Earnings are impressive, AI monetization has just begun, and HSBC chants “the global stock market feast is not over”

The Zhitong Finance App learned that HSBC remains optimistic about the global stock market and pointed out that market concerns about artificial intelligence (AI), interest rates, and geopolitics are increasingly reflected in stock prices, and macroeconomic fundamentals continue to improve.

“We remain strongly optimistic about global stock markets,” Alastair Pinder (Alastair Pinder), head of emerging markets and global equity strategy at HSBC, and strategist Pankaj Agarwala (Pankaj Agarwala) said in a report released on August 10. The two strategists pointed out that the improvement in the macro environment “actually enhanced — rather than weakened — the risk-reward ratio of the stock market until the end of the year.”

HSBC said that the second-quarter earnings report “performed amazingly” and that profit growth was no longer limited to the “Big Seven.” The strategists also mentioned that forward-looking corporate guidance, management confidence, and revised profit data all point to the possibility of further raising expectations.

In terms of regional allocation, HSBC maintains an “overmatch” view of the US and emerging markets, and is optimistic about US semiconductors, the financial sector, and some optional consumer stocks. Within emerging markets, the bank favors the technology sector, and is optimistic about cyclical recovery opportunities in South Africa and Chile, as well as deep value markets such as Brazil and Turkey. HSBC maintains a “neutral” configuration for Europe, while maintaining a “low profile” for Japan.

Regarding AI, Pinder and Agarwala said, “The commercialization of AI is still in the early stages.” Although corporate spending is growing, it is still relatively low. The backlog of cloud service orders continues to rise, and demand for AI computing power is still strong.

In terms of monetary policy, HSBC believes that the market has fully priced the Federal Reserve's hawkish stance, and that the threshold for interest rates to rise further beyond expectations is already high. The bank's benchmark scenario also predicts that tension in the Middle East will ease, which will help the geopolitical premium in crude oil prices fall further and ease the inflationary pressure faced by the central bank.

HSBC also anticipates that the gradual normalization of navigation in the Strait of Hormuz will eventually reduce the geo-risk premium in crude oil to a certain extent, but the bank also pointed out that the normalization process has now come to a standstill.