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Meet VIKTa the bull The four Asian markets that sport the most bullish Elliott Wave structures are Vietnam,

India, Korea and Taiwan - or VIKTa for short. Near-term risks remain but long-term

investors should accumulate overweight positions in these markets. Asian currencies,

however, are still due another wave down.

The next Wave Principle Letter will be published on 26 October.

Stock Markets…page 2. Interest Rate Markets…page 10. FX Markets…page 12.

Cross-Asset Summary

____________________Elliott Wave Cycle Direction________________ Short Term

(Multi Day/Week) Medium Term

(Multi Week/Month) Long Term

(Multi Month/Year)

US Dollar Index

Euro Index

Japanese Yen Index

British Pound Index

Asian Currency Index (ex Yen)

USD 3-Month Interest Rate

USD 10-Year Yield

EUR 10-Year Yield

JPY 10-Year Yield

CDS IG 5-Year (EUR)

China / HK (Hang Seng)

USA (S&P 500)

Europe (Stoxx 600)

Japan (Topix)

Brazil (Bovespa)

Commodity Index (S&P GSCI®)

Gold

Crude Oil Source: HSBC

= Up, = Down, = Range, = Bottoming, = Topping

09 October 2012 Macro Technical Analysis Medium / Long Term

Murray Gunn MSTA CFTe Head of Technical Analysis HSBC Bank plc +44 20 7991 6797 [email protected]

View HSBC Global Research at: http://www.research.hsbc.com

Issuer of report: HSBC Bank plc

Disclaimer & Disclosures 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

Wave Principle Letter Asia-Pacific

http://www.research.hsbc.com/

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Macro Technical Analysis 09 October 2012

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Asia-Pacific Sentiment Overview

“Bull markets are born in pessimism, grow on scepticism, mature on optimism, and die of

euphoria” - Sir John Templeton

Dear Reader,

It’s not all doom and gloom.

There’s always a bull market somewhere and whereas the stock markets in Europe and the US continue to

look very vulnerable, some stock markets in Asia sport extremely bullish wave structures.

Vietnam, India, Korea and Taiwan have the most bullish long-term Elliott Wave structures and

investment allocations to these markets (VIKTa for short) should, under the current Elliott Wave

probability analysis, provide strong returns in the months and years ahead.

Vietnam

Source: HSBC, Updata, Bloomberg

Vietnam is directly bullish as long as the January 2012 low of 332 holds as support. The move higher in

2009 is a clear five wave movement and we label it as Intermediate degree wave (1) of a Primary degree

third wave which should be strongly bullish over the next few years.

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India SENSEX


The long-term chart of India shows a secular bull market. The old resistance line held as support in 2008

and 2009 which is solid long-term bullish evidence.

India SENSEX


The medium-term chart of India shows new 2012 high which is a bullish sign. Against that there was an

outside day on 5 October which may provide for a pause and a retracement of the move higher. As long

as 17,250 holds as support in the SENSEX the medium-term trend should be considered higher.

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Korea


In Korea a move down to a new low below 1,644 is probably required to complete wave (2) of the

longer-term bull market. However, a rise above 2,057 would be the first sign that the bullish cycle is

underway already.

Taiwan


Although marginal lower levels below 6,609 are still possible Taiwan is at the beginning of a long-term

super bullish trend that will last for many years to come.

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Other Asia-Pacific Stock Markets China


The Shanghai A Share Index has bullish technical evidence but only a rise above 2246 would increase

confidence in that case.

In Hong Kong there are two potential triangle Elliott Wave counts, both of which are longer-term bullish.

Resistance lies at 21,400 and 21,760. If 18,400 does not hold as support the probability increases that the

market is going to test the 13,000 zone.

Hong Kong


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Japan


The gap zone around 9,388 held as resistance in the Japanese Nikkei which increases confidence in the

bear case. A drop below the strong support at 8,135 would be particularly bearish. Long-term investors

should note though that this should be the final phase in the entire bear market from 1989.

Singapore


For Singapore, the wave structure counts best as bearish as long as 3,313 holds as resistance. Only a rise

above 3,313 would bring about a more bullish scenario.

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Thailand


Thailand is bullish in the long-term but a correction lower is due. Strong resistance lies around 1370.

Malaysia


Like Thailand, Malaysia sports bearish divergence with new highs in the index not being matched by

new highs in the Relative Strength Index (lower chart). A correction lower is due.

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Philippines


The Philippine stock market is long-term bullish but, similar to other Asian markets, a correction lower is

due.

Indonesia


Indonesia is completing Minor degree wave B of an irregular flat correction. Wave C lower towards

3,300 lies ahead.

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Australia


In Australia the Elliott Wave structure points to Primary degree wave C (circled) being underway. This

should take the market lower in coming months towards 3,000. Interim support exists at 3,829.

New Zealand


The New Zealand stock market has moved above channel resistance but all the price action from the

2009 low is corrective in nature.

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Interest Rate & Bond Markets Australian Government 10-Year Yield


There is a valid Elliott Wave count that shows five cycle degree waves down in the Aussie 10-Year yield

from 1982. Based on that count, a lower yield is probable with 2% not out of the question. So far, there is

no candlestick evidence to suggest a significant reversal higher in yield.

Korean 10-Year


In Korea, 2.86% in the 10-Year Onshore Swap Rate, is a 123.6% retracement of wave (A) and

represents a support area.

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JGB 10-Year


The very long-term reverse head and shoulders pattern in the JGB yield should eventually result in much

higher yields once the neckline (currently at 1.69%) is broken.

JGB Yield Curve


The price action of the JGB yield curve, 2’s 10’s, is displaying an underlying psychology that is

ultimately resolved in a large steepening. Either the cycle degree wave b triangle ended in 2008 or there is

one more small leg lower required to complete it. The next big move is a steeper yield curve.

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Foreign Exchange Markets Asia Dollar Index, ADXY (CNY, HKD, INR,IDR,KRW,MYR,PHP,SGD,TWD,THB)


The Asia Dollar Index has strong resistance between 117.91 and 118.04. A wave (C) lower towards 110

is likely.

USD-JPY


The long-term chart of USD-JPY suggests some upside but the possibility of one more all-time low still

exists.

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USD-SGD


USD-SGD has Intermediate degree wave (C) higher towards 1.35 to come.

AUD-USD


The Aussie still holds bullish longer-term potential but is bearish in the medium term down towards

0.9600.

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NZD-USD


NZD-USD has strong long-term support between 0.7130 and 0.7460. Resistance lies at 0.8224.

USD-INR


The structure in USD-INR suggests that the June high of 57.33 is significant, coming only slightly above

the key 56.85 level. The drop below 54.17 brings support at 48.61 into focus.

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SGD-JPY


In SGD-JPY the structure is bearish in so far as 66.59 holds as resistance. A rise above that level would

switch the probabilities to bullish.

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Our Technical Analysis Methodology

Technical market analysis is, at its essence, a study of crowd behaviour and market psychology.

R.N.Elliott’s Wave Principle is based on his empirically derived discovery in the 1930s that market prices

move in recognisable, repeating patterns and that these patterns reflect a basic natural harmony

manifested in the inherent herding behaviour of crowds. Elliott discovered that these crowd behaviour

cycles appeared at every time scale and whilst they were repetitive in structure they were not always

repetitive in amplitude or the time taken to form. Robert Prechter Jnr has developed Elliott’s Wave

Principle to uncover that a market driven by human decision makers is a robust fractal that may look

chaotic but is actually following a structured formal progression. Essentially a detailed description of

Dow Theory and the orthodox pattern recognition of Edwards & Magee, Elliott’s Wave Principle (being

based on price and volume) is the purest form of technical analysis and is the foundation of our analysis

process.

We enhance this analysis by overlaying a large suite of indicators (Relative Strength Index (RSI), Moving

Average Convergence Divergence (MACD), trend exhaustion etc), volatility and volume data to gauge

sentiment and trend strength, looking for divergences and confirmation. It is vitally important in technical

analysis to view indicators in relation to where the market is in its wave cycle. For instance, an oscillator

showing that a market is overbought could be a confirmation of the start of an extended up trend if it

appears in the wave one position of an impulse wave. Failure to combine a reading of indicators with

where the market is in the wave structure results in a forced appreciation of the Keynesian paraphrase that

the markets can remain overbought or oversold longer than you or I can remain solvent. Other sentiment

indicators such as option pricing, put/call ratios, positioning data and surveys are also used in our

methodology in order to gather as much evidence as possible in coming to our technical analysis

conclusions.

With regards to translating these analysis conclusions into actual trading ideas and positions, we employ

our Trend-Wave Trading methodology. Trend-Wave Trading is a medium term (multi week / month)

investment process that combines the technical analysis of the Elliott Wave Principle with the objective

discipline of Trend Following. A potential trade set-up is given by the wave structure and supporting

technical analysis such as Japanese candlesticks, trend extension and exhaustion measures, momentum

oscillators and sentiment. However, the trade is only executed when there is an objective movement of

momentum in the direction the technical analysis suggests. Specifically, momentum is measured by the

crossing of a short moving average (5 day) with a long average (40 day). If the market price is above the

200 day average when a buy signal is given or below the 200 day when a sell signal is given, more

confidence and size is given to the trade. Initial trade entry and full trade exit is governed by the moving

averages acting as both a trailing stop loss and take profit discipline. By overlaying a disciplined, proven

investment strategy such as Trend Following on our technical analysis we seek to run winning trades and

cut losing trades early.

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Disclosure appendix Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Murray Gunn

Important Disclosures This document has been prepared and is being distributed by the Research Department of HSBC and is intended solely for the clients of HSBC and is not for publication to other persons, whether through the press or by other means.

This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other investment products mentioned in it and/or to participate in any trading strategy. Advice in this document is general and should not be construed as personal advice, given it has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to their objectives, financial situation and needs. If necessary, seek professional investment and tax advice.

Certain investment products mentioned in this document may not be eligible for sale in some states or countries, and they may not be suitable for all types of investors. Investors should consult with their HSBC representative regarding the suitability of the investment products mentioned in this document and take into account their specific investment objectives, financial situation or particular needs before making a commitment to purchase investment products.

The value of and the income produced by the investment products mentioned in this document may fluctuate, so that an investor may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal or exceed the amount invested. Value and income from investment products may be adversely affected by exchange rates, interest rates, or other factors. Past performance of a particular investment product is not indicative of future results.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research.

* HSBC Legal Entities are listed in the Disclaimer below.

Additional disclosures 1 This report is dated as at 09 October 2012. 2 All market data included in this report are dated as at close 08 October 2012, unless otherwise indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its

Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

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Global

David Bloom Global Head of FX Research +44 20 7991 5969 [email protected]

Asia

Paul Mackel Head of FX Research, Asia-Pacific +852 2996 6565 [email protected]

Perry Kojodjojo +852 2996 6568 [email protected]

Dominic Bunning +852 2822 1672 [email protected]

United Kingdom

Daragh Maher +44 20 7991 5968 [email protected]

Stacy Williams +44 20 7991 5967 [email protected]

Mark McDonald +44 20 7991 5966 [email protected]

Murat Toprak +44 20 7991 5415 [email protected]

Mark Austin Consultant

United States

Robert Lynch +1 212 525 3159 [email protected]

Clyde Wardle +1 212 525 3345 [email protected]

Marjorie Hernandez +1 212 525 4109 [email protected]

Technical Analysis

Murray Gunn +44 20 7991 6797 murray,[email protected]

Precious Metals

James Steel +1 212 525 3117 [email protected]

Howard Wen +1 212 525 3726 [email protected]

Global Currency Strategy Research Team

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