• Global Research
    • General Research Insights

Shaken, but not stirred

  • Article
  • EM investors are looking through the noise and remain constructive, our 12th survey shows…
  • …although their risk appetite has moderated and cash levels have picked up since March
  • Top concern is US policy rate path; upside risks include a “soft landing” in DM, and early easing in EM

HSBC Emerging Markets Sentiment Survey

Emerging market (EM) investors are looking through the noise in financial markets and retain a broadly constructive view, HSBC’s 12th EM Sentiment Survey shows.

After a volatile second quarter, there has been some moderation in expectations compared with the previous survey in March, but the net of bullish versus bearish sentiment – at 22% – is still one of the highest readings since the July 2021 survey.

Risk appetite has fallen modestly to 6.1 from 6.9, measured on a scale where “0” is “no risk” and “10” is “highest risk in EM”. Cash levels have also picked up to 5.9% from 5.1% on a weighted-average basis, in line with moderating expectations. However, those who plan to increase their cash holdings have dropped to a mere 6%, the lowest in our survey’s history, and 72% plan to keep cash levels unchanged – perhaps suggesting that some are waiting for better entry points to put their money to work in EM.

The survey was conducted between 26 April and 9 June among 103 investors from 102 institutions representing USD511bn of EM assets under management. The fieldwork coincided with various risk-negative events such as worries about US regional banks, debt ceiling debates, downbeat macro data from China, hawkish global monetary policy and a volatile US dollar. At the same time, however, global economic activity proved to be more resilient than many feared.

Respondents’ top concern is US and other developed market interest rates remaining high for longer than expected, followed by worries about a recession in major economies. However, more investors now see a soft landing in major economies (33% versus 15% previously) or inflation falling to target sooner than expected (28% from 23% previously) as upside risks to the EM outlook.

Survey data also reveal 42% of the respondents now expect EM growth to accelerate over the next 12 months, down from 53% in the March survey. And in contrast to the earlier surveys, around 40% of respondents now expect EM policy rates to be lower in three months’ time, pointing to expectations that EM central banks could start monetary easing earlier than their developed market (DM) counterparts.

So what does this backdrop mean for strategies?


Investors are most upbeat about Latin America (LatAm), our survey suggests. Despite LatAm’s superior performance year-to-date, survey respondents still maintain their bullish expectations for this region. To some extent, this also reflects the rising interest in EM FX and local fixed income markets revealed by the survey. Hard currency debt seems to have fallen out of favour more generally, with nearly 60% of investors now preferring local currency debt.

LatAm is followed by Asia as the second most preferred region. In both regions, survey respondents see a favourable outlook for every asset class (local currency debt, hard currency debt, FX, and equities).

Globally, the sentiment on EM equities has improved visibly, too, with a solid 60% of the investors now expecting EM equities to be higher over the next three months. Similarly, 73% of the respondents expect EM equities to outperform developed market equities over the same time horizon.

The survey also asked about attitudes towards environmental, social and governance (ESG) investing. Engagement remains sizable and has risen marginally from the previous survey, with 39% of respondents now running an ESG portfolio, either directly, party or indirectly, compared with 38% in March.

Would you like to find out more? Click here* to read the full report (you must be a subscriber to HSBC Global Research).

To find out more about HSBC Global Research or to become a subscriber get in touch at askresearch@hsbc.com.

Global Research

HSBC Global Research provides information, insights and thought-provoking ideas.

Find out more

For more information on gaining access to Global Research, ASK Research using the button below.