Global Equity Data Monitor：Back to where we started

Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Issuer of report: HSBC Securities (USA) Inc View HSBC Global Research at: https://www.research.hsbc.com  Highlights of the data  The S&P 500 is up 10% from February’s oversold levels, and near back to January 1st levels, with global equities trailing not far behind. The global growth scare and Fed policy misstep fears have eased (notwithstanding the 16 March FOMC), and our Sentiment Index normalized, but the underlying challenges of the US ‘triple premium’ of peak earnings and margins, above-average valuations, and the strong USD remain. Investors are overweight US equities as a perceived ‘safer haven’, while US corporates – the dominant equity buyer in recent years – are under pressure from squeezed profits and rising funding costs (see Tonev, The Nomadic Investor, 8 March 2016). We are cautious, with less than 5% upside to our unchanged S&P 500 target, and favor Europe ex UK and selective EM equities. Key data points 1. Global equities rose 0.1% the past week (ending 10 March), with EM (+1.4%) outperforming DM (0.0%) in USD terms. EM outperformance was again driven by Brazil this week (+9.7%), followed by Russia (+3.9%) (page 8). Global materials and energy sectors continued to outperform. Both are supported by the USD stabilization (see charts below), and our EM strategists see appetite for the asset class returning (see Ulgen, EM is back in the game, 9 March 2016). 2. The euro strengthened 2% in the last week vs the USD after the ECB announced a broader-than-expected stimulus package. HSBC forecasts Q416 EUR/USD 1.20. This should benefit companies with high domestic exposure, such as utilities, telecoms, financials, and small caps (see Laidler, Who Sells Where 2015: Investing in a global world, 16 July 2015). 3. Investors have continued to cautiously warm up to equities, with global equity funds receiving a second consecutive week of modest inflows despite higher volatility in all major regions (page 43), and the gradual rotation into bonds. Who is the marginal equity buyer? Individual investor and hedge fund sentiment is low and a search for income is likely to reaccelerate, and with potentially lower sovereign wealth fund pressures (see Laidler, Nine and a Half Questions, 8 March 2016). Regional equity performance during historical periods of USD weakness Global sector performance during historical periods of USD weakness Source: MSCI, Thomson Reuters Datastream, HSBC Source: MSCI, Thomson Reuters Datastream, HSBC 13 March 2016 Ben Laidler Global Equity Strategist HSBC Securities (USA) Inc. ben.m.laidler@us.hsbc.com +1 212 525 3460 Daniel Grosvenor* Equity Strategist HSBC Bank plc daniel.grosvenor@hsbcib.com +44 20 7991 4246 Yevgeniy Shelkovskiy Equity Strategist HSBC Securities (USA) Inc. yevgeniy.x.shelkovskiy@us.hsbc.com +1 212 525 3035 * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations Global Equity Data MonitorEQUITY STRATEGY GLOBAL HSBC COUNTRY STRATEGY ALLOCATIONCountry/Region HSBCConsensusUSUnderweightOverweightUKUnderweightOverweightEurozoneOverweightUnderweightJapanNeutral UnderweightEMNeutralUnderweight BrazilUnderweight Underweight ChinaOverweightOverweight IndiaOverweightOverweight RussiaNeutralUnderweightKey Views: OW Europe (Earnings surprise and policy support) OW High Dividend Yield, Non-Cyclical Growth, Energy sectorsSource: HSBC, EPFR Global. *Note: Consensus ratings are EPFR global funds active weights compared to history, where positive Z score is OW and negative Z score is UW Back to where we started abc EQUITY STRATEGY  GLOBAL 13 March 2016 2 Highlights of the week’s data 1 Latest equity strategy reports 3 HSBC Regional Recommendations 4 HSBC Sector Recommendations 5 This week’s calendar 6 Performance 7 Regions/countries 8 Global sectors 11 Top stocks by region* 12 Investment styles 13 Disaggregation of MSCI Index weights 15 Region-sector matrices 16 Indexes vs earnings 17 Valuations 19 Regions/countries 20 Sector neutral PEs 22 Global sectors 23 Top stocks by region* 25 Earnings 27 Earning season analysis 28 Consensus 12M forward EPS change 29 Earnings growth forecasts – regions/countries 30 Earnings revision ratios – regions/countries 31 Earnings growth forecasts – global sectors 32 Earnings revision ratios – global sectors 34 Earnings revision ratio – Top stocks by region* 36 Earnings vs peak and trend 37 Sentiment 39 Sentiment indicators 40 Analyst recommendations 41 Top stocks by region* 42 Fund