Global Equity Data Monitor: Animal spirits high

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  Investor sentiment turned bullish over the past few weeks, with our sentiment indicator rising back to YTD highs (chart below). This is a cautious signal given little concrete change in fundamentals (e.g. US revisions ratio <50 and lower 2017e EPS growth estimates), although the indicator has yet to hit outright sell territory. The improvement has been led by a rebound in retail investor sentiment. Close to 50% of respondents to the AAII investor sentiment survey expect equities to rise over the next six months vs a low of 24% in September (chart below). And global equity funds are seeing tentative net inflows following a prolonged period of redemptions. Equity funds have seen inflows over the past four weeks amounting to 0.5% of AUM, whilst global bond fund outflows were 0.8% of AUM. These inflows have been concentrated in the US – already the greatest investor allocation z-score (page 44) – with both EM and Europe continuing to see net outflows. Key data points 1. Global equities were flat over the past week to end November up 1%. Energy was the best performer at the sector level, having bounced 5% following OPEC’s agreement to cut production (see OPEC cuts a deal), whilst Italy was the best performing market in the lead up to the Italian constitutional referendum (page 8). 2. Cyclical sectors continued to outperform last week and have now beaten defensives by almost 20% globally since early July. Performance has been strongest in Europe where cyclicals have now reversed their entire relative losses over the past three years, but cyclicals have beaten defensives by at least 10% in each major region (page 13). 3. The latest update of our fund holdings analysis shows that global funds have been increasing holdings in Financials over the past few months, particularly in Europe (page 44). Despite this, they remain over 200bp underweight European banks, which suggests there is scope for further buying (see Equity Insights: Caught with their banks down). HSBC sentiment indicator AAII survey: % bullish and bearish Source: MSCI, Thomson Reuters Datastream, HSBC. Source: Economic Policy Uncertainty, Thomson Reuters Datastream. -1.5-1.0-0.50.00.51.01.513141516HSBC sentiment indexSentiment bullishSentiment bearish 102030405060080910111213141516% bullish (1MMAV)% bearish (1MMAV)4 December 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 Neutral Underweight EM Overweight Underweight - Brazil Overweight Overweight - China Neutral Underweight - India Neutral Underweight - Russia Overweight Underweight Key Views Overweight US and EM Overweight Commodities, Utilities, Staples *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. Animal spirits high  EQUITY STRATEGY ● GLOBAL 4 December 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 Small Caps 15 Disaggregation of MSCI Index weights 16 Region-sector matrices 17 Indexes vs. earnings 18 Valuations 20 Regions/countries 21 Regions/countries - z scores 22 Sector neutral PEs 23 Global sectors 24 Global sectors - z scores 25 Top stocks by region* 26 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 Flows 43 Institutional investor holdings 44 Technical Indicators 46 Technical indicators 47 Correlations 48 Macro 49 Economic indicators 50 Lending standards and rates 52 Monetary condition and FX 53 Liquidity indicators 54 Commodity p