According to their latest Equity Insights: “Following a difficult 2011 we expect EMs to bounce back in 2012, as hard landing/inflation fears fade … we see Asia ex-Japan as offering the most potential and Japan the least in 2012.”
Here is HSBC’s country scorecard from best to worst:
To our surprise, they really like China…
Here are their overall views and recommendations:
– Remain overweight EMs
– Stronger GDP growth and greater policy flexibility support our preference for EM
– Structural deleveraging combined with macro and political uncertainty are key reasons to remain underweight on DM
Developed markets (DM) outperformed emerging markets (EM) in 2011… however, we expect this DM renaissance to be a brief one, given that the factors that have combined to pull down EM this year are unlikely to feature as prominently in 2012.
Overheating and inflation were key concerns at the start of 2011, but with growth and inflation indicators now subsiding (but not collapsing) we expect these fears to fade… limit the downside risk to growth, something that cannot be said for most DM.
Just don’t bet the house on it…