This document highlights 20 stocks to own across emerging markets that reflect our top-down and bottom-up views. All are Buy rated.

HSBC’s base-case global macro view is positive for EM equities, revolving around cyclical recovery, durably low bond yields, USD depreciation and buoyant commodity prices. We look at equity markets through a value and growth lens; this is a good way to summarise prospects for many different markets and sectors. In our base case, there is room for both value and growth styles to perform well, with value helped by cyclical upturn, and growth by low bond yields.

Nevertheless, given recent exuberant market performance, it is worth thinking about what could disturb this scenario. We see two obvious areas of weakness. The first is the potential for US economic overheating, with easy fiscal and monetary policy turbocharged by vaccine availability. In this environment, in our view, initially value would outperform growth, given a mix of a stronger cycle and higher bond yields, although after a while the latter would likely depress the outlook for the asset class as a whole. In a second area of potential weakness, macro growth could also disappoint, damaged by new strains of the virus and delays in vaccine deployment. Here growth would, we think, tend to outperform value (see “A market Odyssey”, John Lomax et al, Q1 2021). We are more concerned about overheating. Governments are unlikely to accept defeat around vaccine logistics and are likely to keep pushing to improve this. At the same time, when there is light at the end of the tunnel, markets are likely to be quite forgiving in terms of any near-term disappointment on this count. Overall, primarily reflecting likely style behaviour in our more likely risk scenario (they behave the same in our base case), we suggest a modest tilt into value.