HSBC sees global opportunities in volatility

HSBC analysts say that short-term sentiment has driven markets at the expense of long term investment thinking during a markedly volatile 2011. But what’s been created out of this situation is a potentially attractive set of investment opportunities for 2012 for those with a longer-term perspective.

In its global outlook for the new year, HSBC GAM argues that frequent rotations in sentiment in markets reflect the fact that officials have been applying a ‘sticking plaster' approach to addressing fundamental problems - acting only when faced with severe market pressure, and only then delivering just enough to stem the tide in the short run. Investors are, therefore, presently focused on whether European policymakers will be able to deliver a comprehensive long term solution to deal with the Eurozone crisis.

Given the risks to the outlook, explains Alec Letchfield, Chief Investment Officer,  many investors have flocked to ‘safe havens' during the course of 2011, forcing the gold price to record highs and government bond yields to the lowest levels for a generation. This puts some government bonds in a position where returns are negative when inflation is taken into account, the report notes.

On this basis, the clear long term view for HSBC Asset Management is that equities offer the best value in 2012, even though short-term performance is likely to remain volatile. Many companies are in solid financial shape, having applied their own austerity measures. Balance sheet strength in turn supports the outlook for ongoing growth in dividends paid out to investors.

www.assetmanagement.hsbc.com/uk