Investors’ bullishness on emerging markets is at its highest in over two years, according to HSBC’s quarterly survey of 100 money managers.
About 44% of respondents now have a bullish outlook on EM for the coming three months, according to the survey, which canvassed funds managing a total of $414 billion in emerging markets. That’s up from March when 36% of investors expressed optimism on the sector, and marks the highest reading since March 2023.
“The consensus is still for EM equities to be higher over the next three months and they are also seen outperforming developed-market equities,” said HSBC economist Murat Ulgen who led the survey.
HSBC surveyed the investors between May 2 and June 18, a period that coincided with a bounce in emerging assets, following April’s selloff triggered by President Donald Trump’s tariff announcements. But it also captured the increase in Iran-Israel tensions and the Federal Reserve’s signal that it’s unlikely to cut interest rates in the very near future. During the survey period, MSCI’s EM equity benchmark gained more than 6%, while the currency index hit record highs, adding 2.6%.
The survey did show a slight increase in the proportion of bearish views, which ticked up to 14% from 10% in March. However, the net sentiment gap — the difference between bullish and bearish responses — rose to 30%, versus 26% in the previous survey.
Sentiment toward EM currencies continued to strengthen, as the US dollar slid. There were also notable shifts in regional preferences —Latin America remains in high favor, with improved sentiment on all asset classes in the region. However, net positioning on Asia declined, which Ulgen blamed on “concerns over the impact of reciprocal tariffs on the region.”
The survey also revealed an increase in cash allocations to 5.6% of assets under management, up from 4.9% in March. That indicates a greater degree of caution, particularly given the flare-up in Middle East tensions since Israel’s June 12 airstrike targeting Iran’s nuclear program.
Written by: Kerim Karakaya @Bloomberg
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