Playing our themes, trade’s perfect storm, Bonds and Future Cities

WHAT’S NEW THIS MONTH?

Investment strategy was front and centre this month as we explored how our themes are creating new opportunities. We examined which themes are grabbing investors’ attention the most and identified 99 relevant companies across the world.

Elsewhere, we looked at the latest data on trade disruption and analysed the UN’s updated views on demographics. We also looked at a potential role for green, social and sustainability bonds in building cities of the future. Plus, we had plenty to say on artificial intelligence and the outlook for the tech sector.

So, what were the key talking points? Read on to find out…

Talking point: How do you turn thematic ideas into opportunities?

Theme: Nine themes

At HSBC Global Research, we track nine themes – long-term trends reshaping economies and societies worldwide – to help guide investors’ outlook.

Our thematic research is designed to help them step back from daily market noise and understand how, and where, structural forces are creating long-term investment opportunities.

So where do we see the greatest opportunities today? In our latest Nine Themes Handbook, equity strategists Edward Stanford and Amit Shrivastava find:

?? Themes including Demographics, Disruptive Technology, Automation and Trade Flows have positive momentum…

?? …in the sense that they are front of mind and growing in profile…

??…while the Future Transport theme is facing headwinds, with electrical vehicle penetration in the US and Europe lower than many had previously expected

We present a global overview of 99 listed companies with strong exposure to our themes, representing a broad range of sectors and markets.

Our thoughts?

“In demographics, a drop in birth rates and increasing longevity will have far-reaching consequences for government policy and taxation,” say Edward and Amit. Elsewhere:

?? Within disruptive technology, artificial intelligence is the dominant topic…

?? … and a key influence on equity market performance…

?? …while rising wage inflation is fuelling the growing demand for automation

Clients of HSBC Global Research can find out more, and see our global overview of 99 stock ideas, by reading the full report from the following link.

FULL REPORT ?? https://www.research.hsbc.com/R/84/SxHNctnglqchRq

Talking point: Is trade facing a perfect storm?

Theme: Trade Flows

Container freight rates continue to soar on the back of ongoing vessel attacks in the Red Sea. Disruption is spilling over into other trading routes, with congestion now affecting intra-regional trade in Asia.

At the same time, trade tensions are brewing – with new US tariffs on aluminium and steel, and China set to respond to US and EU trade policies.

So is global trade facing the perfect storm?

Our thoughts?

“The challenges certainly seem to be mounting as shipping disruption and robust demand combines with growing protectionism,” says Shanella Rajanayagam , HSBC’s Trade Economist.

“A key question at the moment is whether higher shipping costs could push up goods prices, hampering progress on disinflation. Heightening protectionism also risks disrupting trade further.”

Clients of HSBC Global Research can find out more by clicking the following link to read Shanella’s latest Trade data and policy tracker.

FULL REPORT ?? https://www.research.hsbc.com/R/84/tWDPR9KglqchRq

Talking point: Could the bond market help build tomorrow’s cities?

Theme: Future Cities

The world continues to urbanise, with the global urban population reaching 4.5 billion in 2022.

? The move to the city brings benefits as people, services and employers gather in the same place…

?? …but it also means increasing need for infrastructure such as transport, housing and water

?? The World Bank estimates that we will need to spend at least USD4.5trn per year globally on urban infrastructure

But how can the world meet these funding needs?

Our thoughts?

“This could be a growth area for green, social and sustainability (GSS) bonds, we think,” say Dominic Kini and Frank Will from HSBC Global Research’s Fixed Income team.

?? Many of the green and social projects that GSS bonds can fund are well suited to cities – from energy efficiency and clean transportation, to affordable housing

??? We also think investors are keen to diversify the purpose of their investments

?? GSS bonds from local and regional governments total USD219bn, with Real Estate adding a further USD207bn

European public authorities currently lead the way in the use of city GSS bonds, but there are examples of their use around the world. We explore 12 case studies across Europe, North America, Asia, the Middle East, and Africa.

Clients of HSBC Global Research can find out more by clicking the following link to read Dominic and Frank’s full report.

FULL REPORT ?? https://www.research.hsbc.com/R/84/qvdKQ6lglqchRq

So those are some of the top talking points for July. But our full report contains more key insights and questions on the nine themes, including …

?? Demographics: What do the UN’s latest population projections mean for the global economy and government policy?

?? Future transport: Can shipping navigate a path to net zero?

?? Disruptive technology: What is the outlook for the tech sector amid high expectations of artificial intelligence?

Clients can find our take on all these talking points in our full report below.

FULL REPORT ?? https://www.research.hsbc.com/R/84/SFpSstrglqchRq

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Disclosure appendix

The following analyst(s), who is(are) primarily responsible for this document, certifies(y) that the opinion(s), views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: David May

This document has been issued by the Research Department of HSBC.

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Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking, sales & trading, and principal trading revenues.

Whether, or in what time frame, an update of this analysis will be published is not determined in advance.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research .

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Additional disclosures

1 This report is dated as at 30 July 2024.

2 All market data included in this report are dated as at close 26 July 2024, unless a different date and/or a specific time of day is indicated in the report.

3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

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