GEMs Investor A narrower path

Research evidence excerpt

GEMs Investor A narrower path

uld remain close to 4%, while the near term

could see further downside surprises on the inflation front. Moreover, positioning is lighter, and

investors remain bullish on near-term EM prospects.

What’s the strategy?

This argues against indiscriminate EM beta. Our valuation framework identifies local-currency debt

as the cheapest EM asset class, trading at a discount of c0.4 standard deviations, or c5% in

nominal terms6. Light positioning, high real yields, and downside inflation risks reinforce the case

for LCD, although exposure should favour markets with credible policy frameworks and resilient

external balances. In particular, LatAm and select CEEMEA and Asia names stand out7.

Equities and EXD screen at a premium but retain selective support. The equity rally so far has been

concentrated on AI stories, which leaves scope for performance to broaden beyond the largest

technology names. Our equity strategy team remains constructive on AI and tech trade, though they

see scope for rotation in performance in H28. In EXD, favourable credit conditions should support

carry, with risk-reward favouring LatAm and select CEEMEA names over Asia9.

Among larger economies and from a multi-asset perspective, our preferred markets are Brazil,

Colombia, and South Africa, followed by mainland China, India, Mexico, and Türkiye.

1 GEMs Investor: Resilience test, 20 April 2026

2 HSBC Global Macro Strategist: Shifting narratives, 25 June 2026

3 Currency Outlook: Grind it out, 9 July 2026

4 Global Economics Quarterly: Crosscurrents, 22 June 2026

5 HSBC EM Sentiment Survey: No country for bears, 22 June 2026

6 GEMs in the week: What’s cheap going into Q3? The tables have turned, 3 July 2026

7 Fixed Income Views: Our convictions and forecasts, 21 July 2026