Global Equity Data Monitor: The wait goes on

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  Friday’s payroll report came in weaker than expectations and, together with August’s sub-50 ISM, does not seem to present a compelling case for the FOMC to raise rates later this month (see US August Employment Report: Job and wage gains below expectations). This should benefit long duration sectors which have suffered in recent weeks, and could see Banks give up some of their relative gains. The ISM number may also raise question marks on the strength of the cycle and our leading indicators suggest there is likely further weakness to come (page 54). We believe that markets are vulnerable to a correction with over optimistic earnings expectations (page 32), premium valuations (page 22) and full sentiment (page 42), likely to undermine the cyclical recovery (see Global Equity Strategy: Goldilocks & the Three Bears). Key data points 1. Global equities were flat over the past week (as of 01 Sep) with EM underperforming DM for the second consecutive week. However, whilst EM underperformed, there was significant divergence at the individual market level with India and China rising more than 1% in USD terms, but South Africa down almost 6% (page 08). Amongst sectors, financials and IT outperformed whilst utilities, energy and telecoms underperformed (page 11). 2. Indices of economic policy uncertainty have fallen sharply from their elevated levels post Brexit. However, uncertainty remains high compared to history in both Europe and China. With a heavy political calendar over the next 12 months, we believe that uncertainty is likely to remain high and this is likely to weigh on both capex and earnings growth (page 50) 3. Real Estate has been promoted to sector level status under the GICs structure. This move could cause some weakness in the near-term as Financials funds divest their holdings but, longer-term, we see Real Estate as a key beneficiary of lower for longer bond yields (see Global Real Estate Compass: Independence Day). We have added separate Real Estate data to the sector sections of this report. 5 September 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 Monitor EQUITY STRATEGY GLOBAL HSBC COUNTRY STRATEGY ALLOCATION Country/Region HSBC Consensus US Overweight Overweight UK Neutral Overweight Eurozone Underweight Underweight Japan Underweight Underweight EM Overweight Underweight - Brazil Overweight Underweight - China Neutral Underweight - India Neutral Underweight - Russia Overweight Underweight Key Views Overweight US and EM Overweight High Dividend Yield, Non-Cyclical Growth, Energy sector *Note: Consensus ratings are EPFR global funds active weights compared to history, where positive Z score is overweight and negative Z score is underweight Source: HSBC, EPFR Global. Short duration sectors may suffer if rate hike expectations fall Cyclicals at risk from weak business cycle indicators Source: MSCI, Thomson Reuters Datastream, Source: Thomson Reuters Datastream, HSBC -0.5-0.4-0.3-0.2-0.100.10.20.3-10%-8%-6%-4%-2%0%2%4%6%Dec-15Mar-16Jun-16Short/Long duration sector performance (%mth)Global Bond Yield (ppt chg mth, RHS)45474951535557596163656065707580859095100105110Jan-11Jan-12Jan-13Jan-14Jan-15Jan-16Cyclicals/Defensives performanceISM (RHS)The wait goes on  EQUITY STRATEGY  GLOBAL 5 September 2016 2 Highlights of the 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 Small Caps 15 Disaggregation of MSCI Index weights 16 Region-sector matrices 17 Indexes vs. earnings 18 Valuations 21 Regions/countries 22 Sector neutral PEs 24 Global sectors 25 Top stocks by region* 27 Earnings 29 Earning season analysis 30 Consensus 12M forward EPS change 31 Earnings growth forecasts – regions/countries 32 Earnings revision ratios – regions/countries 33 Earnings growth forecasts – global sectors 34 Earnings revision ratios – global sectors 36 Earnings revision ratio – Top stocks by region* 38 Earnings vs peak and trend 39 Sentiment 41 Sentiment indicators 42 Analyst recommendations 43 Top stocks by region* 44 Fund Flows 45 Institutional investor holdings 46 Technical Indicators 49 Technical i