- Article
- Global Research
- Emerging markets
- General Research Insights
Hesitant bulls of summer: HSBC Emerging Markets Sentiment Survey
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Investor sentiment has turned more bullish on the EM outlook…
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…though a lower risk appetite along with higher cash holdings…
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…likely reflect lingering trade uncertainties and geopolitical tensions
A mid-summer bull story
Investor sentiment is shifting from ‘neutral’ to more optimistic, according to the findings of HSBC’s 20th Emerging Markets (EM) Sentiment Survey.
The share of respondents with a ‘bullish’ view on EM prospects over the next three months was 44%, up from 36% in the previous survey in March 2025. While ‘bearish’ views also edged up slightly to 14% from 10% in March, the net sentiment, which is the net of bullish and bearish responses, climbed further to 30% from 26% previously.
Despite the improvement in net sentiment, however, ‘risk appetite’ moderated in this edition, with the weighted average score dipping to 6.1 from 6.5. On our 0-10 scale, where ‘0’ is no risk and ‘10’ the highest risk, the decline suggests some investor caution, likely stemming from an even more complex investment backdrop, marked by lingering trade uncertainties, deteriorating global growth prospects, and (most recently) escalating geopolitical tensions.
Meanwhile, cash holdings saw a notable increase, rising to 5.6% of assets under management from 4.9% in March. In line with this rise in cash buffers, current positioning also showed a broad moderation across regions, with the Middle East posting a notable decline amid recent geopolitical escalations.
The survey was conducted between 2 May and 18 June, capturing the views of 100 investors from 97 institutions, collectively managing USD414bn in EM assets. The fieldwork broadly coincided with a period of contrasting market tailwinds and headwinds, and these are reflected in investors’ perception of risks.
Investors continue to view ‘tariffs and trade tensions’ as the top downside risk to the EM outlook, cited by 32% of survey respondents. This is followed by the risk of ‘recession in major economies’, particularly in the US, with more than half of survey respondents (55%) considering a US recession to be ‘somewhat likely’ or ‘very likely’.
Moreover, despite the survey period capturing only a brief window of the recent Iran-Israel tensions, these developments have been reflected in investors’ perception of downside risks, with geopolitics highlighted by 15% of respondents.
On the upside, 27% of respondents identified a ‘reallocation of capital out of the US’ as the top catalyst for EM, followed by an ‘easing in tariff tensions’, cited by 20%.
What does this backdrop mean for investors’ strategies?
Our survey results point to some notable shifts in regional preferences. All major asset classes in Latin America registered improvements on a net basis. Asia equities are still in favour, and sentiment on Africa has also picked up.
Net sentiment for EM currencies has improved even further, thanks to a softer US dollar. Investors show preference for local currency debt over hard currency debt with Latin America and Africa being the favoured regions. China, followed by Brazil and India, are cited as top preferred destinations for equities.
Finally, on the sustainability front, there was a slight increase in the share of investors running an environmental, social and governance (ESG) portfolio directly and partly/indirectly compared to the previous survey, with integration of ESG themes in stock selection being the top responsible activity.
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