1、 Disclosures&Disclaimer 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.Issuer of report:HSBC Securities(USA)Inc View HSBC Global Research at:https:/ US corporates are the most domestically focused
2、 in DM,although overseas exposure increased slightly to 31%in 2018 Opportunities in China-exposed stocks,diversified multi-nationals,and companies in the fastest growing economies We mine our proprietary“Who sells where”database,and present 6 screens;bespoke screens available upon request US corpora
3、tes are the most domestically focused amongst developed markets,a key benefit given US GDP growth remains above-trend.Nevertheless,US overseas revenue exposure,at 31%,is growing despite a stronger USD and protectionist headwinds,and is equivalent to c12%of MSCI ACWI sales.As such,it cannot be ignore
4、d.We highlight 5 key themes,and multiple stock screens:1.FX exposures:The stronger USD reduced MSCI US sales growth by an estimated 2%in 2018,but headwinds are forecast to ease year on year.Our pure exporters screen is seemingly pricing in a weaker USD,contrary to HSBCs forecasts.2.Living up to expe
5、ctations:Domestic companies have had stronger sales growth than those focused overseas.This has been driven by European weakness.US international stocks are sensitive to GDP growth differentials,and that could become a tailwind.We highlight US stocks exposed to the fastest growing economies.3.Europe
6、 exposure:A soft economy and weak EUR have made life difficult for US companies operating in Europe.However,we see opportunities for the Tech(due to a lack of competition)and Consumer sectors(robust labor market).US stocks with European exposure in these sectors trade at a sizable 20%discount vs his
7、tory.4.China exposure:Median US sales growth to China rose 11%last year,despite trade tensions.However,this masks wide divergences,with Semis strengthening,and Autos weakening.Our China exporters stock screen has rallied,but may have further to go if trade tensions ease,and is still at a valuation d
8、iscount to average.5.Diversified multinationals:We are optimistic that multinational companies can overcome tariff and trade-related tensions.We believe their diversified geographic operations provides them with the flexibility to adapt and shift supply chains to mitigate possible headwinds.We highl
9、ight 20 US multinational stocks.We are overweight US equities,seeing upside to earnings growth expectations as margins should prove to be resilient.Valuations appear well-supported,with profitability high and bond yields low.We highlight out-of-favor sectors with strong dynamics.Household Products i
10、s best-placed global sector,while Utilities is best domestic sector.23 April 2019 Ben Laidler Global Equity Strategist HSBC Securities(USA)I+1 212 525 3460 Alastair Pinder,CFA Equity Strategist HSBC Securities(USA)I+1 212 525 4131 Amit Shrivastava*Analyst HSBC Securities and Capital Markets(India)Pr
11、ivate Limited amit1.shrivastavahsbc.co.in+91 80 4555 2759 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Global Equity Strategy Equity Strategy Global Where US companies make their money Equity Strategy Global 23 April 2019 2
12、Understanding where the revenues come from We have updated our US“Who Sells Where”database to include the latest data available for 2018,and examine where US corporates make their money geographically,and why it matters for investors.For background and our 2018 global report,see Laidler Who sells wh
13、ere 2018,23 August 2018.The importance of sales exposure has become increasingly significant as the US administration takes a more protectionist turn,imposing tariffs on a variety of goods and countries.USD appreciation and heightened EM FX volatility also have serious consequences for companies ope
14、rating overseas.Geographic segment reporting can offer a useful guide to economic and FX exposures,and be a key source of potential alpha-generation given the constraints.However,corporate disclosure levels vary widely,with managements given significant flexibility on how they report,and the numbers
15、 therefore need to be treated with a degree of caution.Indeed,results for various countries are often combined rather than given individually,and we have to classify around 14%of US revenues as“miscellaneous”because they are too broad to be placed into one of our four key regions(Asia,Europe,the Ame
16、ricas,and Africa&Middle East).In this report,we highlight some of the key geographical trends in US revenue generation.In summary,US corporates remain very domestic by global standards,generating only 31%of revenues overseas.However,there are huge sector and stock variations,and this presents fertil
17、e ground for alpha generation given the shortcomings of corporate reporting transparency.We take a deeper look at assessing FX exposures,including whether tapping into overseas markets actually generates stronger overall sales growth,the implications of China trade tensions,and the benefits multinat
18、ionals get from diversified revenue streams.Where US companies make their money US corporates are the most domestically focused in DM,although overseas exposure increased slightly to 31%in 2018 Opportunities in China exposed stocks,diversified multi-nationals,and companies in the fastest growing eco
19、nomies We mine our proprietary Who sells where database,and present 6 screens.Bespoke screens available upon request Geographic sources of revenue are poorly understood and a source of alpha-generation 3 Equity Strategy Global 23 April 2019 Where US companies make their money:31%from overseas US com
20、panies continue to remain much more domestically focused than their DM peers,generating just 31%of their revenue overseas in 2018.Whilst relatively small,given the overall size of the US equity markets,this still equates to a significant c12%of MSCI ACWI revenues.In comparison,Europes foreign sales
21、exposure stands at over 50%,while even in Japan it is close to 40%.The largest proportion of US companies foreign revenues come from Europe,accounting for 7%of total revenue,followed closely by Asia Pacific at 6%,and the Americas ex US at 4%.Given limitations around geographical reporting we are una
22、ble to classify 14%of revenues that come from foreign sources.Information technology is by far the most internationally exposed sector,with 62%of its sales generated overseas,and a significant proportion of that focused in Asia.US semiconductor companies,for example,have the largest Asia exposure,ge
23、nerating almost 72%of their revenue from the region.They also dominate EM,accounting for over 80%of EM semiconductor revenues(see Laidler,Bridge to EM:Winning the battle,15 April 2019).However,much of these exports ultimately end up finding their way back to the US home market:in the case of semicon
24、ductors,chips are exported and usually tested,assembled,and packaged in Asia before being re-exported,with a large proportion going to US consumers.Nevertheless,the relative scale of Techs overseas revenue is considerable.Excluding the IT sector,the MSCI USAs foreign revenue exposure would fall to j
25、ust 27%.Industrials,Materials and the Energy sector also have relative high overseas exposure,but are more dependent on economic growth and infrastructure spending in Europe.1.MSCI USA revenue breakdown(2018)Source:MSCI,Refinitiv Datastream,HSBC US corporates are the most domestically focused amongs
26、t developed markets.The IT sector leads the exceptions Regional BreakdownUSDbn%TotalUSA8,594 68.9 3,883 31.1America ex USA445 3.6 Canada72 0.6 Brazil24 0.2 Mexico21 0.2 Unspecified Americas327 2.6Asia747 6.0 China191 1.5Sector revenue composition Japan65 0.5 Taiwan31 0.2 Korea20 0.2 Unspecified Asia
27、439 3.5Europe870 7.0 UK108 0.9 Other Europe762 6.1Africa&ME65 0.5Misc1,753 14.112,477 100.0RegionDomestic revenueOverseas revenueTotal revenueRegional and Country Revenue Breakdown69%4%7%6%1%14%USAmerica ex USEUAsia PacificAfrica&MEMisc020406080100UtilitiesFinancialsHealth CareReal EstateCommunicati
28、onsConsumer DiscretionaryConsumer staplesEnergyIndustrialsMaterialsInformation TechnologyUSAmericas ex USEuropeAsia PacificAfrica&MEMisc Equity Strategy Global 23 April 2019 4 At the other end of the spectrum Utilities,Financials,and Health Care sectors are the most domestically focused sectors.Only
29、 4%of the Utilities sectors sales are identified as being derived from overseas,while this is 17%for the Financials sector.Globalization vs protectionism Despite the domestic nature of US companies,2018 marked the second consecutive year of companies increasing their foreign revenue exposure(Chart 2
30、),and possibly confirms a turning point in the 2011-2016 trend of US firms pivoting towards their home market.This comes as a surprise and is in contrast to the current protectionist rhetoric from the US administration,the headwinds of a modestly stronger USD,and the US GDP outperformance versus res
31、t-of-world seen in recent years.Revenue generation has shifted towards the Americas ex US and also Asia,particularly China(see Chart 3).Interestingly,Europe ex UK was the only foreign region that saw its foreign revenue share decline(by nearly 40bps)and this likely reflects the weakness of the euroz
32、one economy and sluggish domestic demand.This trend could continue in 2019,with HSBC economists forecasting the eurozone to grow just 1%in 2019,compared to 1.6%for developed markets more broadly(see Wells,European Economics Quarterly,3 April 2019)2.The trend of rising domestic revenue exposure is re
33、versing 3.US companies are focusing more towards Americas ex US and Asia Source:MSCI,Refinitiv Datastream,HSBC Source:MSCI,Refinitiv Datastream,HSBC US corporates are becoming more,not less global,however,despite USD and protectionist headwinds.Europe has seen its foreign revenue share decline 4.US
34、revenue share from EM is still relatively low 5.US revenue share from EM sector breakdown Source:MSCI,Refinitiv Datastream,HSBC Source:MSCI,Refinitiv Datastream,HSBC.626364656667686970717205 06 07 08 09 10 11 12 13 14 15 16 17 18MSCI USA:Domestic Revenue Exposure-100-50050Americas ex USMiscAsia Pac
35、Ex ChinaChinaAfrica&MEUKEuropeUSx MSCI USA:Change in revenue share(2017-2018,bps)01234567803 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18EM revenues as a%of total-5.0 10.0 15.0 20.0 25.0Info TechIndustrialsMaterialsCommunicationsReal EstateFinancialsCons.Disc.EnergyCons.StaplesUtilitiesHealth care20
36、18 EM revenues as%of total 5 Equity Strategy Global 23 April 2019 US corporates generate at least 7%of their revenues in the emerging markets.This has nearly doubled since 2003,but remains below that of European and Japanese corporates,which are at 15%and 11%,respectively(as of 2017).At the sector l
37、evel,Consumer Discretionary,Real Estate,Info Tech,Industrials,and Consumer Staples all increased their international exposure,while Financials,Energy,Health Care,and Materials focused more towards the US.The biggest change,however,was for the Communications Sector,mainly driven by the GICS reclassif
38、ication changes(see Laidler,Global Equity Strategy:Key takeaways from new Communications sector,5 September 2018).The inclusion of social media and search engine companies such as Facebook and Alphabet into what was formally the Telecoms sector has meant there has been a sizeable increase(almost 20p
39、pt)in the sectors overseas exposure.This obviously has implications for the characteristics of the sector given it will have shifted from an overwhelmingly domestic bias,to being far more sensitive to overseas developments and FX movements.Global bellwether companies In table 7,we provide our global
40、 bellwether stock screen.This screen identifies the 25 companies in the MSCI USA that derive the largest amount of sales(in USD terms)from overseas and generate at least 20%of their revenue from abroad.Companies in the screen include Exxon Mobil,Apple,and Walmart.Given their sheer scale and large in
41、ternational presence,we believe this group of stocks can be used a good bellwether for the market outlook on the global economic environment.The median overseas sales exposure for this screen of stocks is 53%and collectively they generate USD1.5trn of sales abroad,equivalent to c40%of the MSCI USAs
42、combined overseas revenue.These companies have underperformed the MSCI USA by 3%over the last three months,reflecting broader concerns about the state of the global economy and trade cycle.Relative to history,however,they do look notably cheap,trading at a 22%discount to the MSCI USA(on a 12m forwar
43、d basis),which is a greater discount than the 16%average since 2010.6.Change in sector geographical revenue share(ppts)Source:MSCI,Refinitiv Datastream,HSBC US global bellwethers include Exxon,Apple,and Walmart-5.0-4.0-3.0-2.0-1.00.01.02.03.04.05.0MaterialsHealth CareEnergyFinancialsUtilitiesCons.st
44、aplesIndustrialsInfo TechReal EstateCons.Disc.USAmericas ex USEuropeAsia PacificAfrica&MEMiscChange in sector geographical revenue share 2017-2018More international exposureMore domestic exposure-25.0-20.0-15.0-10.0-5.00.05.010.015.020.025.0Communications Equity Strategy Global 23 April 2019 6 In th
45、e rest of this report we highlight five key themes from our US geographical revenue database:6.Assessing the FX exposures 7.Overseas exposure:does it live up to expectations?8.Europe:opportunities despite weakness 9.China sales resilient in the face of trade tensions 10.Multinationals:benefits of di
46、versification 7.Global bellwether stock screen ranked by absolute overseas revenues Stock Sector%overseas revenue Overseas revenue(USDm)Exxon Mobil Corp XOM US Energy 65.3 182,402 Apple Inc AAPL US Information Technology 63.1 167,534 Walmart Inc WMT US Consumer staples 23.7 122,140 Chevron Corp CVX
47、US Energy 47.6 75,613 General Electric Co GE US Industrials 61.5 74,815 Alphabet Inc GOOGL US Communications 53.8 73,550 A Inc AMZN US Consumer Discretionary 31.2 72,741 Ford Motor Co F US Consumer Discretionary 39.2 62,792 Intel Corp INTC US Information Technology 79.8 56,545 Boeing Co/The BA US In
48、dustrials 55.8 56,451 DowDuPont Inc DWDP US Materials 65.4 56,241 Microsoft Corp MSFT US Information Technology 49.3 54,434 Dell Technologies Inc DELL US Information Technology 52.8 48,521 Johnson&Johnson JNJ US Health Care 48.7 39,697 Procter&Gamble Co/The PG US Consumer staples 59.1 39,532 Costco
49、Wholesale Corp COST US Consumer staples 27.8 39,290 HP Inc HPQ US Information Technology 64.8 37,870 Bunge Ltd BG US Consumer staples 78.2 35,790 Archer-Daniels-Midland Co ADM US Consumer staples 55.4 35,574 Valero Energy Corp VLO US Energy 29.1 34,041 Walgreens Boots Alliance Inc WBA US Consumer st
50、aples 25.2 33,145 MetLife Inc MET US Financials 45.2 30,944 General Motors Co GM US Consumer Discretionary 20.7 30,467 Pfizer Inc PFE US Health Care 52.8 28,318 PepsiCo Inc PEP US Consumer staples 42.5 27,513 Source:MSCI,Refinitiv Datastream,Bloomberg,HSBC 8.Performance of global bellwether stock sc