HSBC says buy signal intact as positioning remains light despite rebound

Investing.com -- HSBC analysts believe the backdrop for risk assets has shifted decisively more positive, citing faster-than-expected progress in U.S.-China trade talks and resilient economic data. 

Despite recent gains, they argue that investor positioning remains light, keeping the “buy signal” intact.

“The dilemma markets have been facing in the past few weeks” has been resolved, HSBC (LON:HSBA) wrote, pointing to a combination of “light sentiment and positioning” and an unexpectedly constructive turn in trade negotiations. 

“There’s very clearly upside risk for the broader risk asset spectrum now,” the analysts said.

They noted that the change in tone from the U.S. administration suggests “future episodes of weakness should be used as buying opportunities.”

While markets have rebounded, HSBC sees more room to run. “Our sentiment and positioning framework still sends a buy signal,” they wrote, adding that “exposure across systematics still [is] very light.” 

This is said to include positioning in both developed and emerging market equities and credit, which have recouped some year-to-date losses but remain under-owned by systematic strategies.

Even macroeconomic data appears to be turning, according to the bank. 

“High-frequency data have also started to show signs of stabilising or even rebounding,” HSBC said, citing improving earnings revisions, more constructive corporate guidance, and tentative recovery in Chinese container data.

Looking ahead, they expect volatility to decline, prompting more buying from quant-driven funds. “With one-month realised volatility to plummet further in the coming days, systematic strategies may well add further to the squeeze.”

Whether data surprises to the upside or downside, HSBC sees a “classic win-win situation” for risk assets in the near term.