In the wake of recent volatility in global markets, and especially emerging markets, HSBC Holdings Plc on Monday said it, nevertheless, expects strong support for global emerging markets but downgraded its rating on Israel, given the country's stability during the latest sell-off. "Israel is a defensive market which has recently outperformed in the emerging market equity crunch," the bank said in a note to clients. "We now want to increase our exposure to risky markets and reduce holding of defensive entities." From a valuation standpoint, HSBC noted that while there was more headroom across the emerging market universe after recent falls, this was generally less true for Israel. In particular, it said, price-to-earnings ratios were higher than in Egypt but with much weaker earnings growth. The only segment in Israel HSBC saw as displaying a good upside was banking but even there it was hard to identify an obvious catalyst. "While GDP growth has been extremely strong, this found little resonance in the first quarter bank earnings, which were generally just in line with analysts' forecasts," the firm said. It called the absence of lending growth "disappointing," given the underlying strength of the economy. "This being the case, it's difficult to see what will move the banks, particularly if we're right about emerging markets generally having a better time." As such, the firm downgraded its rating on the Israel to "underweight" from "neutral" and moved up its recommendation on Egypt to "overweight." Contributing to the positive outlook for Egypt are "constructive" valuations and corporate earnings, as well as the belief that the economy and reform process "are still working well."