SHOWS: HONG KONG, CHINA (March 21, 2013) (REUTERS - ACCESS ALL)

HERALD VAN DER LINDE, CHIEF ASIAN EQUITY STRATEGIST, HSBC

1. REPORTER OFF CAMERA SAYING:

'The HSBC manufacturing PMI came out today - stronger than forecast. What do you make of the numbers?'

2. HERALD VAN DER LINDE SAYING:

'Yes, and they were quite nicely strong. I think they came in at 51.7 versus consensus of 50.8, so that's quite a decent beat. And it confirms again that I think China is going through a recovery phase. What we've probably seen, if you look at some of the other indicators, electricity consumption, some of the other data which comes out from companies, is that after the initial stimulus effect which came in in second half of last year, that some of that is starting to wear maybe a little bit out. So we've had a little bit of soft patch of data coming through over the last two months or so. But this PMI confirms that recovery - which our economists at least are talking about - is firm, still on track. So I think this latest set of data we had which looked a bit soft is really a temporary set of soft data. Then we're going to see better numbers coming through as we go deeper into 2013.'

3. REPORTER OFF CAMERA SAYING:

'Are there any policy implications? And what is your equity strategy in China?'

4. HERALD VAN DER LINDE SAYING:

'I think there's a couple of things going on in the equities sides which are important. The macro side to this PMI data confirms, again, that it looks pretty good. What I think is even maybe more important is that we're in the middle of the Chinese reporting season, or the Asian reporting season that finishes by the end of next week. I think that about 30 or 40% of all the Chinese companies have reported, so a lot of it still has to come. But so far, a lot of companies are pretty much in line with expectations. And this is the first quarter whereby the expectations of the analysts across the street are meeting the economic realities or the earnings realities of the companies. And I think this is important. We've had this expectation reset over the last 6-9 months. Numbers had to be revised downwards. That's not really happening anymore. And I think that sets us up for a Q2 whereby China is going to look increasingly attractive. Valuations have come off. Earnings are not being revised downwards anymore, they've actually remained stable. And we might actually, if these PMI numbers inch a little bit higher again, we might see maybe late Q2 earnings upgrades again. And I think that would allow the market to perform better as we go deeper into Q2.'

5. REPORTER OFF CAMERA SAYING:

'How do you advice clients position ahead of the possible earnings upgrades that you mentioned - defensive or cyclicals?'

6. HERALD VAN DER LINDE SAYING:

'We've been somewhat defensive since mid-January, actually, in our own strategy and also our kind of portfolio which we're running. And I think we still believe that markets are in a holding pattern, but the risk to being defensive is I think rising. So as we go over Easter into April and May, we need to reconsider a little bit again how defensive you really want to be. For the moment I think it's good to remain somewhat defensive and expect that these markets will continue to form this kind of holding pattern. I don't see any catalyst for them to really perform strongly anytime soon unless of course all these results are really going to surprise next week. But I don't think that's going to be the case. And I think deeper into Q2 it's really time to think about that position again.'

7. REPORTER OFF CAMERA SAYING:

'We have the Fed statement and the Cyprus crisis happening outside of Asia. How do you position for such event risks?'

8. HERALD VAN DER LINDE SAYING:

'I mean so many catalysts of course, inside Asia. The most important thing I think is simply earnings revisions. If they're going to be revised upwards, that would be quite key but I don't, as I said, that's not going to happen anytime soon. But then we have, of course, some of the issues outside of Asia beyond our control, beyond the region's control. The Fed has basically said that it will continue its asset purchasing program. And our economist in the U.S. is saying that this will probably continue well into next year. So I think that's going to be on hold or basically they will continue. And of course then there is Cyprus, as well, which at the moment is a situation which is very difficult to judge from where I sit. It just added a little bit of risk to the Asian markets. There is no direct impact on banks or anything like that for the moment. It's really a sentiment issue and I think if it means for an example, in Asia that equity valuations are coming off, that actually would create a bit of a buying opportunity.'