Emerging Market Investors Worry About Economic Growth - HSBC Poll

• Emerging markets investors are increasingly concerned about the outlook for economic growth in developing countries and are clinging to high cash levels with scarce plans to deploy funds in the months to come, an HSBC (Hongkong and Shanghai Banking Corporation) poll showed on Thursday. 
• Nonetheless, respondents expected central banks in many emerging markets to continue to raise interest rates. “The feeling among investors is that while the growth outlook is dimmer and inflation is less of a concern than at the beginning of the year, EM countries will continue to hike rates because they are trying to pre-empt Fed tightening and avoid a repeat of the taper tantrum we saw in 2013-2014," Murat Ulgen, global head of EM research at HSBC said. 
• Central banks in Brazil, Russia, Hungary and Mexico, among others, have already hiked rates this year to counter inflation pressures and currency depreciation. Respondents cited the U.S. Federal Reserve hiking interest rates and tapering its pandemic bond purchase as the biggest risk for emerging markets, ahead of COVID or higher-than-expected inflation. 
• While the number of respondents holding more than 5% of their portfolio in cash decreased to 45% from 48%, investors willing to keep cash levels unchanged for the next three months stood at six out of ten, the highest in at least a year. Investors also reduced overweight positions in fixed income assets and added to overweight positions in equities and currencies, according to the poll. HSBC conducted the survey between June 8-July 23, asking 124 investors from 119 institutions representing $506 billion of emerging market assets under management.

(Source: Reuters)