HSBC announced a regional reshuffle of its equity allocations as it moves into the second half of 2026, closing out its overweight position in emerging market (EM) equities and elevating eurozone stocks to an overweight recommendation. The firm also said it will retain its maximum overweight on global equities overall.
Chief Multi-Asset Strategist Max Kettner framed the change as a response to market dynamics within EM Asia, saying the decision to exit the EM overweight reflects "heightened volatility in EM Asia." He warned that the prevailing narrative around AI overspending - and any indication that AI capital expenditure could be cut - "can hurt semi stocks and therefore disproportionately affect EM equities."
HSBC moved the eurozone to an overweight stance in place of its EM allocation, identifying banks as a key beneficiary of the shift. Kettner noted that "lower consensus growth expectations and the weaker euro should help over the summer months," pointing to a potential near-term tailwind for eurozone financials.
On the broader market view, HSBC said it remains constructive on risk assets heading into the second half of the year. The firm described its overall positioning and sentiment as neutral, and identified the upcoming second-quarter corporate reporting season as "the next upside catalysts."
HSBC also highlighted its view on U.S. corporate earnings, saying sequential U.S. earnings per share expectations for the second quarter are "actually negative ex-energy and materials," which the firm described as a low bar for companies to clear.
Looking further ahead, HSBC expects U.S. "exceptionalism" to ease somewhat in late third quarter, a development it believes markets may initially interpret positively in what it called a "bad-news-is-good-news Goldilocks regime."
The firm addressed a set of common investor concerns directly, pushing back on the immediate risk posed by AI overspending, geopolitics, higher U.S. rates and excessive risk-taking. In that context it said the threshold "to out-hawk the already 40 basis points of hikes in the price is high," and stated that geopolitical risk is "firmly in the rear-view mirror."
Context and implications
- HSBC's move reduces its direct overweight exposure to EM equities while increasing its allocation to eurozone stocks, with banks singled out as a favored sector in the euro area.
- The bank retains a pro-risk overall stance via a maximum overweight on global equities, but expresses a cautious positioning ahead of corporate results that could deliver upside surprises.
- AI-related capital expenditure narratives and semiconductor sensitivity are central to HSBC's rationale for stepping back from EM, particularly in Asia.