HSBC Shifts Equity Strategy, Upgrading Eurozone and Downgrading Emerging Markets

HSBC is adjusting its regional equity allocation strategy heading into the second half of 2026, according to a note released by the firm. The bank announced it is upgrading Eurozone stocks to an overweight position while simultaneously closing its overweight rating on emerging market (EM) equities. The firm maintains its maximum overweight stance on global equities overall.

The decision to downgrade emerging markets stems from what HSBC describes as "heightened volatility in EM Asia." Chief Multi-Asset Strategist Max Kettner warned that a slowdown in artificial intelligence-related capital expenditure could negatively impact semiconductor stocks, which would disproportionately affect emerging market equities.

In contrast, HSBC raised its outlook for the Eurozone, highlighting the banking sector in particular. The firm's note suggested that "lower consensus growth expectations and the weaker euro should help over the summer months," creating a more favorable environment for equities in the region.

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Despite the regional shift, HSBC remains constructive on risk assets for the remainder of the year. The bank views the upcoming second-quarter earnings season as a potential positive catalyst, noting that expectations for U.S. earnings per share (excluding energy and materials) are low and present a bar that could be easily cleared. The firm also dismissed several common investor concerns, including AI overspending and geopolitical risks.