16 June 2025
Recently, the Reserve Bank of India (RBI) delivered front-loaded policy easing with a surprise 0.50% rate cut and liquidity easing through lower reserve requirements. Falling inflation and a broadly dollar-bearish backdrop have opened the door for the RBI to deliver bold moves this year – with a quick, cumulative 1% rate cut, substantial liquidity infusions, and multiple relaxations of macro-prudent measures. Big moves like this aim to speed up policy transmission through the banking sector and boost credit growth, helping to bolster consumer spending and capital investment. The measures are likely to support local stocks too, especially in rate-sensitive sectors like real estate and some financials. It comes as Indian equities have been under pressure this year amid heightened global policy risks. They’re also likely to lead to further spread compression on rupee-denominated corporate and supranational bonds, which offer attractive spreads over Indian government bonds.
But this isn’t just an India story. A number of emerging market central banks have taken decisive policy action recently – as the US Fed continues to hold. Among them have been Mexico, Indonesia, Poland, South Africa, and Egypt. In some cases, countries have been able to act because their fiscal outlooks are improving. But the critical factor has been the weaker dollar, as investors reassess its status as a global safe haven. A weaker dollar is an obvious EM positive. It typically eases dollar debt servicing, helps trade, supports capital flows, and boosts returns in stocks and local currency bonds. With many EM economies transforming their macro structures since the “fragile five” phase a decade ago, and amid faltering confidence in American exceptionalism, no wonder investors are paying more attention.
Over the past decade, emerging market economies – especially in Asia and Latin America – have enjoyed closer integration when it comes to regional trade and banking. The result has been better growth, access to alternative sources of credit, and less volatile government spending. But this closer regional EM integration has come at a time of rising geopolitical tensions that have led to more fragmentation at a global level. This rewiring of global trade linkages is the focus of a new bulletin by the Bank of International Settlements.
The BIS research explores how, prior to the 2010s, global trade expanded faster than GDP, but then slowed as geopolitical wrangling intensified. Meanwhile, integration in global banking fell sharply after the financial crisis and didn’t recover much afterwards. But at a regional level, trade and banking integration have continued to progress in emerging Asia and LatAm. According to the BIS authors, these trends – and the economic drivers behind them – have the potential to act as a buffer against geopolitical shocks that lead to global fragmentation. Their encouraging conclusion is that the reinforcing nature of trade and banking means that deeper regional integration in EMs – and the better growth and regional stability that comes with it – is likely to develop.
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management, Bloomberg. Data as at 7.30am UK time 13 June 2025.
The Fed is widely expected to leave the funds rate unchanged at its meeting this week. What Chair Powell says and how the Fed factors US import tariffs into its updated forecasts will be the focus. In March, the Fed expected 1.7% yoy growth in Q425 with core PCE inflation at 2.8%. The current Bloomberg consensus figures are 0.9% and 3.3% respectively, giving some sense of how the Fed’s numbers could change. The March “dot plot” implied two rate cuts in 2025, in line with current market pricing, which suggests investors have interpreted higher expected inflation and lower expected growth as broadly offsetting. |
The latest data don’t argue for the Fed to guide market rate expectations in one direction or the other. Activity and survey data have been mixed. The labour market is cooling gradually but remains resilient. Importantly, March, April, and May inflation data have been softer than expected, implying that, absent tariffs, underlying price pressures are reasonably well contained. Modest policy easing later in 2025 appears appropriate. One catch is that a data-dependent Fed risks intensifying the sensitivity of the macro system to news, which could spur US market volatility.
US technology dominates the artificial intelligence revolution. But recent advances by Chinese AI firm DeepSeek have shown China to be a serious competitor. A new research by some Equity Research teams finds that while the US is still likely to lead on AI innovation – driven by Silicon Valley start-ups and Magnificent 7 mega-caps – China could lead globally in engineering optimisation, production, and widespread commercialisation.
With AI reasoning models now able to reach potentially billions of users, some investment specialists believe the AI race is no longer just about who builds the smartest machine, but who gets it to consumers at the lowest cost. And for investors, there are several implications. One is that software firms will probably lead the next stage of the AI investment cycle, as they work to get AI apps into the hands of users. Second, the influence of DeepSeek is likely to give emerging Asia inherent advantages in monetising AI tech, and that will attract increasing investor attention. As the cost of AI compute falls, the impact should be seen in a broadening-out of profits growth to emerging Asia and beyond – as the profits edge enjoyed by US tech over the past decade erodes.
Asia’s investment in renewable energy is slowing as its governments struggle to balance decarbonisation objectives with delivering reliable and more affordable power sources. A scarcity of traditional funding options is adding to the headache. In the past, infrastructure has been dominated by large country-scale projects. But the current energy transition requires more localised investments, typically ranging from USD40 million to USD250 million. This shift has created a gap, because banks are geared towards larger deals. But the good news is that private credit, which is well-suited to renewable energy infrastructure because of its flexibility, is proving a successful alternative. Microgrids across the Philippines – combining solar panels, battery storage, and smart distribution tech – are a good example of successful privately-financed energy projects. |
With private credit delivering superior returns to both credits and stocks over time, and interest rates and inflation expected to remain high compared to historical levels, investor appetite for these kinds of cash-flow-generating assets with inflation protection is likely to persist.
Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management. Macrobond, Bloomberg. Data as at 7.30am UK time 13 June 2025.
Source: HSBC Asset Management. Data as at 7.30am UK time 13 June 2025. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.
Risk markets struggled to make headway as investors weighed the outcome of the latest US-China trade negotiations, US inflation data, and geopolitical concerns. Oil and gold prices climbed, while the US dollar weakened further against major currencies. Core government bonds found support from tame CPI data and a solid 30-year Treasury debt auction. In equity markets, US stocks rose but EU-US trade tensions weighed on the Euro Stoxx 50, with the DAX the main casualty. Japan’s Nikkei 225 was little changed ahead of the BoJ meeting. South Korea’s Kospi led Asian markets, building on post-election gains, whereas India’s Sensex and China’s Shanghai Composite fell. In Latin America, Brazil’s Bovespa index rebounded after recent declines.
This document or video is prepared by The Hongkong and Shanghai Banking Corporation Limited (‘HBAP’), 1 Queen’s Road Central, Hong Kong. HBAP is incorporated in Hong Kong and is part of the HSBC Group. This document or video is distributed and/or made available, HSBC Bank (China) Company Limited, HSBC Bank (Singapore) Limited, HSBC Bank Middle East Limited (UAE), HSBC UK Bank Plc, HSBC Bank Malaysia Berhad (198401015221 (127776-V))/HSBC Amanah Malaysia Berhad (20080100642 1 (807705-X)), HSBC Bank (Taiwan) Limited, HSBC Bank plc, Jersey Branch, HSBC Bank plc, Guernsey Branch, HSBC Bank plc in the Isle of Man, HSBC Continental Europe, Greece, The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India), HSBC Bank (Vietnam) Limited, PT Bank HSBC Indonesia (HBID), HSBC Bank (Uruguay) S.A. (HSBC Uruguay is authorised and oversought by Banco Central del Uruguay), HBAP Sri Lanka Branch, The Hongkong and Shanghai Banking Corporation Limited – Philippine Branch, HSBC Investment and Insurance Brokerage, Philippines Inc, and HSBC FinTech Services (Shanghai) Company Limited and HSBC Mexico, S.A. Multiple Banking Institution HSBC Financial Group (collectively, the “Distributors”) to their respective clients. This document or video is for general circulation and information purposes only.
The contents of this document or video may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. This document or video must not be distributed in any jurisdiction where its distribution is unlawful. All non-authorised reproduction or use of this document or video will be the responsibility of the user and may lead to legal proceedings. The material contained in this document or video is for general information purposes only and does not constitute investment research or advice or a recommendation to buy or sell investments. Some of the statements contained in this document or video may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. HBAP and the Distributors do not undertake any obligation to update the forward-looking statements contained herein, or to update the reasons why actual results could differ from those projected in the forward-looking statements. This document or video has no contractual value and is not by any means intended as a solicitation, nor a recommendation for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The views and opinions expressed are based on the HSBC Global Investment Committee at the time of preparation and are subject to change at any time. These views may not necessarily indicate HSBC Asset Management‘s current portfolios’ composition. Individual portfolios managed by HSBC Asset Management primarily reflect individual clients’ objectives, risk preferences, time horizon, and market liquidity.
The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Past performance contained in this document or video is not a reliable indicator of future performance whilst any forecasts, projections and simulations contained herein should not be relied upon as an indication of future results. Where overseas investments are held the rate of currency exchange may cause the value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Economies in emerging markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade. Investments are subject to market risks, read all investment related documents carefully.
This document or video provides a high-level overview of the recent economic environment and has been prepared for information purposes only. The views presented are those of HBAP and are based on HBAP’s global views and may not necessarily align with the Distributors’ local views. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. It is not intended to provide and should not be relied on for accounting, legal or tax advice. Before you make any investment decision, you may wish to consult an independent financial adviser. In the event that you choose not to seek advice from a financial adviser, you should carefully consider whether the investment product is suitable for you. You are advised to obtain appropriate professional advice where necessary.
The accuracy and/or completeness of any third-party information obtained from sources which we believe to be reliable might have not been independently verified, hence Customer must seek from several sources prior to making investment decision.
The following statement is only applicable to HSBC Mexico, S.A. Multiple Banking Institution HSBC Financial Group with regard to how the publication is distributed to its customers: This publication is distributed by Wealth Insights of HSBC México, and its objective is for informational purposes only and should not be interpreted as an offer or invitation to buy or sell any security related to financial instruments, investments or other financial product. This communication is not intended to contain an exhaustive description of the considerations that may be important in making a decision to make any change and/or modification to any product, and what is contained or reflected in this report does not constitute, and is not intended to constitute, nor should it be construed as advice, investment advice or a recommendation, offer or solicitation to buy or sell any service, product, security, merchandise, currency or any other asset.
Receiving parties should not consider this document as a substitute for their own judgment. The past performance of the securities or financial instruments mentioned herein is not necessarily indicative of future results. All information, as well as prices indicated, are subject to change without prior notice; Wealth Insights of HSBC Mexico is not obliged to update or keep it current or to give any notification in the event that the information presented here undergoes any update or change. The securities and investment products described herein may not be suitable for sale in all jurisdictions or may not be suitable for some categories of investors.
The information contained in this communication is derived from a variety of sources deemed reliable; however, its accuracy or completeness cannot be guaranteed. HSBC México will not be responsible for any loss or damage of any kind that may arise from transmission errors, inaccuracies, omissions, changes in market factors or conditions, or any other circumstance beyond the control of HSBC. Different HSBC legal entities may carry out distribution of Wealth Insights internationally in accordance with local regulatory requirements.
Important Information about the Hongkong and Shanghai Banking Corporation Limited, India (“HSBC India”)
HSBC India is a branch of The Hongkong and Shanghai Banking Corporation Limited. HSBC India is a distributor of mutual funds and referrer of investment products from third party entities registered and regulated in India. HSBC India does not distribute investment products to those persons who are either the citizens or residents of United States of America (USA), Canada or New Zealand or any other jurisdiction where such distribution would be contrary to law or regulation.
The following statement is only applicable to HSBC Bank (Taiwan) Limited with regard to how the publication is distributed to its customers: HSBC Bank (Taiwan) Limited (“the Bank”) shall fulfill the fiduciary duty act as a reasonable person once in exercising offering/conducting ordinary care in offering trust services/ business. However, the Bank disclaims any guarantee on the management or operation performance of the trust business.
The following statement is only applicable to PT Bank HSBC Indonesia (“HBID”): PT Bank HSBC Indonesia (“HBID”) is licensed and supervised by Indonesia Financial Services Authority (“OJK”). Customer must understand that historical performance does not guarantee future performance. Investment product that are offered in HBID is third party products, HBID is a selling agent for third party product such as Mutual Fund and Bonds. HBID and HSBC Group (HSBC Holdings Plc and its subsidiaries and associates company or any of its branches) does not guarantee the underlying investment, principal or return on customer investment. Investment in Mutual Funds and Bonds is not covered by the deposit insurance program of the Indonesian Deposit Insurance Corporation (LPS).
Important information on ESG and sustainable investing
Today we finance a number of industries that significantly contribute to greenhouse gas emissions. We have a strategy to help our customers to reduce their emissions and to reduce our own. For more information visit www.hsbc.com/sustainability.
In broad terms “ESG and sustainable investing” products include investment approaches or instruments which consider environmental, social, governance and/or other sustainability factors to varying degrees. Certain instruments we classify as sustainable may be in the process of changing to deliver sustainability outcomes. There is no guarantee that ESG and Sustainable investing products will produce returns similar to those which don’t consider these factors. ESG and Sustainable investing products may diverge from traditional market benchmarks. In addition, there is no standard definition of, or measurement criteria for, ESG and Sustainable investing or the impact of ESG and Sustainable investing products. ESG and Sustainable investing and related impact measurement criteria are (a) highly subjective and (b) may vary significantly across and within sectors.
HSBC may rely on measurement criteria devised and reported by third party providers or issuers. HSBC does not always conduct its own specific due diligence in relation to measurement criteria. There is no guarantee: (a) that the nature of the ESG / sustainability impact or measurement criteria of an investment will be aligned with any particular investor’s sustainability goals; or (b) that the stated level or target level of ESG / sustainability impact will be achieved. ESG and Sustainable investing is an evolving area and new regulations are being developed which will affect how investments can be categorised or labelled. An investment which is considered to fulfil sustainable criteria today may not meet those criteria at some point in the future.
THE CONTENTS OF THIS DOCUMENT OR VIDEO HAVE NOT BEEN REVIEWED BY ANY REGULATORY AUTHORITY IN HONG KONG OR ANY OTHER JURISDICTION. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE INVESTMENT AND THIS DOCUMENT OR VIDEO. IF YOU ARE IN DOUBT ABOUT ANY OF THE CONTENTS OF THIS DOCUMENT OR VIDEO, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.
© Copyright 2025. The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED.
No part of this document or video may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited.
