Why are higher yields not biting? Multi-Asset Strategy

Research evidence excerpt

Why are higher yields not biting? Multi-Asset Strategy

hare price, the stock will be classified as a Reduce.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change

in target price or estimates).

Upside/Downside is the percentage difference between the target price and the share price.

Prior to this date, HSBC’s rating structure was applied on the following basis:

For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate,

regional market established by our strategy team. The target price for a stock represented the value the analyst expected the

stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight,

the potential return, which equals the percentage difference between the current share price and the target price, including the

forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12

months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was

expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage

points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.

*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months

(unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which

we did not consider volatile may in fact also have behaved in such a way.