Investors Are Most Positive on EM in Two Years, HSBC Survey Says

Investor bullishness on emerging markets (EM) has reached its highest level in over two years, according to HSBC's latest quarterly survey of 100 money managers. The survey, which canvassed funds managing $414 billion in EM, found that 44% of respondents are now optimistic about the sector for the next three months, a notable increase from 36% in March. This significant shift in sentiment suggests potential for increased capital flows into EM assets.

Analysis

Institutional sentiment towards emerging markets (EM) has reached its most bullish level in over two years, indicating a significant and strengthening positive shift in investor positioning. According to a quarterly HSBC survey of 100 money managers who collectively oversee $414 billion in EM assets, 44% now hold a bullish outlook for the next three months. This figure represents a material increase from 36% in the prior quarter and marks the highest level of optimism since March 2023. The strongly positive sentiment score of 0.75 reinforces this trend, suggesting that a critical mass of institutional capital is turning favorable on the asset class, which could foreshadow increased capital flows and supportive market dynamics for EM equities and debt in the near term.

Key Decisions for Investors

• Investors with underweight exposure to emerging markets should consider increasing their allocation to align with the positive institutional sentiment and capitalize on potential near-term capital inflows.
• Current EM investors should view this growing bullish consensus as supportive for their positions, but remain vigilant for signs of sentiment becoming overly euphoric, which could signal a near-term peak.
• Given the broad nature of the survey, it is crucial to perform due diligence on specific EM regions and countries, as the overall positive sentiment may not be uniformly distributed across all markets.