Economies around the world are beginning to see meaningful recovery, five years after the worst downturn since the Great Depression of the 1930s.

The largest economic gains in the coming years should take place in advanced economies such as the US, Europe, and emerging markets such as China, which positions global bank HSBC Holdings (NYSE: HSBC) as a compelling long-term investment.

The bank enjoys a large presence in each of these markets, receiving roughly 30 percent of its earnings from Europe and North America, 57 percent from Asia, and the rest from emerging markets elsewhere in the world. This earnings structure offers investors excellent diversification and a means to benefit from growth in economic activity around the world.

HSBC’s Fortunes are Tracking the Global Recovery in China/Asia

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The International Monetary Fund (IMF) in its recent World Economic Outlook (WEO) Update, released in January 2014, reported that “activity is expected to improve further in 2014–15, largely on account of recovery in the advanced economies. Global growth is now projected to be slightly higher in 2014, at around 3.7 percent, rising to 3.9 percent in 2015, a broadly unchanged outlook from the October 2013 WEO.”

The recovery is expected to progress at two speeds, whereby advanced economies are moderately improving and emerging markets continue at high growth rates. Given its presence and stellar reputation in each of these markets, HSBC offers an opportunity for investors to earn a higher blended return than one could achieve by distinct pure play banks in each region.

• In the United States: theIMF projects growth of 2.8 percent in 2014, up from 1.9 percent in 2013. Following upward surprises to inventories in the second half of 2013, the pickup in 2014 will be carried by final domestic demand, supported in part by a reduction in the fiscal drag as a result of the recent federal budget agreement.

• In the euro zone: IMF projects growth to strengthen to 1 percent in 2014 and 1.4 percent in 2015, but the recovery will be uneven. The pickup will be more modest in economies under stress, despite some upward revisions. High debt, both public and private, and financial fragmentation will hold back domestic demand. Elsewhere in Europe, activity in the United Kingdom has been buoyed by easier credit conditions and increased confidence. Growth is expected to average 2.25 percent in 2014–15, but economic slack will remain high.

• In China: IMF projects growth in emerging market and developing economies to hit 5.1 percent in 2014 and 5.4 percent in 2015. Growth in China rebounded strongly in the second half of 2013, largely due to a accelerated investment. Growth is expected to moderate slightly to around 7.5 percent in 2014–15.

Many market analysts have noted that HSBC is also best positioned to benefit from the Federal Reserve’s tapering of its stimulus program. The bank’s profitability would gain from any U.S. Federal Reserve move beyond tapering and toward tightening, owing to its low loan-to-deposit ratio in key markets such as Hong Kong and the United Kingdom.

Close to 25 percent of HSBC’s assets are in cash or short-term bonds yielding no more than 40 basis points (0.4 percent). Higher rates would mean a higher yield on those deposits. In fact, some analysts have been quoted in the financial press saying Fed tapering could lead to “massive earnings expansion” at the bank.

The biggest irony is that that the stock, which is down 2.9 percent over the past 12 months, was sold off as part of the larger reaction by investors to the Federal Reserve’s tapering announcement. But the result is to have created an extremely compelling and cheap investment opportunity with HSBC.

HSBC by the Numbers

HSBC has not been immune from the downturn. The bank experienced losses in the years following the 2008 global meltdown. But the firm has been on the mend, partly by selling off non-performing divisions, and all projections point to robust earnings growth in 2014.

The bank reported a solid third-quarter performance in November 2013, supported by cost efficiencies and higher profits. HSBC reported a pre-tax profit for the quarter that was up 30 percent year over year, to $4.5 billion. Growth was attributed to strong performance in its core Hong Kong business that was offset by a two-thirds fall in its Latin American profits and a 10 percent slip in Asia (excluding Hong Kong).

The bank also reported that a closely watched cost-efficiency ratio, which compares overheads with income, fell back to 57 percent from the high 60 percent-plus levels of a year ago. Further, return on equity for the first nine months was 10.4 percent, up from 8.9 percent for the equivalent period in 2012.

The bank’s earnings per share (EPS) and dividends per share for the nine months to Sept. 30 were $0.71 and $0.30, respectively, compared with $0.58 and $0.27 for the equivalent period in 2012. The bank’s core tier 1 capital ratio was up too, from 12.3 percent at the end of 2012 to 12.7 percent, so liquidity was also looking good at the firm.

Although HSBC offers global diversification, the bank’s larger fortunes are tied to a continued recovery in Asia, where it has a strong presence. But all indicators suggest growth in advanced economies means greater growth in Asia. If that were to happen, it could boost the bank’s profits by 30 percent over the next 2 years to $1.29 billion in 2015. HSBC Holdings is a buy up to 65.