HSBC Private Bank has downgraded its stance on Indian equities to “underweight,” increasing allocations to gold, cash, and hedge funds.

According to a Bloomberg report, in response to risks associated with the conflict in Iran and oil price shocks, HSBC Private Banking has reduced its allocation to emerging Asian equities, cut exposure to the Indian market, and increased holdings in gold, cash, and hedge funds.

Fan Tsz Wa, Chief Investment Officer for North Asia at HSBC Private Banking and Wealth Management, stated that heightened uncertainty arising from tensions in the Middle East, energy security concerns, and shifts in global capital flows has prompted a review of asset allocations to limit excessive risk. The bank is assessing ‘which markets or sectors would be impacted if a risk scenario materializes.’

He noted that the current situation reflects a cautious view towards emerging Asian economies, as rising oil prices and a stronger US dollar pose a ‘dual negative impact’ on markets reliant on energy imports and foreign capital.

Regarding equities, Fan Tsz Wa mentioned that Indian stocks have been downgraded from ‘neutral’ to ‘underweight,’ as India is considered the ‘most vulnerable’ emerging Asian market amid rising energy prices. He expressed a preference for North Asian markets. South Korean and Chinese equities are expected to benefit more from artificial intelligence (AI) investments due to their strong exposure to memory chips and upstream industries, along with more attractive valuations and earnings visibility. He also believes that the AI narrative and profit expansion will continue.