency debt due toits superior Sharpe rat
40、io(see page 24).Extend duration in some key local markets(see page 28).Increase exposure to inflation-linked bonds(see page 31).Remain long EM FX,although being selectiveis recommended(see page 34).,Reduced tail risks are keyThe macroeconomic backdrop confrontingemerging markets this year is likely
41、to be verysimilar to that of 2012,we believe.Economicgrowth in developed markets should remainsubpar,to say the least.We forecast an expansionof 0.9%for developed markets vs 1.2%for2012.A heavy debt load should keep developedmarkets consumers on the defensive,whilegovernments will remain embarked on
42、 a processof fiscal consolidation that still has many years torun its course(see Global Economics Quarterly,The Great Rotation,by Stephen King,20December 20120).However,the outlook forinvesting in the emerging markets has improvedfor several reasons.Low growth in developed markets means thatcore cen
43、tral banks will stay in full-reflationmode,yet the money printed there will find itsway to emerging markets(see Rolling in theMoney:Tracking the shift in flows in global bond,abc,markets,27 November 2012).QE flows continueto reduce the cost of funding for EM sovereignsChart A3.2013:Continue to add r
44、isk as tail risks are reduced and growth acceleratesGrowth,+,+,-,China,StimulusFiscal cliff/debt ceiling resolution?-OMT/QE3Source:HSBC6,months.,Global Emerging MarketsMulti-asset strategy15 January 2013and companies,while credit in the Southcontinues to expand at a good pace.Second,policymakers res
45、olution to prevent arepetition of the great financial crisis has beentested and proven by markets.The result islikely to continue to be one of action(by themarkets)and reaction(by authorities),but in away in which risks will remain contained.Debtdynamics in the developed markets are such thatthe ten
46、sion between the need for fiscalconsolidation and the need for growth will persistfor some time,generating gyrations that appear,likely to affect markets from time to time.In this sense,monetary authorities aresomewhat setting a ceiling both for rates in theUS and in Europe,reducing tail risks anden
47、couraging risk taking.In a less riskyenvironment,the force of liquidity injections dueto QE should be felt in an even stronger fashionthan before,especially for the more risky portionof the EM asset class:FX and equities.We seeUST 10-year potentially touching 2.2%in Q1,butonly to come back closer to
48、 1.5%by year-end.,abc,Table A1.Global risks update_ US _ _Eurozone _Latest developments,The congressional resolution on the“fiscal cliff”on 1 January prevented aneconomic disaster,but it did little to solve the nations long-term fiscal problems.Consequently,contentious negotiations between the two p
49、olitical parties inWashington over longer-run problems are likely to continue for the next several-Mid-Feb/early March:Treasurys debt ceiling approval deadline-March 1:Automatic across-the-board spending cuts(“sequestration”)kick in-March 27:Expiration of the current continuing budget resolution,In
50、2012,eurozone leaders set out the beginnings of a roadmap for integration ofeconomic and monetary union,a widely feared Greek exit from the eurozone wasavoided,and most important,European Central Bank head Mario Draghi promised todo“whatever it takes”to preserve the euro,a commitment that has seen p
