Robust growth in emerging markets will prevent a recession, says HSBC Investments.
The investment manager’s prediction follows 2008 global growth figures from the International Monetary Fund (IMF) which show estimates of a 0.4% slowdown on 2007 to 4.8%.
HSBC Investments says profit-taking and resilient earnings in emerging economies have improved many company valuations. It expects Latin America to grow at more than twice the rate of the Eurozone next year. However, continued inflation increases could force governments or central banks to pursue policy objectives that hurt economic growth.
Roger Noddings, chief investment officer of HSBC Investments, says: “The main downside risk to emerging markets is that turbulence in global financial markets could disrupt capital flows to emerging markets and thus trigger problems for the expansion of their domestic markets.
“Countries in Emerging Europe and other ex-Soviet bloc countries are particularly exposed because of their large current account deficits and reliance upon bank-related inflows.”
Noddings says the IMF’s 1.9% 2008 gross domestic product (GDP) growth projection for the US suggests a low to moderate chance of a recession in the event of no further shocks.
IMF’s estimate shows more pessimism than economic survey company Consensus Economics, which last month lowered projections from 2.6% to 2.4%.
Consensus Economics estimates UK GDP growth will slow to 1.9% from its 3% target for 2007.
Noddings says a mixture of cheap equity valuations and dramatic policy response should rally stock markets toward the end of 2008, leading the FTSE 100 to a 6,800 close.
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