HSBC Says Sell Stocks Because Paulson Plan Won't Stop Slowdown

By Alexis Xydias

Sept. 23 (Bloomberg) -- Investors should reduce stocks in developed markets because a U.S. plan to shore up financial markets won't stop a ``nasty slowdown,'' according to strategists at HSBC Holdings Plc.

The strategists at Europe's largest bank cut their recommendation on equities to ``underweight'' from ``neutral,'' according to a note today entitled ``Armageddon Postponed.'' They advised buying long-dated government bonds.

While U.S. Treasury Secretary Henry Paulson's $700 billion proposal to stabilize the banking system ``puts a floor -- fingers crossed -- on the worst of the downturn, it seems unlikely to be able to prevent a nasty slowdown, for the simple reason that both the financial system and the real economy will continue to deleverage,'' a team of strategists led by Richard Cookson wrote.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.