Global Sector Playbook: China and the world: Equity implications

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 ithttps://www.research.hsbc.comGlobal Sector PlaybookChina and the world: Equity implicationsChina is moving up the manufacturing value chain, increasing services consumption, and investing more abroadWe look at the potential impact on equities in this companion piece to our Economics team’s China and the world report We highlight the opportunities and challenges for 17 sectors EQUITY STRATEGYGLOBALMay 2016 By: Ben Laidler, Daniel Grosvenor, and the HSBC Global Equity Sector Teams abc 1 EQUITY STRATEGY  GLOBAL 23 May 2016 Contents HSBC sector playbook: top ideas 2 Executive summary 3 Equity implications of China’s changing role 3 An ever-changing story 4 Equity implications 7 Sector views 16 Auto 16 Climate change 17 Building materials 17 Capital goods 18 Chemicals 19 Consumer staples 20 Cosmetics 20 Eyecare 21 Food & beverage 22 Infant milk formula 23 Leisure 24 Luxury 24 Materials 24 Pharma 25 Real estate 25 Retail: Food & non-food 26 Sporting goods 27 Disclosure appendix 32 Disclaimer 36 In this document HSBC may comment on the potential economic impact dependent on the outcome of the UK Referendum. HSBC is not taking a political position and this document and the information contained herein are not intended to promote or procure, or otherwise be in connection with promoting or procuring, a particular outcome in relation to the question asked in the UK Referendum. 2 abcEQUITY STRATEGY  GLOBAL 23 May 2016 HSBC sector playbook: top ideas Company Ticker Country Industry HSBC rating Mcap Analyst Analyst e-mail CMP TP Upside Capital goods Schneider Electric SU FPFrance Electrical EquipmentBuy36,594Michael Hagmann(1) michael.hagmann@hsbcib.comEUR55.47EUR7128% Assa Abloy ASSAB SSSweden Building ProductsBuy21,273Michael Hagmann(1) michael.hagmann@hsbcib.comSEK165.3SEK20524% Siemens AG SIE GRGermany ConglomeratesBuy88,351Michael Hagmann(1) michael.hagmann@hsbcib.comEUR92.76EUR10816% ABB ABBN VXSwitzerland Electrical EquipmentBuy46,746Michael Hagmann(1) michael.hagmann@hsbcib.comCHF19.99CHF2210% Chemicals Saudi Basic Industries CoSABIC ABSaudi Arabia ChemicalsBuy66,495Sriharsha Pappu(6) sriharsha.pappu@hsbc.comSAR83.13SAR10020% Consumer staples L'Oreal OR FPFrance Personal ProductsHold99,801Graham Jones(1)graham.jones@hsbc.comEUR158.2EUR1697%Cosmetics LG H&H 051900 KSKorea Household ProductsBuy13,450Karen Choi(4)karen.choi@kr.hsbc.comKRW1025000KRW140000037% AmorePacific* 090430 KSKorea Personal ProductsBuy20,357Karen Choi(4)karen.choi@kr.hsbc.comKRW414500KRW54000030% Eyecare Essilor EI FPFrance Health Care EquipmentBuy27,229Antoine Belge(2)antoine.belge@hsbc.comEUR112.25EUR13722% Food & beverage Uni-President 1216 TTTaiwan Food ProductsBuy10,394Chloe Wu(5)chloe.c.wu@hsbc.com.twTWD60TWD7017% Infant milk formula Danone BN FPFrance Food ProductsBuy43,730Damian Mcneela(1) damian.mcneela@hsbc.comEUR59.5EUR73.123% Dairy Crest DCG LNUnited Kingdom Food ProductsBuy1,153Damian Mcneela(1) damian.mcneela@hsbc.comGBP5.62GBP6.8522% Nestle NESN VXSwitzerland Food ProductsHold232,724Damian Mcneela(1) damian.mcneela@hsbc.comCHF72.25CHF74.63%Leisure Whitbread WTB LNUnited Kingdom Hotels Restaurants & Leis. Buy10,868Lena Thakkar(1)lena.thakkar@hsbcib.comGBP40.8GBP4818% Luxury Moncler** MONC IMItaly Text., App. & Lux. GoodsBuy4,210Anne-Laure Bismuth(1) annelaure.bismuth@hsbcib.comEUR15.02EUR2033% Pandora A/S PNDORA DC Denmark Text., App. & Lux. GoodsBuy17,084Anne-Laure Bismuth(1) annelaure.bismuth@hsbcib.comDKK968.5DKK108012% Materials AngloGold Ashanti ANG SJSouth Africa Metals & MiningBuy5,727Derryn Maade(7)derryn.maade@za.hsbc.comEUR223.29EUR29833% Pharmaceuticals AstraZeneca AZN LNUnited Kingdom PharmaceuticalsHold70,302Julie Mead(1)julie.mead@hsbc.comGBP38.12GBP42.411% Real Estate Hammerson HMSO LNUnited Kingdom Real EstateBuy6,444Stephen Bramley-Jackson(1)stephen.bramley-jackson@hsbcib.com GBP5.58GBP6.6820% Retail