Habib Bank AG Zurich 2024 outlook: Navigating volatility, seizing opportunities

Looking at H2, what is Habib Bank AG Zurich’s outlook on the global markets?

Global financial markets had a strong first half of 2024, but the second half of the year could become more challenging. The Fed may cut rates once, but as long as the US economy expands and inflation stays above 2 per cent, substantial easing is unlikely. Other major central banks may also slow their easing. The US equity market is expensive, and further rises require sustained earnings growth.

While full-year S&P 500 earnings growth is likely to exceed 9 per cent, markets will punish companies missing forecasts. Outside the US, we see opportunities in Japan and India but remain cautious about Chinese assets. We favour IT stocks due to their robust fundamentals and business prospects. In fixed income, we see value in investment-grade corporate bonds and select emerging market issuers. Gold remains our preferred hedge against volatility and unexpected US dollar weakness.

What key risks does the bank see in the global markets in H2 2024?

Disappointing corporate earnings amid stretched valuations could dent equity market performances. If lower earnings result from lower margins, cost pressures could signal a rebound of inflation, making central bankers nervous and ending any talk of Fed easing.

Political risks include renewed instability in the eurozone due to French elections and potential volatility from the US elections. The Japanese yen, undervalued currently, may cause global market reverberations if there’s a major policy shift by the Bank of Japan, although an internationally coordinated move seems unlikely.

From the bank’s perspective, what’s your take on the state of the GCC economies?

The GCC economies have been relatively stable, and efforts to reduce reliance on fossil fuels in the UAE and Saudi Arabia are likely to sustain economic expansion. Saudi Arabia is becoming a regional power with global reach. Opportunities are likely to abound, but so will poorly designed projects. Investments in private equity and infrastructure are areas investors should explore. 

What is your take on the global energy market, and do you think OPEC+ nations will boost production soon? 

OPEC+ policy has focused on maintaining a floor for crude oil by managing output. Significant production increases are likely only if strong global demand threatens market stability. While some adjustments are possible, sustained high oil prices (above $100/bbl) would enhance the attractiveness of alternative energy sources and accelerate the energy transition, which is disadvantageous to established fossil fuel producers.

 Where is the bank seeing the biggest growth in its client base?

We remain focused on our HNWIs and ultra-HNWIs, particularly those seeking to benefit from our wealth management and commercial banking services.

Our geographic presence enables us to ensure we can meet our clients’ needs as they evolve. Our global booking centre, located at our Head Office in Zurich, is strategically positioned to meet the demands of clients seeking diversification and security.

We see an increase in interest from the next generation of our clients, whose expectations and requirements differ from those of the previous generation. This new generation is more focused on innovative financial solutions and sustainable investments.

Overall, this trend highlights the need for flexibility and personalised service to meet our clients’ changing needs. In addition to our Zurich office, our branch in the Dubai International Financial Centre (DIFC) has been a significant growth driver for us.

The DIFC’s strategic location, world-class infrastructure, and business-friendly environment have attracted a multitude of high-net-worth individuals and families from around the globe, the ever-evolving fiscal landscape across developed markets has led to an increased interest in making Dubai a permanent base.

Habib Bank AG Zurich’s presence in DIFC enhances our ability to serve clients in the Middle East and our core markets but also acts as a gateway for international clients looking to capitalise on emerging opportunities in the region. The DIFC’s reputation as a leading financial hub aligns perfectly with our commitment to providing top-tier wealth management services.

Furthermore, our commercial clients have been a substantial contributing factor to our growth. These clients are increasingly looking to capitalise on our offshore wealth services, seeking robust financial solutions to expand and secure their assets globally. The demand for sophisticated banking services and international investment opportunities underscores the importance of our comprehensive approach to wealth management.