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HSBC Emerging Markets Sentiment Survey
Bulls on the march
Investors were already upbeat about the prospects for emerging markets (EM), but the findings of HSBC’s 21st EM Sentiment Survey suggest optimism has strengthened even further.
The share of respondents with a ‘bullish’ view on EM prospects over the next three months jumped to 62%, up from 44% in our previous survey in June 2025. This is the second highest reading in the survey’s history. At the same time, ‘bearish’ views halved to 7% from 14% in June, lifting net sentiment to 55% – also the second highest on record.
The distinct improvement in net sentiment was not fully mirrored in ‘risk appetite’, however. On our 0-10 scale, where ‘0’ is no risk and ‘10’ the highest risk, the weighted average score picked up only marginally to 6.2 from 6.1. Meanwhile, cash holdings also remained elevated, at 5.6% of assets under management, suggesting investors still have capital that can be put to work.
The survey was conducted between 4 August and 15 September 2025, capturing the views of 100 investors from 100 institutions, collectively managing USD423bn in EM assets.
The fieldwork coincided with a complex external backdrop, as the US administration announced new reciprocal tariffs, and there were further signs of weakness in the US labour market. That said, global markets remained broadly buoyant amid a re-pricing of monetary policy in the US.
In terms of risks, investors continue to view ‘tariffs and trade tensions’ as the top downside risk to the EM outlook, cited by 28% of survey respondents. This is followed by the risk of ‘recession in major economies’, particularly in the US, though there was a decline (22%) in the share of investors citing this as a major risk.
On the upside, 33% of respondents identified a ‘reallocation of capital out of the US’ as the top catalyst for EM, followed by a ‘stronger rebound in mainland China’, cited by 19%.
Survey respondents also turned more optimistic on the growth outlook, with the majority expecting activity in developing economies to accelerate over the next 12 months.
Strategy
Survey results point to some notable shifts in regional preferences. Latin America continues to be a favoured region, with positive net scores across fixed income and FX. Meanwhile, investors still see Asia as the region with better prospects for equities.
Net sentiment for EM FX has moderated compared to June, likely due to a sideways US dollar during the survey period. Investors show preference for local currency debt over hard currency debt, though there was a notable pick-up for the latter. The consensus is still for EM equities to be higher over the next three months and they are also seen outperforming developed market equities.
On the sustainability front, embedding sustainability into the investment decision-making process is gathering increased attention. However, our survey finds that developments are needed across government support, planning, and regulation to drive the transition in EM.
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