HSBC senior economist, Julien Seetharamdoo, told delegates at the Corporate Adviser Summit that emerging markets would continue to outperform old-world developed economies for many years and many would themselves become developed markets inthe near future.
“The definition of a developed market is annual income per head of $15,000. Hundreds of millions of people in China are already reaching this level,” he said.
In a whistle stop overview of the global economic and investment outlook, Seetharamdoo told delegates that he was optimistic about the investment prospects for emerging markets, because they had stabilised and much of the bad news was already priced in.
Emerging markets had previously been perceived as high risk, due to poor governance, high debt and political instability, but that this had changed, with some emerging markets now having less debt than many developed worldcountries.
Emerging economies were becoming more mainstream and would soon outgrow the developed world, adding that HSBC’s view was that Chinese economy would have a soft landing.
He said the US market was doing better than Europe, but that there would be volatility in the short term due to the imminent US elections and the fiscal cliff in January. Assuming that US politicians managed to reduce the impact of the fiscal cliff, Q1 and Q2 of 2013 would see the fundamentals of the US economy starting to show through.
Europe was likely to follow a Japanese style scenario and that European banks had started to recognise losses and write down debtthis year, something which the US banks did at the start of the crisis.
Demographics favoured the US economy because its population was growing, which was eating into the housing surplus and had helped trigger a sharp turnaround in house building confidence. By contrast, some European countries had little or no population growth and their economies were still heading into a mild recession.
HSBC favours both developed and emerging market corporate debt and expected a number of emerging market currencies to appreciate over time. The bank also liked real assets, such as property, commodities, silver, gold and oil companies.