HSBC Private Banking cuts rating on Asian emerging markets, reduces positions in India, increases holdings in gold and cash to counter the impact of oil price shocks.

Notice that HSBC Private Banking and Wealth Management has downgraded its rating on Asian emerging market stocks and significantly reduced its position in India, while increasing allocations to gold, cash, and hedge funds in response to the risks of a war with Iran and oil price shocks. Patrick Ho, Chief Investment Officer for North Asia at the bank, said: "We have reviewed our asset allocation to limit excessive risk." He highlighted the increasing uncertainty related to the tensions in the Middle East, concerns about energy security, and changes in global capital flows. The institution is studying "which markets or sectors will be impacted if the risk scenarios develop into reality." Ho's team uses a scenario-based risk management model with three potential outcomes: negotiations, escalation of tensions, or a result between the two. He stated that their current allocation reflects a cautious attitude towards emerging countries in Asia, as higher oil prices and a stronger dollar have a "double negative" impact on markets dependent on energy imports and foreign capital. Since the Middle East war, the Indian stock market has lagged behind other stock markets in Asia. The bank also downgraded the ratings of various Asian currencies and reduced positions in regional bonds, citing the potential capital outflows in scenarios of increased volatility. In terms of stock assets, the company has become more selective. Ho stated that they have downgraded India's allocation from "neutral" to "underweight," calling the country the "most vulnerable" emerging market in Asia due to energy price factors, and are more positive on North Asia. Ho added that South Korea and China stocks are in a more favorable position for artificial intelligence investment, with greater exposure to memory chips and the upstream industrial sector, as well as more attractive valuations and profit visibility. Rising energy costs have raised questions about the impact on investments in artificial intelligence, including whether rising oil prices will harm WINOX margins or put pressure on returns in data centers. Nevertheless, the bank still expects the long-term artificial intelligence theme to remain intact. Ho stated: "We still believe that the narrative of artificial intelligence and profit expansion will continue."