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Advantage India:
The Unrealised Opportunity
January 2018
This publication is intended for Professional Clients and intermediaries’ internal use
only and should not be distributed to or relied upon by Retail Clients. The
information contained in this publication is not intended as investment advice or
recommendation. This commentary provides a high level overview of the recent
economic environment, and is for information purposes only. It is a marketing
communication and does not constitute investment advice or a recommendation to
any reader of this content to buy or sell investments nor should it be regarded as
investment research. It has not been prepared in accordance with legal
requirements designed to promote the independence of investment research and is
not subject to any prohibition on dealing ahead of its dissemination. The
performance figures displayed in the document relate to the past and past
performance should not be seen as an indication of future returns. Any forecast,
projection or target where provided is indicative only and is not guaranteed in any
way. HSBC Global Asset Management accepts no liability for any failure to meet
such forecast, projection or target.
Non contractual document
1 1 Non contractual document 1
Why India now?
Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any
failure to meet such forecasts, projections or targets. The views expressed were held at the time of preparation and are subject to
change without notice. For illustrative purposes only
India is currently one of the fastest
growing major economies in the
world, having come a long way in
the 25+ years since the country
embraced market-orientated
reforms and opened its doors to
foreign investments. In recent
years, India has demonstrated its
desire to accelerate its economic
growth and create a more
conducive business environment
through a series of key reforms
such as the implementation of a
landmark tax reform and a record
capital injection to shore up its
public banks.
The introduction of these structural
reforms have not been without their
challenges but the government has
persevered, thus paving way for
India to potentially become the
fourth largest economy in the world
by 2022.
This report attempts to outline the
impact of these far-reaching
changes and to examine the
resultant investment opportunities in
both the equity and fixed income
markets, spanning a wide array of
sectors and industries.
2 2 Non contractual document 2
India 18%
Rest of world82%
Breathtaking pace of India’s ascent in numbers
Over 300 million households in
India have opened new bank
accounts since 2014, helped by the
government’s financial inclusion
initiatives.
18% of the world’s working age
population resides in India, and
almost half of its population is under
the age of 25.
There are 217 million active
Facebook users in India. Social
network users in India are expected to
exceed the total population of the US
in 3-4 years.
India is the world’s 2nd largest smartphone market but nearly one
billion Indians still do not own a
smartphone.
India has the world’s second largest
and Asia’s largest railway network,
carrying over 23 million passengers
daily. India’s railway network remains
one of the most underinvested.
The government is targeting to raise
India’s renewable energy to 175 GW by 2022. It has already reached 22% of
the target.
Working age population proportion
The Indian economy is expected to
nearly triple in size to reach US$6
trillion in GDP within 10 years.
By 2025, India’s middle class is
expected to double to 550 million
people, which is equivalent to the
current population of the United
States, the United Kingdom, Germany
and France combined.US$ 2,2 trillion
US$ 6 trillion
2016 2026F
Source: World Bank as of December 2017, HSBC Global Asset Management as of December 2017, HSBC Global Research as of
September 2017, Harvard Business Review as of November 2017, Economic Times as of November 2017, Facebook Quarterly Earnings
3Q 2017, Ministry of Railways India, Morgan Stanley as of September 2017, Renewables Now as of September 2017
Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any
failure to meet such forecasts, projections or targets. The views expressed were held at the time of preparation and are subject to
change without notice. For illustrative purposes only
3 3 Non contractual document 3
Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any
failure to meet such forecasts, projections or targets. The views expressed were held at the time of preparation and are subject to
change without notice. For illustrative purposes only
India is growing at the highest pace
among large economies
India is outpacing China and becoming the
world’s fastest growing economy1. The world
in 2022 may see India surpass France,
United Kingdom and Germany to become the
fourth largest economy.
Real GDP Growth 2018 Forecast
6,7 6,5
3,02,6 2,5
2,2 2,1 1,9 1,81,4 1,3
3,7
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
India
Chin
a
So
uth
Kore
a
US
A
Bra
zil
Canada
Eu
ro
Russia
Fra
nce
UK
Jap
an
World
%
India is increasingly becoming a
preferred investment destination
Foreign direct investment (FDI) inflows into
India have been on a robust growth trajectory.
While China currently attracts a higher level
of FDI, India’s FDI growth compared to
China’s has been phenomenal. Strong FDI
inflows are enhancing India’s productivity,
funding its current account, and improving its
macro stability.
FDI net inflows 2013 vs. 2017
USD 20 billion
USD 36 billion
FY2013 FY2017
USD 112billion
USD 124billion
FY2013 FY2017
India China
Indian start-up ecosystem is the
world’s third largest
Indian entrepreneurship continues to thrive as
India retains its place as one of the largest
start-up bases in the world, ranking only
behind the United States and the United
Kingdom. India is seeing a rapid rise in the
tech space, with over 1000 tech start-ups
added in 2017, bringing the total to around
5200.
Advantage India
Note 1: Large economies defined as 2016 nominal GDP
exceeding US$1.28 trillion. Source: Bloomberg, World Bank,
HSBC Global Asset Management, as of January 2018
FY = fiscal year from 1 April to 31 March. Reserve Bank of India,
Ministry of Finance People’s Republic of China, HSBC Global
Asset Management as of December 2017
Source: Nasscom as of November 2017
Healthy growth of start-ups in 2017
Net inflows up by 79.7% Net inflows up by 10.6%
Favourable demographics are
powering consumption
Consumption is the largest contributor to
India’s GDP and will continue to be a growth
driver in the coming years. A growing working
age population, rising urbanisation and
increasing levels of income would continue to
power consumption growth across sectors.
Consumption37%
Investment45%
Government14%
Net exports
4%Consumption
59%
Investment30%
Government12% Net
exports-1%
Source: HSBC Global Research as of September 2017
India:
Economic makeupChina:
Economic makeup
31%28%
13%
5%
15%
25%
35%
Fin-tech Health-tech ecommerce
% growth year-on-year
4 4 Non contractual document 4
Monetary and fiscal reforms
Objectives
Progress & impact
Improvement seen across key macro
indicators:
Improve
transparency &
accountability of
monetary policy
Goods and services tax (GST)
Objectives
Progress & impact
Make in India / Ease of Doing
Business
Objectives
Progress & impact
Reform focus
Since assuming office in 2014, the Modi government has placed substantial focus on
structural economic reforms. Highlighted here are four sets of key reforms that are
impacting the economy and financial markets.
Bank recapitalisation and
bankruptcy law
Objectives
Progress & impact
Improved tax
collections are
expected
9,0
10,0
11,0
12,0
FY
15
FY
16
FY
17
FY
18E
FY
19E
FY
20E
India climbing
the ranks of
World Bank’s
ease of doing
business index
Source: World Bank Doing Business 2018 report
FY= fiscal year 1 April to 31 March. Source: HSBC Global
Asset Management as of December 2017
FY= fiscal year 1 April to 31 March. Source: PIB, Business Line,
MTEF of Union Government, YES BANK as of August 2017
FY2013 FY2017
Consumer price
inflation (yoy increase)9.9% 4.5%
Fiscal deficit (% of GDP) 4.9% 3.5%
Current account
balance (% of GDP)-4.8% -0.7%
Foreign exchange
reserves (in billion)USD 260 USD 346
Address public sector
banks’ capital
adequacy issues
Create a single law
for insolvency &
bankruptcy
Reorient economy
from unorganised
to organised
Simplify
tax
structure
Increase
tax
compliance
Increase government
spending on
infrastructure and focus
on fiscal consolidation
Make India
a major design and
manufacturing hub
Improve
ease of doing
business
Robust growth in FDI
The government is
targeting reforms in all 10
categories of Doing
Business, including starting
a business, dealing with
construction permits, and
registering property 2016 2017 2018
100th
130th131st
Expected to
increase tax base
Expected to reduce
systemic leakage
Expected to reduce
logistics and
administrative
bottleneck
Bank recap is expected to strengthen public
sector banks
Bank recap is a major stimulant for corporate
profits and economic growth
Bankruptcy law provides effective and timely
process for lenders to restructure NPAs
Improved environment for business and
settlement of claims; increased FDI
NPAs = non-performing assets. Source: HSBC Global Asset
Management as of January 2018
Centre gross tax
revenues (% of GDP)
Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any
failure to meet such forecasts, projections or targets. The views expressed were held at the time of preparation and are subject to
change without notice. For illustrative purposes only
5 5 Non contractual document 5
Retail landscape: Transforming and
strengthening
Structural reforms (including GST), increasing
income, rising urbanisation, and large working
population are some of the key drivers that
will further propel the growth of organised
retail in India. Organised retail currently
makes up a low percentage of India’s retail
industry, presenting an immense growth
potential for the segment.
Organised9%
Unorganised91%
Household savings structure: Shift
to financial assets
Domestic households are reducing their
allocation to physical assets such as real
estate and gold, given positive real rates.
Instead, exposure to financial savings has
been on the rise, indicating a shift in the
savings structure that is beneficial for
economic growth.
Digitalisation of the economy
Digitalisation is surging in India, with digital
transactions increasing at 77% compounded
annual growth rate (CAGR) over the past four
years. Smartphone penetration has also more
than doubled in the last three years.
However, overall levels of digital use in India
are still low relative to other major nations,
creating a huge growth opportunity for the
digital space as India continues to develop
and catch up to other countries.
INR billion
0
5 000
10 000
15 000
20 000
25 000
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
Credit cards Debit card POS m-wallet Mobile banking
FY = fiscal year from 1 April to 31 March. Source: Reserve
Bank of India, CLSA, HSBC Global Asset Management, August
2017
Spotlight on structural shifts
Digital Payments
Internet penetration
Source: We Are Social, Internet World Stats, International
Telecommunication Union, Internet Live Stats, CIA World
Factbook, Facebook, National Regulatory Authorities as of
January 2017
Distribution of household savings
FY = fiscal year from 1 April to 31 March. FY2017 physical
savings are based on estimates. Source: Reserve Bank of
India, HSBC Global Asset Management, December 2017
Canada
91%
USA
88%
Brazil
66%
UK
92%
Germany
89%
Russia
73%
Japan
93%China
53%
South Korea
90%
Australia
87%
India
35%
South Africa
52%
Mexico
59% Nigeria
51%
Saudi Arabia
70%
Source: IBEF as of November 2017
Retail industry
penetration
31%
33%
36%
36%
41%
44%
69%
67%
64%
64%
59%
56%
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
Financial savings Physical savings
Source: Reserve Bank of India, CLSA, IBEF & HSBC Global Asset Management. Any forecast, projection or target where provided is
indicative only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections or targets.
The views expressed were held at the time of preparation and are subject to change without notice. For illustrative purposes only
6 6 Non contractual document 6
Banks
Private sector banks: The outlook is positive
for select private banks that have the best-in-
class retail deposit franchises but are
currently underappreciated by the market.
Public sector banks: Confidence in the
banking sector was boosted by a recent move
by the government to inject a record US$32
billion worth of capital into public sector
banks.
Household credit
Urbanisation, rising incomes, as well as
supportive government initiatives have
pushed up the demand for affordable housing
in India. There exists an emerging opportunity
for the housing finance sector, particularly
with housing affordability for middle and low
income housing at one of its best levels in the
last two decades, reaching a 28% mortgage
payment to post-tax income ratio in FY2017
versus 36% in FY2012. Mortgage penetration
in India is also the lowest amongst major
economies at only 9% of GDP.
Investment opportunities
Germany
42%
Australia
93%USA
68%
China
18%India
9%
Autos
The Indian automobile industry is currently
ranked fifth in the world. Favourable
conditions will continue to support the
industry’s prospects, including:
1. Strong demand arising from increasing
income and young population
2. Robust FDI investments and allowing
100% foreign ownership in the sector
3. Government support, with Automotive
Mission Plan 2026 targeting a fourfold
growth in the industry
4. Focus on electric vehicles (EV) with
ambitious government target of 40% EV
penetration by 2032
Industrials
Industrials in India are seeing improved
conditions, as consumer demand is strong,
exports are recovering and capital investment
in the sector is rising. A key driver for the
sector is the current government’s thrust on
infrastructure building including railways,
roads, urban transportation and airports.
Further, lower cost of capital and better
legislative environment are important supply-
side catalysts.
GDP contribution 7.1%
Manufacturing GDP contribution 22%
2017-2026 forecast CAGR of
passenger vehicles domestic
sales
12.9%
India autos
5
10
15
20
FY13 FY14 FY15 FY16 FY17BE FY18E
USD billion
Capex growth for Indian railwaysPublic sector banks expected to be stronger
following bank recapitalisation
Mortgage penetration
as % of GDP
Source: CLSA as of August 2017, HSBC Global Asset
Management as of November 2017 Source: IBEF as of November 2017
Source: HSBC Global Asset Management as of November 2017 Source: JP Morgan, Ministry of Railways, Economic Times as of
January 2017
1. Clean up balance sheets
2. Speed up resolution of bad loans
3. Meet Basel III requirements
4. Increase propensity to lend
5. Improve profitability
The content of this page is historic and contains information that is not current. It is not intended as an advice or recommendation to buy
or sell any sector or financial instrument. Allocation is as at the date indicated, may not represent current or future allocation and is
subject to change without prior notice. Investment involves risk. Past performance is not indicative of future performance. Any
forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any failure
to meet such forecasts, projections or targets. The views expressed were held at the time of preparation and are subject to change
without notice. For illustrative purposes only
7 7 Non contractual document 7
Indian equities: a US$2.2 trillion
market is underrepresented
India’s economy is one of the world’s largest
but its equity market representation in the
MSCI AC World Index remains at only 1.0%.
This means there is potential for a sizeable
increase in the index weight in the coming
years.
CountryWorld GDP
contribution (%)
MSCI AC World
Index weight (%)
United States 24.6 51.0
Japan 6.5 7.9
United Kingdom 3.5 5.4
China 14.8 3.1
Australia 1.6 2.3
South Korea 1.8 1.8
Hong Kong 0.4 1.5
India 3.0 1.0
Relative valuations remain
reasonable
India’s equity market has historically traded at
a premium relative to Asia ex Japan (AXJ),
which can be attributed to historically higher
return-on-equity as well as a more diversified
market composition as compared to the
region.
0,9
1,4
1,9
1/1
3
5/1
3
9/1
3
1/1
4
5/1
4
9/1
4
1/1
5
5/1
5
9/1
5
1/1
6
5/1
6
9/1
6
1/1
7
5/1
7
9/1
7
5-year average = 1.48
Now = 1.55
Championed by domestic investors
Achieve portfolio diversification with Indian equities
India’s equity market
India USA EuropeDeveloped
markets
Emerging
marketsAsia China
India 1.00
USA 0.44 1.00
Europe 0.39 0.70 1.00
Developed markets 0.47 0.96 0.85 1.00
Emerging markets 0.56 0.65 0.49 0.65 1.00
Asia 0.54 0.78 0.70 0.86 0.80 1.00
China 0.37 0.55 0.36 0.55 0.90 0.77 1.00
Institutional investors 2016 2017
Foreign 2.9 7.6
Domestic 5.3 14.0
Note: Correlation is calculated using monthly returns of respective MSCI local currency indices from December 2013 to December
2017. Source: Bloomberg, HSBC Global Asset Management, data as of December 2017
Note: GDP data is based on 2016 calendar year GDP.
Source: Bloomberg, World Bank, HSBC Global Asset
Management, data as of December 2017
Source: Bloomberg as of December 2017
Fund flows into equities (in USD billions)
Correlation matrix of major equity markets
Equity representation vs GDP contribution
India’s P/E premium vs
Asia ex Japan
India AXJ
ROE 14.1% 11.6%
Forward
EPS growth19.4% 12.5%
Note: Respective equity markets are represented by MSCI
Indices. Source: Bloomberg, HSBC Global Asset
Management as of December 2017
Equity market composition
0%
20%
40%
60%
80%
100%
AXJ China India
Health Care
Utilities
Telecommunication Services
Energy
Materials
Consumer Staples
Real Estate
Industrials
Consumer Discretionary
Financials
Information Technology
India/AXJ P/E
Source: Bloomberg, MSCI & HSBC Global Asset Management. Investment involves risk. Past performance is not indicative of
future performance. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC
accepts no liability for any failure to meet such forecasts, projections or targets. The views expressed were held at the time of
preparation and are subject to change without notice. For illustrative purposes only
8 8 Non contractual document 8
Indian bonds offer attractive bond
yields
In a low yield global environment, Indian
bonds offer a premium to other markets, with
an attractive 7.32% yield on its 10-year
government bonds.
India’s bond market
Sovereign credit ratings on the rise
Indian bond market:
large and diversified
The Indian bond market has grown rapidly
and has surpassed USD 1.1 trillion in size.
While 66% of the market is made up of
government bonds, the corporate market is
likely to grow strong in the coming years.
30
40
50
60
70
0
200
400
600
800
1 000
1 200
1 400
09/1
2
09/1
3
09/1
4
09/1
5
09/1
6
09/1
7
Government bonds
Corporate bonds
GDP
Source: Bloomberg, data as of 29 December 2017
Yield (%)USD billion
Source: HSBC Global Research as of September 2017
Long term rating Economic outlook Date
Moody's Baa2 Stable Nov 2017
Fitch BBB- Stable May 2017
S&P BBB- Stable Sep 2014
Source: Moody’s, Standard & Poor’s, and Fitch ratings, as of 31 December 2017
Market access Major issuers • Government bonds (51%)
• State Government bonds (24%)
• Corporate bonds (25%)
Market access by
foreign investors
• Foreign Professional Investors (FPI) can access market via an FPI license
from a Designated Depository Participant (DDP)
• Coupons and capital gains are taxed
Foreign ownership 4.29%
Impact of government
regulation
• Total FPI government securities limit set at 5% of total outstanding bonds1.
The quota is reviewed every 6 months and released every quarter
• FPIs can invest in dated government securities and corporate bonds having
residual maturity of 3 years or above
• Reserve Bank of India (RBI) has opened up State Development Loans (SDLs)
and Masala bonds to foreign investors
Note 1: Denominated in INR terms
Source: AsiaBondsOnline, Reserve Bank of India, HSBC Global Research, HSBC Global Asset Management, as of November 2017
Bonds outstanding 10-year government bond yields
0
1
2
3
4
5
6
7
8
Russia
India
Indonesia
Bra
zil
Ma
laysia
Chin
a
New
Ze
ala
nd
Au
str
alia
US
A
Th
aila
nd
Canada
Sin
ga
pore
UK
Fra
nce
Germ
any
Jap
an
GDP %
Investment involves risk. Past performance is not indicative of future performance. Any forecast, projection or target where
provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections
or targets. The views expressed were held at the time of preparation and are subject to change without notice. For illustrative purposes
only
9 9 Non contractual document 9
India is quickly emerging as a major economic powerhouse, fueled by many important
factors, one of which is its incredible population size. With 29 states and a total
population of 1.3 billion people, India can be thought of as a country of countries. The
below map provides our global audience with an idea of how the people of India are
spread out across its states and territories by illustrating population in country equivalent
terms.
A country of countries
Source: IIFL, CEIC, The Economist, World Bank, HSBC Global Asset Management as of January 2018
Less than 25 25 - <50 50 - <75 75 - <100 100 or more
Population (millions)
Country equivalent
(Indian state/territory)
India’s population is equivalent to:
= European Union × 2.6
= North America × 3.7
= Latin America & Caribbean × 2.1
= Middle East & North Africa × 3.0
Somalia
(Jammu and Kashmir)
Hong Kong
(Himachal Pradesh)
Malaysia
(Punjab) Belgium
(Uttarakhand)
Yemen
(Haryana)Romania
(Delhi)
Brazil
(Uttar Pradesh)Thailand
(Rajasthan)
France
(Gujarat) Germany
(Madhya Pradesh)
United Kingdom
(Karnataka)
Peru
(Chhattisgarh)
South
Africa
(Andhra
Pradesh)
Argentina
(Odisha)
Slovenia
(Goa)
Japan
(Maharashtra)
Bahrain
(Puducherry)
Philippines
(Bihar)
Poland
(Jharkhand)Vietnam
(West
Bengal)
Mauritius
(Sikkim)
Morocco
(Assam)
Gambia
(Arunachal Pradesh)
Macedonia
(Nagaland)
Mongolia
(Manipur)
Uruguay
(Meghalaya)
Cyprus
(Mizoram)
Canada
(Kerala)
Turkey
(Tamil Nadu)
Kuwait
(Tripura)
Bermuda
(Lakshadweep)
The Bahamas
(Andaman and Nicobar Islands)
South Korea
(Northeast India)
Algeria
(Telangana)
The views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target
where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts,
projections or targets. For illustrative purposes only
10 10 Non contractual document 10
HSBC Global Asset ManagementIndian Investment Capabilities
Key products HSBC GIF Indian Equity HSBC GIF India Fixed Income
Key proposition High conviction and diversified Indian
equity portfolio with differentiated
strategy
Invests in Indian fixed income across
the credit spectrum, in both onshore
and offshore markets
Benchmark S&P/IFCI Investable India Index* None
Approach Bottom-up fundamental approach
Concentrated positions with below
average valuation for a given level
of profitability
Integrated approach towards
fundamental research and local
insight
Robust rate process
Investment universe Equities of companies domiciled,
based or carrying out large part of
business in India (minimum 90%)
Investment grade, high yield, and
unrated INR bonds, including
corporates and government
Investment grade, high yield, and
unrated bonds in other currencies
hedged back to INR, including
corporates and government
Fund AUM (Dec. 2017) USD1,828 million USD 797 million
Inception March 1996 August 2012
Source: HSBC Global Asset Management, data as of November 2017. Investment involves risk. Past performance is not
indicative of future performance. Characteristics are for information only, are not guaranteed and are subject to change over time,
and without prior notice, taking into account any changes in markets. The views expressed were held at the time of preparation and
are subject to change without notice. For illustrative purposes only
Why active management with HSBC?
Indian
equities
Attractive combination of profitability and valuation – Concentration of
overweight positions in profitable companies at below-average valuations,
enhancing returns over the long run
Strong fundamental focus – Significant value added with strong fundamental
focus, which is supported by high quality research
Indian
fixed income
Rigorous credit selection and risk management – An integrated approach
towards fundamental research and local insight that marries rigorous credit
selection with stringent risk controls
Robust rate process – Investment views formulated through extensive analysis of
economic fundamentals, central bank policies and liquidity, to derive appropriate
rate strategy for the portfolio; process is fully supported by the on-the-ground
investment team in India
Emerging
markets
expertise
HSBC Global Asset Management is one of the largest managers of emerging
market assets. HSBC Group’s longstanding brand equity in the emerging world
provides a unique level of access to management teams as well as a nuanced
understanding of local politics, cultures, and markets
Reputation and
brand equity
open doors
The actively managed portfolios benefit from goodwill and strong relationships that
come with being a part of the HSBC Group
Note: In addition to the key products showcased, HSBC Global Asset Management offers a full suite of offshore
and onshore capabilities related to Indian investment strategies, including multi-asset, infrastructure, liquidity,
equity small/mid cap, and other equity and fixed income expertise
*Index given for comparative and illustrative purposes only. The fund is not managed to the index, is actively managed and returns may
deviate materially from the performance of the specified index.
Representative overview of the investment process, which may differ by product, client mandate or market conditions. For
illustrative purposes only.
11 11 Non contractual document 11
The value of investments and any income from them can go down as well as up and
investors may not get back the amount originally invested.
• Exchange rate risk: Investing in assets denominated in a currency other than that of the
investor’s own currency perspective exposes the value of the investment to exchange rate
fluctuations.
• Liquidity risk: Liquidity is a measure of how easily an investment can be converted to cash
without a loss of capital and/or income in the process. The value of assets may be significantly
impacted by liquidity risk during adverse market conditions.
• Emerging market risk: Emerging economies typically exhibit higher levels of investment risk.
Markets are not always well regulated or efficient and investments can be affected by reduced
liquidity.
• Derivative risk: The use of derivatives instruments can involve risks different from, and in
certain cases greater than, the risks associated with more traditional assets. The value of
derivative contracts is dependent upon the performance of underlying assets. A small
movement in the value of the underlying assets can cause a large movement in the exposure
and value of derivatives. Unlike exchange traded derivatives, over-the-counter (OTC)
derivatives have credit and legal risk associated with the counterparty or the institution that
facilitates the trade.
• Operational risk: The main risks are related to systems and process failures. Investment
processes are overseen by independent risk functions which are subject to independent audit
and supervised by regulators.
• Concentration risk: Funds with a narrow or concentrated investment strategy may experience
higher risk and return fluctuations and lower liquidity than funds with a broader portfolio.
• Interest rate risk: As interest rates rise debt securities will fall in value. The value of debt
securities is inversely proportional to interest rate movements.
• Derivative risk (leverage): The value of derivative contracts depends on the performance of an
underlying asset. A small movement in the value of the underlying can cause a large movement
in the value of the derivative. Over-the-counter (OTC) derivatives have credit risk associated
with the counterparty or institution facilitating the trade. Investing in derivatives involves
leverage (sometimes known as gearing). High degrees of leverage can present risks to sub-
funds by magnifying the impact of asset price or rate movements.
• Emerging market fixed income risk: Emerging economies typically exhibit higher levels of
investment risk. Markets are not always well regulated or efficient and investments can be
affected by reduced liquidity, a measure of how easily an investment can be converted to cash
without a loss of capital, and a higher risk of debt securities failing to meet their repayment
obligations, known as default.
• High yield risk: Higher yielding debt securities characteristically bear greater credit risk than
investment grade and/or government securities.
• Contingent Convertible Security (CoCo) risk: Hybrid capital securities that absorb losses when
the capital of the issuer falls below a certain level. Under certain circumstances CoCos can be
converted into shares of the issuing company, potentially at a discounted price, or the principal
amount invested may be lost.
Key Risks
For more detailed information on the risks associated with the funds presented in this document, investors should refer to the prospectus.
12 12 Non contractual document 12
Important information
This document is distributed in France, Italy, Spain and Sweden by HSBC Global Asset Management (France), in Switzerland by HSBC Global Asset
Management (Switzerland) Ltd and is only intended for professional investors as defined by MIFID. It is incomplete without the oral briefing provided by the
representatives of HSBC Global Asset Management. The information contained herein is subject to change without notice. All non-authorised reproduction
or use of this commentary and analysis will be the responsibility of the user and will be likely to lead to legal proceedings. This document has no contractual
value and is not by any means intended as a solicitation, nor a recommendation for the purchase or sale of any financial instrument in any jurisdiction in
which such an offer is not lawful. The commentary and analysis presented in this document reflect the opinion of HSBC Global Asset Management on the
markets, according to the information available to date. They do not constitute any kind of commitment from HSBC Global Asset Management.
Consequently, HSBC Global Asset Management will not be held responsible for any investment or disinvestment decision taken on the basis of the
commentary and/or analysis in this document. All data from HSBC Global Asset Management unless otherwise specified. Any third party information has
been obtained from sources we believe to be reliable, but which we have not independently verified.
The performance figures displayed in the document relate to the past and past performance should not be seen as an indication of future
returns. The value of investments and any income from them can go down as well as up. Capital is not guaranteed. Investments in emerging markets are
by their nature higher risk and potentially more volatile than those inherent in established markets.
Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used
to create any financial instruments or products or any indices. The MSCI information is provided on an 'as is' basis and the user of this information
assumes the entire risk of any use it may make or permit to be made of this information. Neither MSCI, any of its affiliates or any other person involved in
or related to compiling, computing or creating the MSCI information (collectively, the 'MSCI Parties') makes any express or implied warranties or
representations with respect to such information or the results to be obtained by the use thereof, and the MSCI Parties hereby expressly disclaim all
warranties (including, without limitation, all warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a
particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct,
indirect, special, incidental, punitive, consequential or any other damages (including, without limitation, lost profits) even if notified of, or if it might otherwise
have anticipated, the possibility of such damages.
The funds presented herein are sub funds of HSBC Global Investment Funds, a Luxemburg domiciled SICAV. Shares of the Company may not be offered
or sold for sale or sold to any "U.S. Person within the meaning of the Articles of Incorporation, i.e. a citizen or resident of the United States of America (the
"United States"), a partnership organised or existing under the laws of any state, territory or possession of the United States, or a corporation organised or
existing under the laws of the United States or of any state, territory or possession thereof, or any estate or trust, other than an estate or trust the income of
which from sources outside the United States is not includible in gross income for purposes of computing United States income tax payable by it. All
subscriptions in any fund presented in this document are accepted only on the basis of the current prospectus, available on request from HSBC Global
Asset Management (France), the centralisation agent, the financial department or the usual representative.
Before subscription, investors should refer to the Key Investors Information Document (KIID) of the fund as well as its complete prospectus. For more
detailed information on the risk associated with this fund, investors should refer to the complete prospectus of the fund. Subscriptions are accepted only on
the basis of the current prospectus accompanied by the latest annual or half-yearly report, available on request.
Important information for Luxembourg investors: HSBC entities in Luxembourg are regulated and authorised by the Commission de Surveillance du
Secteur Financier (CSSF).
Important information for Swiss investors: This document may be distributed in Switzerland only to qualified investors according to Art. 10 para 3, 3bis and
3ter of the Federal Collective Investment Schemes Act (CISA). The presented fund is authorised for distribution in Switzerland in the meaning of Art. 120 of
the Federal Collective Investment Schemes Act. (Potential) investors are kindly asked to consult the latest issued Key Investor Information Document
(KIID), prospectus, articles of incorporation and the (semi-)annual report of the fund which may be obtained free of charge at the head office of the
representative: HSBC Global Asset Management (Switzerland) Ltd., Gartenstrasse 26, P.O. Box, CH-8002 Zurich. Paying agent in Switzerland: HSBC
Private Bank (Suisse) SA, Quai des Bergues 9-17, P.O Box 2888, CH-1211 Genève 1.
HSBC Global Asset Management is the brand name for the asset management business of HSBC Group. The above document has been produced by
HSBC Global Asset Management (France) and has been approved for distribution/issue by the following entities :
HSBC Global Asset Management (France)
HSBC Global Asset Management (France) - 421 345 489 RCS Nanterre. Portfolio management company authorised by the French regulatory authority
AMF (no. GP99026) with capital of 8.050.320 euros.
Offices: HSBC Global Asset Management (France) - Immeuble Coeur Défense - 110, esplanade du Général Charles de Gaulle - 92400 Courbevoie - La
Défense 4 – France.
(Website: www.assetmanagement.hsbc.com/fr).
HSBC Global Asset Management (Switzerland) Limited
Gartenstrasse 26, P.O. Box, CH-8002 Zurich. Paying agent: HSBC Private Bank (Suisse) S.A., Quai des Bergues 9-17, P. O. Box 2888, CH-1211 Geneva
1(Website: www.assetmanagement.hsbc.com/ch)
Copyright © 2018. HSBC Global Asset Management (France). All rights reserved.
Non contractual document - AMFR_Ext_65_2018 expires February 2019.
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