HSBC has downgraded its stance on emerging market equities from overweight to neutral, citing rising volatility in Asia and deepening concerns that a slowdown in artificial intelligence spending could disproportionately hurt EM tech stocks.
The move marks a notable shift in sentiment for one of the region's largest banks, reflecting broader unease about the sustainability of the recent rally in growth-oriented assets.
HSBC warned that EM equities, which have benefited from the global AI investment boom, face heightened downside risk if corporate capex plans are scaled back.
The bank's decision comes as investors increasingly question whether the current valuation premiums in emerging markets are justified by underlying fundamentals.
HSBC warned that EM equities, which have benefited from the global AI investment boom, face heightened downside risk if corporate capex plans are scaled back.
This caution aligns with a broader trend of de-risking, as portfolio managers seek to reduce exposure to concentrated tech themes that have driven much of the recent market performance.
The downgrade underscores the fragility of the current market regime, where sentiment is heavily tied to the trajectory of US tech giants and their supply chains.