Stunning profits, AI monetization just getting started, HSBC exclaims that "the global stock market feast is not over."

HSBC remains optimistic about global stock markets, noting that concerns surrounding artificial intelligence (AI), interest rates, and geopolitical issues have increasingly been reflected in stock prices, while macro fundamentals continue to improve. "We maintain a firmly bullish stance on global stock markets," said Alastair Pinder, Head of Emerging Markets and Global Equity Strategy at HSBC, and strategist Pankaj Agarwala in a report released on August 10. The two strategists pointed out that the improving macro environment "actually enhancesrather than diminishesthe risk-reward ratio for the stock market by the end of the year." HSBC stated that the U.S. second-quarter earnings reports "performed spectacularly," with profit growth no longer limited to the "seven giants." The strategists also mentioned that corporate forward guidance, management confidence, and earnings revision data all point to the possibility of further upward adjustments to expectations. In terms of regional allocation, HSBC maintains an "overweight" view on the U.S. and emerging markets, favoring the semiconductor sector, financials, and select consumer discretionary stocks in the U.S. Within emerging markets, the bank prefers the technology sector while also being optimistic about cyclical recovery opportunities in South Africa and Chile, as well as deeply valued markets like Brazil and Turkey. HSBC assigns a "neutral" allocation to Europe and maintains an "underweight" position on Japan. Regarding AI, Pinder and Agarwala stated: "The commercialization of AI is still in its early stages." Corporate spending is increasing but remains relatively low, with cloud service order backlogs continuing to rise and strong demand for AI computing power. On monetary policy, HSBC believes that the market has fully priced in the Fed's hawkish stance, making the threshold for further unexpected rate hikes relatively high. The bank's baseline scenario also expects a gradual easing of tensions in the Middle East, which would help further reduce the geopolitical premium in oil prices and alleviate inflationary pressures faced by central banks. HSBC also anticipates that navigation through the Strait of Hormuz will gradually normalize, ultimately expected to somewhat lower the geopolitical risk premium in oil; however, the bank also pointed out that the normalization process has currently stalled.