Clients can manage market volatility through tactical overweight positions in gold and hedge funds, a strategic allocation to private markets and a strong preference for high quality bonds and stocks, according to Cheuk Wan Fan, chief investment officer, Asia, HSBC global private banking and wealth (HSBC GPB&W) CIO.
“We view actively managed multi-asset strategies as effective risk diversifiers to reduce drawdown risks in portfolios,” she said in a note.
Fan (pictured) believes US earnings expectations will fall based on the latest negative guidance from business leaders. Hence, clients should adopt a defensive portfolio strategy and sector stance with a strong focus on high quality stocks and bonds with stable cash flows and limited exposure to tariffs.
She is avoiding small-cap stocks and highly geared companies with fragile balance sheets.
Within the CIO’s neutral positioning in global equities, it remains overweight emerging market Asia stocks and favours “markets with strong domestic growth drivers and policy stimulus support to mitigate headwinds from US tariffs”.
The CIO is “mildly overweight in China, India, and Singapore for their domestic resilience. India and Singapore stand out as relative safe havens amid global tariff escalation,” said Fan.
The CIO also recommends the structural growth theme on “China’s innovation champions”, which focuses on AI enablers and adopters from the internet, ecommerce, software, smartphones, semiconductor, autonomous driving, and robotics sectors.
“Broadening out our China equity exposure beyond AI plays, we favour the consumption, financial and industrial leaders as well as quality SOEs paying high dividends as China steps up policy stimulus to boost growth,” said Fan.
Among fixed income markets, global headwinds and the disinflation trend create room for the Asian central bank policy stance, which supports the CIO’s preference for high quality Asian credit.
The CIO forecast that the US Federal Reserve will deliver three 25 basis points of policy rate cuts in June, September and December this year.
“We stay focused on Asian US dollar investment grade bonds and favour Asian financials, Indian local currency debt, Chinese hard currency bonds in technology, financials, SOEs, and Macau gaming,” said Fan.
