HSBC Market Update. Weekly Market Views. Changes in Major Market Indices. Past performance does not guarantee future results.

Transcription

1 HSBC Market Update Weekly Market Views Ma rch 16, 2012 Changes in Major Market Indices Market Index Index Close on Weekly Price Year-to-Date Mar. 16, 2012 Change % Price Change % Global & MSCI All Countries World Regional Equities 1 MSCI World 4, MSCI North America 5, MSCI All Countries Europe MSCI Asia Pacific ex-japan MSCI Eastern Europe MSCI Latin America 9, MSCI Global Emerging Markets 1, North American Equities 1 S&P 500 1, Nasdaq 3, DJIA 13, S&P/TSX Composite 12, European Equities 1 Euro Stoxx 50 2, FTSE 100 Index 5, CAC 40 3, DAX 7, Asia Pacific Equities 1 Nikkei , Topix TSE Second Board 2, Korea KOSPI 2, Hang Seng 21, Hang Seng China Enterprise 11, Taiwan 8, Singapore Strait 3, Bangkok SET 1, KL Composite 1, Australia S&P/ASX 200 4, Philippine SE 5, BRIC Equities 1 Brazil Bovespa Stock 67, Russian Trading System 1, India's SENSEX 17, China Shanghai A 2, China Shenzhen A 1, CIVETS Equities 1 Columbia IGBC General Index 15, Indonesia's JCI 4, Ho Chi Minh Egypt EGX 30 Index 5, Turkey ISE National 100 Index 62, South Africa FTSE/JSE Africa All Shr 34, Commodities 1 Crude Oil Future R/J CRB Futures Index Fixed Income Citigroup World Government Bond 2, JPMorgan Global High Yield Bond 2, Citigroup Global Emerging Mkt Gov't Sovereign 2, DEX Universe-Canada 1, Citigroup Treasury & Gov't Bond 1,3 1, HSBC Asian Bond 1, Current Yield Weekly Yield Change % Year-to-Date Yield Change % Ten Year US Government Germany Bonds Japan UK Canada Index Close on Mar. 16, 2012 Weekly Price Change % Year-to-Date Price Change % Foreign Exchange Euro Spot (Versus USD) British Pound Spot Japanese Yen Spot Data Source: MSCI and Bloomberg 1 Total Return Indices in Local Currency 2 These indices show total return in US dollars. 3 Closing data from the previous day s close.

2 HSBC Market Update Weekly Market Views March 16, 2012 Economic and Market Developments for the Week Ending March 16, 2012 Key Takeaways The statement from the US Federal Open Market Committee reflected a firmer outlook for US economic growth. China reported its biggest trade balance deficit ($31.5 billion) on record. Norway s central bank reduced its policy rate by 25 basis points to 1.5%. Summary The improved macroeconomic environment that has been encouraging the risk-on attitude among investors got a further boost from the recent statement by the Federal Open Market Committee (FOMC) reflecting a firmer outlook for US economic growth and labour market conditions. With investors lowering expectations for a possible further round of liquidity injection by the US Federal Reserve, the dollar appreciated and gold sold-off on the week. US 10-year yields jumped, mostly in response to the FOMC s upgrading of the economic outlook. Elsewhere, ratings agency Moody s and the International Swaps and Derivatives Association (ISDA) both declared Greece to have defaulted as per the condition of its debt exchange program, triggering the payment of credit default swaps. Data released during the week for the developed world were mostly in line with expectations. In the US, retail sales reported an increase of 1.1% month-over-month (meeting expectations) in February, reflecting the ongoing strength in automobile sales and increased spending on non-durable goods. The two major regional manufacturing surveys the Empire State Manufacturing Survey and the Federal Reserve Bank of Philadelphia s monthly Business Outlook Survey reported increased activity for the month of March. Average temperatures over the past few months in the US have been among the highest ever recorded during that period. There is a view that the warmer temperatures have lowered overall consumption and GDP growth, which could recover strongly during the upcoming spring season. February US inflation remains unchanged and in line with expectations at 2.9% year-over-year, while core inflation, which excludes more volatile items like food and energy, declined slightly to 2.2% year-over-year from 2.3% in January. In the eurozone, industrial production grew by 0.2% month-over-month (vs. consensus expectations for 0.5%) in January, with some of the German activity rebound being offset by a disappointing contraction in Italian production. The February inflation report showed that euro area inflation remains unchanged at 2.7% year-over-year, somewhat above the European Central Bank s target of 2.0%. The recent oil price increase has been the main cause of this sticky inflation rate in the eurozone. In the UK, the labour market remains broadly flat, with unemployment unchanged at 8.4%. In a surprise move, the Norges Bank (Norway s central bank) reduced its policy rate by 25 basis points to 1.5% to guard the domestic growth outlook against low inflation and a weak outlook elsewhere in the developed world. In Japan, machine orders rose by 3.4% month-over-month in January, higher than expectations, after a decline of 7.1% in December. Japan s consumer confidence came in at 39.5 for February, down from 40.0 in January. However, it is important to note that given the timing of the survey, it does not fully reflect the recent positive impact of the yen s depreciation, the stock market rise and policy changes by the Bank of Japan. In emerging markets, investors remained focused on ongoing political and economic developments with China. February s reported trade numbers indicated a sharper slowdown in both export and import growth than expected, while reporting the country s biggest trade balance deficit ($31.5 billion) on record. As the outlook for European economies (China s largest export destination) remains gloomy, these numbers reinforce the need for a step-up in monetary easing efforts by the People s Bank of China. In India, February headline Wholesale Price Index (WPI) inflation picked up more than expected (7.0% year-over-year vs. 6.6% in January), led by food inflation as base effects receded. This will keep the Reserve Bank of India cautious about lowering policy rates further, especially given the added pressure from rising oil prices. On the positive side, India s industrial production grew faster than expected in January (6.8% vs. 2.5% in December), driven by improvements in manufacturing and a big jump in non-durables. In Russia, industrial production growth accelerated in February to 6.5% year-over-year, its fastest pace in more than a year, on the back of growth in manufacturing and utilities. We continue to see improvement in the global economic situation and a reduction in tail risks. The steady improvements in manufacturing data and the positive political and policy developments in the eurozone have gone a long way in reassuring investors that financial assets are attractive and that the risks of a significant double-dip recession in the developed world have abated. However, changes to the framework of political decision-making and adjustments to government fiscal balances are likely to persist and fuel volatility in the markets. Furthermore, the recent increase in oil prices could pose additional concerns for global growth prospects. Government bond yields in developed countries remain low and continue to reflect a weak economic environment and low interest rates. Given the prospects of negative real returns, it is hard to envisage value in developed-market government bonds over the medium term, except as a portfolio stabilizer and moderator of risk. However, the same is not true for corporate issuers, particularly at the higher-yielding end of the spectrum, and so we continue to favour these over government bonds. Despite their recent strong run in performance, equities continue to trade at attractive forward price/earnings (PE) ratios, and so we maintain our moderate overweight position. Our key recommendation continues to be to remain well diversified.

3 HSBC Market Update Weekly Market Views March 16, 2012 Weekly Economic Calendar (All times expressed as Greenwich Mean Time) March 19, 2012 United States Europe Japan Sun Mon 14:00: National Association of Home Builders Housing Market Index, Mar (19 th 23 rd ) UK Nationwide Consumer Confidence, Feb (tentative) Bank of England Inflation Report Hearings, Q1 09:00: Eurozone Current Account, Jan Tue Wed Thu 12:30: Housing Starts, Feb 09:30: UK Consumer Price Index, Feb 09:30: UK Retail Price Index, Feb 11:00: Confederation of British Industry Industrial Order Expectations, Mar 14:00: Existing Home Sales, Feb 09:30: Bank of England Monetary Policy Meeting Minutes, Mar7-8 09:30: UK Public Sector Net Borrowing, Feb 12:30: UK Annual Budget Release 14:00: Leading Indicators, Feb 09:00: Eurozone Manufacturing Purchasing Managers Index, flash Mar 09:00: Eurozone Services Purchasing Managers Index, flash Mar 09:30: UK Retail Sales, Feb 10:00: Eurozone Industrial New Orders, Jan Bank Holiday 04:30: All Industries Activities Index, Jan 23:50: Trade Balance, Feb Fri 14:00: New Home Sales, Feb Sat

4 Equity market movement for 10 months ending March 16, ,500 13,000 12,500 12,000 11,500 11,000 10,500 10,000 Dow Jones Industrial Average 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 NASDAQ 9,500 1,800 9,000 DOW JONES INDUS. AVG INDU Index Last Price NASDAQ COM POSITE INDEX CCM P Index Last Price European equities Japanese equities 3,000 2,900 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000 13,000 12,500 12,000 11,500 11,000 10,500 10,000 9,500 9,000 8,500 8,000 DJ STOXX 50 = PR SX5P Index Last Price NIKKEI 225 NKY Index Last Price Asia Pacific (ex-japan) equities* BRIC equities* A ug S ep S ep O ct-11 M SCI AC ASIA PAC EX JAPN Last Price MSCI EM BRIC USD MSEUBRIC Index Last Price Source: Bloomberg *Source: MSCI

5 Bond/currency market movement for 10 months ending March 16, 2012 Global government bonds 3-month LIBOR Citigroup WGBI All Maturities SBWGU Index Last Price BBA LIBOR USD 3 Month Last Price EUR/USD USD/JPY EURO SPOT EUR Currency Last Price JAPANESE YEN SPOT JPY Currency Last Price Crude Oil Spot Gold 130 1, ,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 Generic 1st 'CL' Future CL1 Commodity Last Price GOLD SPOT $/OZ GOLDS Index Last Price Source: Bloomberg

6 Issued by HSBC Bank Malaysia Berhad (Company No V) ( HSBC ). The information in this newsletter has been obtained from reports (relevant reports) issued by HSBC Global Asset Management (GAM). HSBC Global Asset Management is a part of HSBC Group. Whilst every care has been taken in preparing and issuing this document, HSBC, GAM and the HSBC Group make no guarantee, representation or warranty and accept no responsibility or liability as to its accuracy or completeness. Some of the information in this document is derived from third party sources as specified at the relevant places where such information is set out. GAM believes such information to be reliable but it has not independently verified. All opinions and estimates constitute GAM judgment as of the date(s) of the relevant reports issued by GAM and are subject to change without notice. The information contained in this document is not directed at and is not intended for the residents of the United States, Canada or Australia. The information contained in this document has not been reviewed in the light of your personal financial circumstances. HSBC, GAM and the HSBC Group are not providing any financial or investment advice. The information is not and should not be construed as an offer or solicitation, or recommendation, to acquire or dispose of any investment and should not be considered as investment advice. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment. Investment involves risk, value of investment may move up or down, and may become valueless. Past performance figures shown are not indicative of future performance. The relevant product offering documents should be read for further details.