Asia Equity Insights Quarterly:Keep calm and carry on

 With Greece and China A-shares dominating the news, and concerns about US interest rates, softer growth and stalling reforms in Asia never far away, there’s been a lot to track. While markets have become more volatile, Asian equities are still up this year. We see the following themes playing out across the region:  There is further scope for lower interest rates, particularly in China. Chinese banks and property are our preferred ways to exploit this opportunity.  Prefer North Asia: We like China (policy support) and Taiwan (a brighter tech outlook) and are cautious on ASEAN (weak demand) and India (little room to cut interest rates, slow pace of reforms).  We look for “new China” sectors that have fallen sharply or still offer good valuations and growth prospects (construction, new energy). After a bad run, the outlook for Macau gaming stocks has also started to improve.  Taiwan versus Korea. While tech demand remains weak, we now have a (tactical) preference for Taiwan in anticipation of an invigorated supply chain as product demand builds for Apple launches, China’s Golden Week, US’s Black Friday and Christmas.  While valuations start to look attractive in parts of ASEAN, we feel currency risk remains high in Indonesia and Malaysia. We prefer northern Asia to ASEAN.  This quarter we introduce a new radar system to help arrive at our Asia sector views. The radar combines data-driven signals from investor sentiment, short-term dynamics and valuation to track which sectors are most attractively positioned. Based on our new Asia sector radar, we are overweight financials, utilities and energy. Sell ideas: consumer discretionary and healthcare.  In this quarterly, we move Taiwan to overweight (from neutral), Hong Kong to underweight (from neutral) and the Philippines to neutral (from overweight). In sectors, we move technology to neutral (from overweight), consumer discretionary to underweight (from neutral), materials to neutral (was underweight), consumer staples to neutral (was underweight), energy to overweight (was underweight) and healthcare to underweight (was neutral). Third Quarter 2015 Asia Equity Insights Quarterly Keep calm and carry on Equity Strategy Pan Asia Herald van der Linde* Head of Equity Strategy, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited +852 2996 6575 heraldvanderlinde@hsbc.com.hk Devendra Joshi* Equity Strategist, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited +852 2996 6592 devendrajoshi@hsbc.com.hk Anurag Dayal* Associate Bangalore View HSBC Global Research at: http://www.research.hsbc.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited 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 Asia Equity Insights QuarterlyKeep calm and carry on  While regional markets are volatile, equities are still up y-t-d  We like China and Taiwan and are cautious on ASEAN, India  Based on our sector radar, we are overweight financials, utilitiesand energy. Sell ideas: consumer discretionary, healthcare Equity weightings Market Current Previous China overweight overweight Korea neutral neutral Taiwan overweight neutral Hong Kong underweight neutral India underweight underweight Singapore overweight overweight Malaysia underweight underweight Indonesia neutral neutral Thailand underweight underweight Philippines neutral overweight Sector Financials overweight overweight Technology neutral overweight Cons Discr underweight neutral Industrials neutral neutral Telecom neutral neutral Energy overweight underweight Cons Staples neutral underweight Materials neutral