In its emerging market strategy report released on October 6, HSBC identified the emerging stock markets it favors for 2027. The six markets receiving an "overweight" rating are Brazil, South Africa, Turkey, Hungary, the UAE and Colombia. Among them, the ratings for the UAE and Colombia were upgraded from "neutral" to "overweight."
HSBC believes that against the backdrop of elevated oil prices, food inflation pressures, rising US Treasury yields and the rapid development of artificial intelligence technology, investors will increasingly favor economies that possess advantages in resources, technology, financing and access to international markets.
Latest Market Ratings and Rating Changes
Brazil is rated overweight, maintaining its previous rating. South Africa is rated overweight, maintaining its previous rating. Turkey is rated overweight, maintaining its previous rating. Hungary is rated overweight, maintaining its previous rating. The UAE is rated overweight, upgraded from neutral. Colombia is rated overweight, upgraded from neutral. Mexico is rated neutral, downgraded. Chile is rated neutral, downgraded. Egypt is rated neutral, downgraded. India is rated underweight, maintaining its previous rating. Thailand is rated underweight, maintaining its previous rating. Indonesia is rated underweight, maintaining its previous rating. The Philippines is rated underweight, maintaining its previous rating.
Global Investment Environment Shifts as HSBC Introduces "Autonomy Premium"
HSBC points out that emerging markets are facing four major challenges: international oil prices at elevated levels, food inflation triggered by the El Niño phenomenon, rising US Treasury yields, and industrial changes brought about by the rapid development of artificial intelligence technology.
Against this backdrop, HSBC expects that investors will place greater emphasis on an economy's ability to withstand external shocks, particularly in terms of resource supply, technological capability, financing channels and independence in accessing international markets. HSBC refers to this investment preference as the "Autonomy Premium," believing that markets with stronger economic resilience and strategic autonomy may command higher valuations and greater weight in capital allocation.
Brazil and South Africa: Monetary Easing and Commodity Prices Provide Support
Brazil: Monetary Easing and Rising Oil Prices Bring Investment Opportunities. HSBC maintains its "overweight" rating on the Brazilian stock market, believing that monetary policy easing and elevated international oil prices will create favorable conditions for local companies. As Brazil enters its presidential election cycle, HSBC believes the market still offers an attractive balance between potential returns and risks.
South Africa: Rising Precious Metal Prices and Structural Reforms Improve Corporate Earnings. HSBC likewise maintains its "overweight" rating on the South African stock market. South Africa has a large precious metals mining industry, and higher international commodity prices help improve cash flow for mining companies. At the same time, structural reforms being advanced in South Africa are expected to enhance corporate operating efficiency and improve profitability, making it one of the resource-oriented emerging markets favored by HSBC.
UAE and Colombia: Both Receive Rating Upgrades
UAE: Infrastructure Investment and Economic Activity of Expatriate Population Support Growth. HSBC upgraded the UAE stock market rating from "neutral" to "overweight." The bank believes that the UAE's main advantages include the resilience of its expatriate residents and related economic activities, continued progress in infrastructure investment, and the relatively limited allocation by international investors to this market at present. These factors give the UAE the potential to further attract international capital.
Colombia: Fiscal Consolidation and Energy Sector Reform Provide Upside Potential. HSBC upgraded Colombia's stock market rating from "neutral" to "overweight." HSBC believes that fiscal consolidation, deregulation of the oil and gas industry, and export growth related to reconstruction activities may create new growth opportunities for Colombian companies.
Turkey and Hungary: Economic Policy Normalization and EU Funds as Key Catalysts
Turkey: Economic Policy Normalization Drives Investment in Defense, Aviation and AI. HSBC maintains its "overweight" rating on the Turkish stock market, believing that as economic policy gradually normalizes, local companies are expected to benefit from an improved operating environment and related investment growth. HSBC focuses on defense, aviation, artificial intelligence and reconstruction-related investment sectors, believing these industries may become important drivers of Turkish stock market performance.
Hungary: Expected Release of Frozen EU Funds Brings Growth Opportunities. HSBC likewise maintains its "overweight" rating on the Hungarian stock market. The bank believes that if previously frozen EU funds are released, it will provide support for Hungary's economy and corporate investment. In addition, reform progress and increased investment may also improve the earnings prospects of local companies. However, HSBC also notes that Hungary still faces exchange rate volatility and political risks.
Mexico, Chile and Egypt Downgraded; Four Asian Markets Remain Underweight
While upgrading the UAE and Colombia, HSBC downgraded the stock market ratings of Mexico, Chile and Egypt to "neutral," mainly due to the lack of sufficiently strong upside catalysts in these markets and increased economic risks.
In addition, HSBC continues to maintain "underweight" ratings on the stock markets of India, Thailand, Indonesia and the Philippines. HSBC believes that against the backdrop of a changing global investment environment, emerging market investment requires greater emphasis on selective allocation. Going forward, economic resilience, resource security capabilities, technological advantages and strategic autonomy may become important factors influencing stock performance across different markets.