A pick-up in consumer demand, improving economic growth and attractive stock market valuations have contributed to the popularity of emerging markets (EM) this year. HSBC is sticking to its “cautiously constructive” stance on them in 2025, as U.S. President-elect Donald Trump prepares to return to office in January. “There is no sugar coating that tariffs and a strong USD are downside risks,” the investment bank’s analysts wrote in a Dec. 2 research note. They observe that the balance of risk and reward for EM equities is “better than widely perceived,” given their “relatively favorable” growth dynamics compared to those of developed markets. “If U.S. tariffs are predominantly targeted towards specific markets, such as mainland China, rather than universally, some EM economies could benefit from a rejigging of trade flows,” they explained, highlighting India, South Africa and Brazil as “arguably less vulnerable to trade tensions.” EMs on the MSCI list include Brazil, China, Greece, India, Indonesia, South Korea, Mexico, and Qatar. HSBC analysts continue to see “justification for a small overweight in EM” from a global perspective, even as the U.S. election outcome will “likely reinforce the era of U.S. equity exceptionalism.” Here are two of the bank’s lesser-known top stock ideas: XP Inc HSBC is bullish on XP Inc and has a target price of $25 on the stock, giving it 90% upside potential from its Wednesday close. The Brazilian investment platform offers a range of equities, fixed income, real estate investment trusts (REIT) and pensions plans, making its stock “quite correlated to the policy rates cycle in Brazil,” the analysts noted. Shares in XP are down nearly 50% this year, largely following the start of Brazil’s rate hiking cycle in September. The nation’s central bank flagged that more rate increases may be needed if inflation worsens. “A high interest rate environment puts pressure on net inflows and also marks a shift from equity to fixed income assets, which are typically lower yielding for asset managers like XP,” the HSBC analysts wrote. They remain bullish on XP as the company “continues to show resilient earnings performance,” with its EPS (earnings per share) seeing an estimated 12% compound annual growth rate 2022 and 2024. They also expect the stock’s dividend yield to be circa 7% in 2023 and 2024. Cemex Over in Mexico, HSBC is betting on building materials company Cemex , despite concerns over demand for its products and policy risks under the Trump administration. The bank’s analysts reckon that the market is “overly pessimistic on Cemex.” They noted that potential import tariffs against other nations will “likely benefit Cemex’s U.S. operations,” which the analysts estimate will account for 35% of the firm’s EBITDA in 2025. Shares in Cemex were trading at 4.6 times the company’s enterprise value to its earnings before interest, taxes, depreciation & amortization (EV/EBITDA) estimated for 2025 at the time of the note, the analysts flagged — a 35% discount to its 10-year historical average multiple of 7 times and a 46% discount to the 8.6-times multiple where stock of its main global competitor Holcim is trading. “With its strong pricing power and exposure to U.S. infrastructure spending, we see significant rerating potential as Mexican macro concerns ease,” the HSBC analysts added. HSBC has a target price of $9 on Cemex’s American Depositary Receipt, giving it a roughly 62.2% upside potential from the Wednesday close price. — CNBC’s Michael Bloom contributed to this report.