ECB announces reduction of asset purchases in Equities Government bonds Corporate bonds Other. View Move Asset class View

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1 Investment Monthly 01 November 2017 For Professional Client and Institutional Investor Use Only ECB announces reduction of asset purchases in 2018 Key takeaways We remain overweight global equities and local currency emerging market (EM) government bonds. We also retain our underweight stance on developed market (DM) government bonds and investment grade (IG) corporate bonds The carry offered in European high-yield (HY) has diminished in 2017 and now looks less attractive when compared to European equities. We move to underweight in this asset class, although remain neutral for global HY overall Global equities rose in October amid upbeat economic data and Q3 earnings releases, as well as continuing optimism over US tax reform. Japanese stocks outperformed The European Central Bank (ECB) announced an extension of its QE programme by at least nine months to September 2018, at a reduced purchase amount of EUR30bn per month The US Senate passed the 2018 budget resolution, boosting the prospect of tax reform being enacted, which may add up to USD1.5trn to the budget deficit over the next 10 years China s 19th CPC National Congress signalled a shift in emphasis away from short-term growth objectives towards sustainable economic development via reforms Monetary policy normalisation remains uber gradual Growth remains strong and synchronised across DM and EM economies. Despite this, we continue to operate in a lowflation regime. This has allowed major global central banks to normalise policy at an uber gradual pace. For example, at the October policy meeting, the ECB left its QE programme openended and continued to signal that higher interest rates remain a long way off. Among other things, this is a supportive environment for continued positive global growth momentum, and should favour risk asset classes over bonds. The risk for investors, however, comes from over-paying to access assets which benefit from this backdrop. For corporate bonds, we believe much of the good news is already priced in. If the default/downgrade outlook were to deteriorate even slightly, current pricing looks vulnerable. Amid a decline in prospective risk adjusted returns, we have downgraded our view on European HY to underweight. We prefer to access economic growth through global equities, with relative valuations and fundamentals favouring Japan, the eurozone and EM. Finally, we remain underweight DM government bonds, where stretched valuations make them vulnerable to any gradual inflation pressures, policy error or sentiment shock. For local-currency EM debt, however, there remains a solid investment case despite strong performance in 2017, in our view. Equities Government bonds Corporate bonds Other Asset class Global View OW View Move Asset class View Developed Market (DM) UW View Move Asset class View Global investment UW grade (IG) View Move Asset class View EM agg bond (USD) US N US UW USD IG UW Gold N UK N UK UW EUR and GBP IG UW Other commodities Eurozone OW Eurozone UW Asia N Real estate N Japan OW Japan UW Emerging Markets (EM) OW EM (local currency) Global high-yield OW US N N UW N View Move Asia ex Japan OW Europe UW CEE & Latam N Asia N This commentary has been produced by HSBC Global Asset Management to provide a high level overview of the recent economic and financial market environment, and is for information purposes only. The views expressed were held at the time of preparation; are subject to change without notice and may not reflect the views expressed in other HSBC Group communications or strategies. This marketing communication 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. The content 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. You should be aware that the value of any investment can go down as well as up and investors may not get back the amount originally invested. Furthermore, any investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets. Any performance information shown refers to the past and should not be seen as an indication of future returns. You should always consider seeking professional advice when thinking about undertaking any form of investment.

2 Long-term asset class positioning (>12 months) Basis of Views and Definitions of Long term Asset class positioning tables Views are based on regional HSBC Global Asset Management Asset Allocation meetings held throughout October 2017, HSBC Global Asset Management s long-term expected return forecasts which were generated as at 29 September 2017, our portfolio optimisation process and actual portfolio positions. Icons: View on this asset class has been upgraded No change View on this asset class has been downgraded Underweight, overweight and neutral classifications are the high-level asset allocations tilts applied in diversified, typically multi-asset portfolios, which reflect a combination of our long-term valuation signals, our shorter-term cyclical views and actual positioning in portfolios. The views are expressed with reference to global portfolios. However, individual portfolio positions may vary according to mandate, benchmark, risk profile and the availability and riskiness of individual asset classes in different regions. Overweight implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would have) a positive tilt towards the asset class. Underweight implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would) have a negative tilt towards the asset class. Neutral implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks HSBC Global Asset Management has (or would have) neither a particularly negative or positive tilt towards the asset class For global investment-grade corporate bonds, the underweight, overweight and neutral categories for the asset class at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, USD investment-grade corporate bonds and EUR and GBP investment-grade corporate bonds are determined relative to the global investment-grade corporate bond universe. Equities Asset class View Movement Rationale Global Overweight Rationale of overweight views: Global economic growth momentum remains solid, driving global equity markets to deliver positive returns over the long term. Overall, support from still loose accommodative monetary policy and fiscal policy (if needed) will, in the medium and longer term, likely outweigh any headwinds from more modest Chinese growth, US and eurozone monetary policy normalisation, and political uncertainty in many regions. Risks to consider: Fairly narrow implied equity premia (excess return over cash) limit the ability of the market to absorb bad news. Episodic volatility may be triggered by concerns surrounding Chinese growth, US economic policy, and/or a potentially more rapid than expected Fed or ECB tightening cycle, coupled with political risks. A notable and persistent deterioration of the global economic outlook could also dampen our view. US Neutral Positive factors: US profits data has shown improvement amid a broadly robust economic backdrop. Fiscal stimulus presents an upside risk to earnings. US equities have also been resilient in the face of Fed policy normalisation and supported by historically low volatility. Overall, our measure of the implied risk premium (excess returns over cash) remains consistent with a neutral positioning. Risks to consider: Relatively high current valuations lead to an implied risk premium that is lower than in many other developed markets. We have seen slight softness in US whole economy profits. A more rapid than expected tightening of Fed policy also poses risks. UK Neutral Positive factors: The potential for further sterling weakness supports the UK earnings outlook given a large dependency on foreign earnings. Gains in commodity prices would also be a positive. Overall, current valuations are consistent with our neutral positioning. Risks to consider: The prospective reward for bearing equity risk in the UK is relatively low compared to other markets. The UK economy is showing signs of weakness amid sterlinginduced inflationary pressures and Brexit-related uncertainty. Eurozone Overweight Rationale of overweight views: Eurozone equities benefit from relatively high implied risk premia and scope for better earnings news given the region s earlier point in the activity cycle. Furthermore, ultra-low ECB policy interest rates are likely to persist until the end of the decade. Risks to consider: Valuations have become less attractive following the rally over the last year. Political risks also remain amid looming Italian general elections, tensions in Spain (Catalonia) and Brexit-related uncertainty. A weaker UK economy may dent exports to a significant trading partner. ECB monetary policy may also be less accommodative than expected. 01/11/2017 Investment Monthly 2

3 Asset class View Movement Rationale Japan Overweight Rationale of overweight views: Relative valuations and risk premia are attractive, in our view, whilst the Bank of Japan s (BoJ) very loose monetary policy and the government s recent fiscal stimulus may boost earnings. Large corporate cash reserves provide firms with the scope to boost dividends or engage in stock repurchases. Earnings momentum remains positive. Risks to consider: Although there has been a pick-up in investment, domestic economic fundamentals are relatively sluggish. Emerging Markets (EM) Overweight Rationale of overweight views: EM economic growth momentum continues to look good (especially relative to stable growth in DM). Based on current pricing, we also think there is still significant potential for (selected) EM currency to appreciate over the medium term. Unhedged exposures to EM Asia offer the best risk-adjusted rewards, in our view. Risks to consider: Aggregate EM equity valuations no longer look anomalously cheap. There could be some near-term volatility as worries persist around the uncertain path for future Fed tightening, the potential for increased trade protectionism, economic transition in China, and the robustness of the global economy as a whole. Geopolitical uncertainty also poses risks. Asia ex Japan Overweight Rationale of overweight views: Earnings have benefited from a cyclical recovery, corporate actions and structural tailwinds. Margins and return-on-equity have also been boosted by capex discipline, more efficient operations and use of cash on balance sheets, and cost controls. Structural/ corporate governance reforms are potential catalysts in some markets. Risks to consider: A sharp rise in Treasury yields is a key risk. Fed balance-sheet reduction and ECB tapering could raise uncertainty. US protectionist policies remain a major risk. Other risks include geopolitical events; commodity-price and/or currency volatility; a fragile or faltering global growth recovery; and renewed concerns about China s growth, policy and financial risks. CEE & Latam Neutral Positive factors: Brazil exited recession in Q1 and is embarking on an ambitious reform agenda, whilst Mexico s economy is resilient. We believe Poland, Russia and Hungary offer attractive risk premia. Risks to consider: Geopolitical tensions are also high and unpredictable. High local cash rates and sovereign yields in many countries diminish the case for bearing equity risk. Government bonds Asset class View Movement Rationale Developed Markets (DM) Underweight Rationale of underweight views: Prospective returns still look low relative to competing asset classes. In a bond-unfriendly environment (strong global activity, the risk of cyclical inflationary pressures, and gradual Fed/ECB policy normalisation), global bond yields could move higher still. Positive factors: Government bonds still provide diversification benefits and reduce volatility within our multi-asset portfolios. Meanwhile, secular stagnation forces are powerful (ageing populations, low productivity and investment), and the global pool of safety assets is limited. US Underweight Rationale of underweight views: The US labour market is at (or close to) full employment so underlying inflationary pressures may build, especially if fiscal stimulus materialises. In addition, prospective returns still look low relative to competing asset classes. Positive factors: Today s environment of price stability means that the term premium (compensation for bearing duration risk) may be capped at a lower level than historically. We think ten-year US Treasuries offer a reasonable way to diversify portfolios at not too high a cost. UK Underweight Rationale of underweight views: Although the UK economy could slow, boosting safehaven demand for gilts, we think current valuations are extreme. Positive factors: Amid downside risks to growth, UK monetary policy is likely to stay accommodative for a longer period. Eurozone Underweight Rationale of underweight views: Similarly, core European bonds are overvalued, in our view. A key risk is a further reduction of ECB asset purchases after September Positive factors: Core inflationary pressures in the region remain subdued, which should keep accommodative monetary policy in place for an extended period of time. Japan Underweight Rationale of underweight views: Japanese government bonds (JGBs) are overvalued, in our view. The BoJ has also recently reduced the amount of its JGB purchases. Positive factors: The Yield Curve Control framework should limit volatility and reduce the risk of higher yields in the near-term. 01/11/2017 Investment Monthly 3

4 Asset class View Movement Rationale Emerging markets (EM) Overweight Rationale of overweight views: Despite the recent strong performance, most countries offer high prospective returns, especially relative to the opportunity set. Our estimate of the sustainable return on EM currencies reinforces our choice to hold this position unhedged. Risks to consider: A more aggressive than expected tightening of Fed policy and idiosyncratic political risks. Being selective is key. Corporate bonds Asset class View Movement Rationale Global investment grade (IG) Underweight Rationale of underweight views: Low implied credit premia mean that the margin of safety against negative shocks, such as a slight deterioration in the data or default outlook, is very thin. Given current pricing, we think there are better opportunities in other risky asset classes e.g. equities. We also prefer government bonds to IG credits as a safety asset. Positive factors: The macro environment remains supportive for credits implied recession probabilities are near zero. The risk of defaults and downgrades appear limited for now. USD investment grade Underweight Rationale of underweight views: Apart from low implied credit premia, the duration of US IG corporate bonds a measure of their sensitivity to shifts in underlying interest rates is at record highs, making them vulnerable to a more aggressive pace of Fed tightening. Positive factors: US investment grade debt looks more attractive than European credit. Carefully selected US credit may outperform. EUR and GBP investment grade Underweight Rationale of underweight views: Alongside a compressed credit risk premium, EUR IG prospective returns are also weighed down by a negative duration risk premium i.e. we are being penalised for bearing interest-rate risk. Positive factors: For the time being, the ECB s corporate bond-buying programme remains supportive. Default rates also remain low. Asia Neutral Positive factors: Within the IG universe, the carry offered by Asian credits looks attractive relative to DM. Our measure of the implied credit risk premium is also relatively high. Accelerating underlying activity in EM Asia and a neutral monetary policy stance in most countries is also supportive. Risks to consider: A more aggressive than expected Fed policy normalisation poses a key risk, particularly for corporates who borrow in US dollars. Risks from rising protectionism cannot be ignored either, while the extent of Chinese leverage remains a long-term issue. Global highyield Neutral Positive factors: Corporate fundamentals are improving following a pick-up in the global activity cycle and defaults are low. We prefer higher-rated HY bonds. Risks to consider: Further credit-spread compression leaves a thin margin of safety. We are neutral with a negative bias. US Neutral Positive factors: Broad-based acceleration in US economic activity continues to support corporate fundamentals. Default rates are relatively low. Risks to consider: Substantial risk-premium compression leaves a thin margin of safety. Current pricing is vulnerable to even a slight deterioration in the data or default outlook. A sustained fall in commodity prices and a more aggressive Fed tightening cycle all pose key risks. Europe Underweight Rationale of view change: The carry offered in Euro HY has declined in 2017 and now looks less attractive when compared to European equities. The ECB APP, which has so far been positive for this asset class, is likely to be tapered in Overall, our measure of prospective risk-adjusted returns in EUR HY is now consistent with an underweight positioning. Positive factors: The robust eurozone recovery, coupled with spill-over effects from the ECB Asset Purchase Programme (APP) remain supportive. Asia Neutral Positive factors: The carry offered by Asian High Yield looks attractive given the alternatives, with relatively high prospective risk-adjusted returns. Economic momentum continues to build and inflationary pressures appear to have mostly stabilised. Risks to consider: A Fed error in its normalisation of monetary policy poses a key risk, particularly for corporates who borrow in US dollars. Risks from rising protectionism cannot be ignored either, while the extent of Chinese leverage remains a long-term issue. 01/11/2017 Investment Monthly 4

5 Other Asset class View Movement Rationale EM agg bond (USD) Underweight Rationale of underweight views: Dollar-denominated EM bonds have performed well over the year. Consequently, prospective risk-adjusted returns now look poor relative to the opportunity set. The risk of a more hawkish Fed and rising USD poses a significant risk to USD denominated debt holdings in the EM universe. USD debt leverage is high in some economies. Positive factors: Investors reach for yield may continue to support EM hard-currency bonds, but the prospective return on offer is only slightly higher than competing asset classes such as DM investment grade (IG) credits. Gold Neutral Positive factors: Gold futures can offer reasonable diversification benefits to our multi-asset portfolios and have some inflation-hedging characteristics. Risks to consider: Based on our expected returns framework, prospective returns on gold futures look poor today given current market pricing. This is because there is a large negative expected roll yield (the cost of renewing futures contracts) and a negative expected spot price return. Other commodities Neutral Positive factors: Commodity futures can offer reasonable diversification benefits to our multiasset portfolios and have some inflation-hedging characteristics. Risks to consider: Based on our expected returns framework, prospective returns on commodity futures look poor today given current market pricing. This is primarily because there is a large negative expected roll yield (the cost of renewing futures contracts). Real estate Neutral Positive factors: Based on our dividend growth assumptions and current yields, which offer a premium of over 1.4% points above the dividend yield from wider equities, we believe real estate equities are priced to deliver reasonably attractive long-run returns compared to developed-marked government bonds. In the long run, rents are positively related to wider economic growth and offer a partial inflation hedge. Risks to consider: The US has underperformed other listed property markets over the last 12 months in USD terms. Concerns over the health of some retailers have dragged down retailoriented Real Estate Investment Trusts and US office markets such as New York and Washington are suffering from excess supply. The UK's decision to leave the EU has reduced rental growth prospects, especially in central London, and increased uncertainty around future occupier demand in the UK. 01/11/2017 Investment Monthly 5

6 ECB announces reduction of asset purchases in 2018 Markets: global equities higher in October; US Treasuries sold off; crude oil prices rose on hopes of OPEC deal extension Global equities rose in October amid upbeat economic data and Q3 earnings releases, as well as continuing optimism over US tax reform. The MSCI AC World index closed 2.6% higher over the month. Japanese stocks in particular outperformed after the sweeping victory of Premier Shinzo Abe s coalition, paving the way for more fiscal stimulus and the continuation of an ultra-loose monetary policy. Meanwhile US Treasuries sold off amid continued speculation about the next Fed Chair and as the White House made some progress in its tax reform efforts. Meanwhile, most European government bonds gained as the ECB extended its stimulus. Finally, crude oil prices rose, boosted by lingering tensions in the Kurdish region of Iraq and on hopes of an extension of OPEC s output cut deal (all data above as of close of 31 October in local currency, price return, month-to-date terms). US: Senate passes 2018 budget resolution; Q3 GDP supported by large jump in inventory building The Senate voted to pass the 2018 budget resolution, bolstering prospects of tax reforms being enacted by year-end. The current schedule implies the fiscal deficit could increase by around USD1.5trn in the next decade. Q3 GDP expanded by 3.0% qoq annualised (2.6% expected), only slightly below Q2 s print of 3.1% despite weather disruptions. However, the upside surprise was largely due to a jump in inventories which added 0.73 percentage points to growth (0.12 prior). Other data for September remained upbeat (retail sales and durable goods orders). Average hourly earnings also accelerated to 2.9% yoy whilst the unemployment rate fell to 4.2%. Soft data (e.g. ISM surveys) was also positive. Regarding inflation, September core CPI remained at 1.7% yoy (1.8% expected). Core PCE in the same month was also soft (1.3% yoy). Nevertheless, the Fed appears committed to raise the fed funds rate again in December. Europe: ECB announces lower monthly asset purchases in 2018; Bank of England set for November rate hike Eurozone economic data releases remain very solid, with the flash October composite PMI (55.9) remaining above the 12-month moving average. The advance estimate of Q3 GDP growth came in at 0.6% qoq, a touch below the previous quarter (+0.7%). There also seems to be little evidence of an adverse impact from a stronger euro. The flash October manufacturing PMI index rose to just below the all-time high set in February 2011, suggesting that solid global demand conditions are proving supportive. At their October policy meeting, the European Central Bank (ECB) announced an extension of the bank s Asset Purchase Programme (APP) by at least nine months to September 2018, at a lower monthly purchase amount of EUR30bn. Although the bank is reducing its monthly asset purchases next year, ECB policy remains very accommodative, with ultra-low policy rates likely to persist for a long time. This is a supportive environment for continued economic outperformance. In the UK, the strength of the labour market combined with some upbeat activity data (Q3 GDP growth at +0.4% qoq) suggests the Bank of England is likely to hike Bank Rate at its 2 November policy meeting. Asia: China National Congress signals shift to sustainable economic development; Japan s activity data remains upbeat China s 19th CPC National Congress signalled a shift in emphasis away from short-term growth objectives towards sustainable economic development via reforms. Nevertheless, we believe maintaining steady growth remains a government priority. India s government announced a recapitalisation plan for public sector banks amounting to INR2.1trn (1.3% of GDP) over FY18 and FY19. This should help facilitate resolution of non-performing assets and eventually aid credit growth to the real economy. In Japan, high-frequency data releases suggest that GDP momentum remained solid in Q3. Nevertheless, with inflationary pressures remaining absent amid stagnant wage growth, the BoJ is likely to maintain ultra-loose policy going forward. Other EM: Central banks in Brazil and Russia continue monetary easing; Turkish assets sell off on US-Turkey tensions Brazil retail sales and industrial production fell in August, but remain on an upward trend. Meanwhile, September inflation was benign at 2.5% yoy, allowing the central bank to cut policy rates by 75bps to 7.50% the lowest since April Russia s central bank also cut interest rates (25bps to 8.25%) amid recent cooling inflation. The bank s press release left open the option of further rate reduction at its upcoming meetings, although it noted that inflation expectations remain elevated. Turkish bonds and the lira continued to sell off in October amid: (i) a higher than expected September inflation print; (ii) US- Turkey tensions, and; (iii) the prospect of new bond issuance in the near term. Meanwhile, the central bank kept rates on hold. South Africa s bonds and the rand also fell in October on lingering political uncertainty, and after the Treasury cut growth forecasts for this year, also warning of a widening budget deficit. 01/11/2017 Investment Monthly 6

7 Global Strategic Asset Allocations Global Strategic Asset Allocations (as at 29 September 2017) Global equities rose in September amid easing geopolitical concerns, whilst higher oil prices and developed market government bond yields boosted energy and financial stocks. By far the best reward for backing a strong growth and low inflationary backdrop continues to be through global equities, in our view. Relative valuations and fundamentals continue to favour Japan and eurozone equities. In the credit space, spreads have compressed substantially over the past 12 months and we don t find the market-implied odds for taking credit risk particularly attractive. Low implied credit premia mean that the margin of safety is now very thin and provides little insulation against negative shocks. We continue to advocate an underweight positioning for US and European investment-grade corporate debt. Meanwhile, although we retain a neutral stance on global high-yield (HY) credits, we move to underweight for European HY. Finally, developed market government bond valuations remain extreme, making them sensitive to any gradual inflationary pressures, a policy error or a sentiment shock, in our view. We remain underweight in this asset class. Within the allocations of our global multi-asset model portfolios, the underweight in DM government bonds is only significantly visible within the model portfolio for Risk Profile 2, where the lower volatility target prevents too high an allocation to global equities. Risk Profile 2 Global Multi-Asset Model Portfolio Asset Class Current Model Portfolio Reference SAA Portfolio Tilt (Sep 2017) Portfolio Tilt Change Global Equities 25.0% 23.0% 2.0% 0.0% Global Government Bonds 14.0% 18.0% -4.0% 0.0% DM Government Bonds 5.5% 11.0% -5.5% 0.0% EM Government Bonds 8.5% 7.0% 1.5% 0.0% Global Corporate Bonds 52.5% 54.0% -1.5% 0.0% Global Investment Grade 42.0% 43.0% -1.0% 0.0% Global High Yield 6.0% 6.0% 0.0% 0.0% EM Debt (Hard Currency) 4.5% 5.0% -0.5% 0.0% Global Real Estate 4.0% 4.0% 0.0% 0.0% Cash 4.5% 1.0% 3.5% 0.0% Total 100.0% 100.0% 0.0% 0.0% Target Volatility 5-8% Risk Profile 3 Global Multi-Asset Model Portfolio Asset Class Current Model Portfolio Reference SAA Portfolio Tilt (Sep 2017) Portfolio Tilt Change Global Equities 51.5% 49.5% 2.0% 0.0% Global Government Bonds 11.0% 12.5% -1.5% 0.0% DM Government Bonds 2.0% 5.0% -3.0% 0.0% EM Government Bonds 9.0% 7.5% 1.5% 0.0% Global Corporate Bonds 29.5% 32.0% -2.5% 0.0% Global Investment Grade 19.0% 21.0% -2.0% 0.0% Global High Yield 6.0% 6.0% 0.0% 0.0% EM Debt (Hard Currency) 4.5% 5.0% -0.5% 0.0% Global Real Estate 5.0% 5.0% 0.0% 0.0% Cash 3.0% 1.0% 2.0% 0.0% Total 100.0% 100.0% 0.0% 0.0% Target Volatility 8-11% 01/11/2017 Investment Monthly 7

8 Risk Profile 4 Global Multi-Asset Model Portfolio Asset Class Current Model Portfolio Reference SAA Portfolio Tilt (Sep 2017) Portfolio Tilt Change Global Equities 75.0% 73.0% 2.0% 0.0% Global Government Bonds 9.0% 7.5% 1.5% 0.0% DM Government Bonds 0.0% 0.0% 0.0% 0.0% EM Government Bonds 9.0% 7.5% 1.5% 0.0% Global Corporate Bonds 10.0% 13.5% -3.5% 0.0% Global Investment Grade 0.5% 3.5% -3.0% 0.0% Global High Yield 5.0% 5.0% 0.0% 0.0% EM Debt (Hard Currency) 4.5% 5.0% -0.5% 0.0% Global Real Estate 5.0% 5.0% 0.0% 0.0% Cash 1.0% 1.0% 0.0% 0.0% Total 100.0% 100.0% 0.0% 0.0% Target Volatility 11-14% The above Current Portfolio is based on regional HSBC Global Asset Management Asset Allocation meetings held throughout October The SAA Portfolio is the result of HSBC Global Asset Management s portfolio optimisation process. These model portfolios are expressed in USD. Key Terms Strategic Asset Allocation Portfolio: Within AMG s multi-asset investment process, the SAA refers to the Strategic Asset Allocations, which are generated through optimising long-term estimates of both expected return and covariance. These form the portfolios reference allocation for each risk level. Current Portfolio: The Current Portfolio represents the portfolio s current target exposure. This reflects any active positions currently held in the portfolio (i.e. over/under weight positions relative to the SAA). Portfolio Tilt: The difference between the Current Portfolio and SAA Portfolio allocations. Positive values reflect overweight exposure i.e. where a positive outlook on a particular asset class is currently held. Conversely, negative values reflect underweight positions i.e. where the team currently maintain a more cautious outlook. Portfolio Tilt Change: The change in Portfolio Tilts from the previous Multi-Asset Strategy meeting. Risk Profiles Each of the three portfolios outlined above match different customer risk profiles, as defined by their target long-term volatility bands: Risk Profile 2 has a long-term target volatility of 5-8%. This portfolio typically has a substantial allocation to fixed income investments and some allocations to growth-oriented investments such as equities. Risk Profile 3 has a long-term target volatility of 8-11%. This portfolio typically has allocations to both fixed income investments and growth-oriented investments such as equities. Risk Profile 4 has a long-term target volatility of 11-14%. This portfolio typically has a high allocation to growth-oriented investments with higher risk levels. Note: The Strategic Asset Allocations detailed above may sometimes appear to differ from the Long-term Asset Class positioning table on pages 2 and 3 primarily due to portfolio constraints which include achieving portfolio volatility within the target long-term volatility bands and minimum and maximum asset class weights. The above Current Portfolio allocations are based on HSBC Global Asset Management s current outlook and portfolio positioning. These positions are revisited on a monthly basis. The allocations are for illustrative purposes and are designed to be broadly representative of our current multi-asset positioning. Actual portfolio positioning may differ by product or client mandate due to manager discretion, local requirements, portfolio constraints and other additional factors. The Current Portfolio allocations do not consider the investment objectives, risk tolerance or financial circumstances of any particular client. They should not be relied upon as investment advice, research, or a recommendation by HSBC Global Asset Management. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. The reference index for Equities is the MSCI All Country World Index (ACWI), which includes both developed and emerging market equities. The reference index for Real Estate is the FTSE EPRA/NAREIT Developed Index, which is designed to track the performance of listed real estate companies and Real Estate Investment Trusts (REITs). 01/11/2017 Investment Monthly 8

9 Market Data MTD 3M 1-year YTD 52-week 52-week Fwd Close Change Change Change Change High Low P/E Equity Indices (% ) (% ) (% ) (% ) (X) World MSCI AC World Index (USD) North America US Dow Jones Industrial Average 23, ,485 17, US S&P 500 Index 2, ,583 2, US NASDAQ Composite Index 6, ,738 5, Canada S&P/TSX Composite Index 16, ,065 14, Europe MSCI AC Europe (USD) Euro STOXX 50 Index 3, ,698 2, UK FTSE 100 Index 7, ,599 6, Germany DAX Index* 13, ,374 10, France CAC-40 Index 5, ,531 4, Spain IBEX 35 Index 10, ,184 8, Asia Pacific MSCI AC Asia Pacific ex Japan (USD) Japan Nikkei-225 Stock Average 22, ,456 16, Australian Stock Exchange 200 5, ,957 5, Hong Kong Hang Seng Index 28, ,799 21, Shanghai Stock Exchange Composite Index 3, ,421 3, Hang Seng China Enterprises Index 11, ,785 9, Taiwan TAIEX Index 10, ,843 8, Korea KOSPI Index 2, ,556 1, India SENSEX 30 Index 33, ,652 25, Indonesia Jakarta Stock Price Index 6, ,042 5, Malaysia Kuala Lumpur Composite Index 1, ,797 1, Philippines Stock Exchange PSE Index 8, ,587 6, Singapore FTSE Straits Times Index 3, ,396 2, Thailand SET Index 1, ,730 1, Latam Argentina Merval Index 27, ,101 15, Brazil Bovespa Index* 74, ,024 56, Chile IPSA Index 5, ,614 4, Colombia COLCAP Index 1, ,509 1, Mexico Index 48, ,772 43, EEMEA Russia MICEX Index 2, ,294 1, South Africa JSE Index 58, ,637 48, Turkey ISE 100 Index* 110, ,900 71, *Indices expressed as total returns. All others are price returns. 3-month YTD 1-year 3-year 5-year Change Change Change Change Change Equity Indices - Total Return (% ) (% ) (% ) (% ) (% ) Global equities US equities Europe equities Asia Pacific ex Japan equities Japan equities Latam equities Emerging Markets equities All total returns quoted in USD terms. Data sourced from MSCI AC World Total Return Index, MSCI USA Total Return Index, MSCI AC Europe Total Return Index, MSCI AC Asia Pacific ex Japan Total Return Index, MSCI Japan Total Return Index, MSCI Latam Total Return Index and MSCI Emerging Markets Total Return Index. Sources: Bloomberg, HSBC Global Asset Management. Data as at close of business 31 October /11/2017 Investment Monthly 9

10 Market Data (continued) MTD 3-month 1-year YTD Close Change Change Change Change Bond indices - Total Return (% ) (% ) (% ) (% ) BarCap GlobalAgg (Hedged in USD) JPM EMBI Global BarCap US Corporate Index (USD) 2, BarCap Euro Corporate Index (Eur) BarCap Global High Yield (USD) Markit iboxx Asia ex-japan Bond Index (USD) Markit iboxx Asia ex-japan High-Yield Bond Index (USD) Total return includes income from dividends and interest as well as appreciation or depreciation in the price of an asset over the given period End of 3-months 1-year Year End Bonds Close last mth. Ago Ago 2016 US Treasury yields (%) 3-Month Year Year Year Year Developed market 10-year bond yields (%) Japan UK Germany France Italy Spain End of 3-mths 1-year Year End 52-week 52-week Currencies (vs USD) Latest last mth. Ago Ago 2016 High Low Developed markets EUR/USD GBP/USD CHF/USD CAD JPY AUD NZD Asia HKD CNY INR MYR KRW 1,120 1,145 1,119 1,144 1,206 1,212 1,111 TWD Latam BRL COP 3,042 2,938 2,986 3,007 3,002 3,208 2,831 MXN EEMEA RUB ZAR TRY Latest MTD 3-month 1-year YTD 52-week 52-week Change Change Change Change High Low Commodities (% ) (% ) (% ) (% ) Gold 1, ,358 1,121 Brent Oil WTI Crude Oil R/J CRB Futures Index LME Copper 6, ,177 4,850 Sources: Bloomberg, HSBC Global Asset Management. Data as at close of business 31 October /11/2017 Investment Monthly 10

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ED0412 Exp. 01/05/ /11/2017 Investment Monthly 11