HSBC's Private Banking and Wealth Management division has downgraded its rating on emerging market equities in Asia and significantly reduced its positions in India. In response to risks from the Iran conflict and oil price shocks, the bank has increased allocations to gold, cash, and hedge funds. Patrick Ho, Chief Investment Officer for North Asia at the bank, stated, "We have reassessed our asset allocation to limit excessive risk." He highlighted growing uncertainties linked to Middle East tensions, energy security concerns, and shifts in global capital flows. The institution is analyzing which markets or sectors would be most affected if risk scenarios materialize. Ho's team employs a scenario-based risk management model outlining three potential outcomes: negotiation, escalation, and an intermediate scenario. He noted that their current positioning reflects caution toward Asian emerging nations, as higher oil prices and a stronger US dollar create a "double negative" impact for markets reliant on energy imports and foreign capital. Since the onset of the Middle East conflict, Indian equities have underperformed other Asian markets. The bank has also downgraded several Asian currencies and reduced bond holdings in the region, citing potential capital outflows in a heightened volatility scenario. Within equity assets, the firm has become more selective. Ho indicated that India's allocation was lowered from "neutral" to "underweight," describing the country as the "most vulnerable" Asian emerging market due to energy price factors, while expressing greater optimism toward North Asia. He added that South Korean and Chinese stocks are better positioned in artificial intelligence investment, with greater exposure to memory chips and upstream industrial sectors, along with more attractive valuations and earnings visibility. Elevated energy costs have raised questions about the impact on AI investments, including whether rising oil prices could hurt profit timelines or pressure data center returns. Nevertheless, the bank expects the long-term AI theme to remain intact. Ho stated, "We continue to believe the AI narrative and earnings diffusion story will persist."