HSBC Global Private Banking said the Philippine economy to grow by 5.4 percent this year and expects the beginning of Fed rate cuts in June 2024, US soft landing, corporate earnings recovery, and solid Asia growth to improve global risk appetite and investment outlook of equity and bond markets.
James Cheo, Chief Investment Officer for Southeast Asia and India, Global Private Banking and Wealth of HSBC, highlights Philippines economy remains resilient in 2024.
“The strength and resilience of Philippines economy in 2024 will come from its consumers. Domestic consumer spending will be a key pillar of its economy due to a healthy labor market and strong wage growth. Philippines has one of the most favourable demographics in the region and is expected to enjoy the structural tailwinds of its demographic dividends in the years ahead. We expect Philippines’ economy to grow by 5.3 percent GDP growth in 2024.” Cheo said.
“On Philippines equity market, the consensus earnings for Philippines are expected to be healthy in 2024, but lower compared to most of its peers. The valuation of the equity market is trading below its historical average,” Cheo pointed out.
“Inflation remains a challenge and there could be an upside risk from higher-than-expected food prices, we think that BSP will stay vigilant and keep policy rates on hold for first half and perhaps contemplate rate cuts in the next 6 months. We forecast the peso to stay stable at 55.2 against the US dollar by the end of 2024,” Cheo added.
He said disinflation is on track in most Asian economies, with inflation now expected to return to central bank target ranges in 2024 in most countries, ahead of most other regions.
“We believe Asian yields are peaking and expect policy rate cuts in Australia, mainland China, Hong Kong, India, Indonesia, South Korea, the Philippines and Singapore in 2024 to bring policy tailwinds for the Asian bond markets in the coming year,” Cheo said.
For the next six months, HSBC GPB adopts a mild risk-on investment strategy with underweight on cash, mild overweight on US Treasuries and global investment grade bonds and tactical overweight on hedge funds.
Within its neutral positioning in global equities, it is overweight on US, EM Asia and Latin American equities.
Within Asia ex-Japan equities, it favours structural growth leaders and has mild overweight position in India, Indonesia, and South Korea. It stays neutral on mainland China and Hong Kong equities with focus on service consumption opportunities. It holds a positive view on the US dollar due to support of high real yield, growth differential and safe-haven demand driven by geopolitical uncertainty.
“As we look ahead into 2024, we see two positive drivers supportingglobal financial markets. Major western central banks have done with rate hikes amid continued disinflation and the US economy is heading for a soft landing. These two positive developments should support recovery of global risk appetite in 2024. Positioning for slowerbut positive global growthand Fed rate cuts starting in June 2024, putting cashto work in quality bonds, US and Asian equities and alternatives should deliver diverse sources of return andincome to optimise portfolio performance and mitigate market volatility,” Fan Cheuk Wan, Chief Investment Officer, Asia, Global Private Banking and Wealth, HSBC, said.
“We see quality bonds as the most attractive asset class for H1 2024 ahead of the first Fed rate cut. We focus on locking in still attractive yields via our overweight in US and UK government bonds and investment-grade bonds across developed and emerging markets. Although global growth should remain below trend growth in 2024, the US growth engine continues to run, thanks to the resilient US consumer and government stimulus supporting investment and innovation in technology and healthcare. Equity valuations now see better fundamental support from earnings recovery that we anticipate in 2024, which provides potential upside for stocks that can deliver on earnings expectations. We expect the global AI investment boom will extend into 2024, reinforcing our bullish view on the global, US and Asian IT sectors,” Fan noted.
HSBC Global Private Banking helps clients manage, grow and preserve their wealth for generations to come. Its network of global experts helps clients access investment opportunities around the world, plan for the future with wealth and succession planning, manage their portfolio with tailored solutions, and find the right support for their philanthropy.
The Hongkong and Shanghai Banking Corporation Limited is the founding member of the HSBC Group. HSBC serves customers worldwide from offices in 62 countries and territories. With assets of $3,021bn at 30 September 2023, HSBC is one of the world’s largest banking and financial services organisations.