HSBC Global Asset Management China Research Field Trip: China in Transition

Transcription

1 HSBC Global Asset Management China Research Field Trip: China in Transition Presented by: Bill Maldonado, Chief Investment Officer, Asia-Pacific and Strategy Chief Investment Officer, Equities 13 October 215

2 Content page China macro: What s happened and where we are now Looking ahead: Where are the investment opportunities? The way forward: Implications for asset management 215 F 22 F 2

3 What s happened and where we are now

4 China in transition: from rapid growth to new normal The Chinese economy is entering a new normal phase after decades of rapid expansion, with a focus on structural reforms and quality of growth We expect China s real GDP growth to slow to 6-7% over the next 3-5 years from about 7% currently Efforts to address debt overhang and overcapacity will likely weigh on the medium-term growth outlook While economic restructuring should bring long-term gains, there will be short-term pains such as greater financial market volatility during this transition China s slower economic growth reflects both cyclical and structural factors % QoQ, sa, annualised YoY 1Q 1Q2 1Q4 1Q6 1Q8 1Q1 1Q12 1Q14 Note: Li Keqiang index is an index tracking growth in railway cargo, power consumption and total social financing (TSF)/bank lending Source: CEIC, HSBC Global Asset Management, data at of June Industrial activity showed signs of growth stabilisation, but economic momentum remained weak Li Keqiang index*, lhs Industrial production (% yoy), lhs Real GDP growth (% yoy), rhs 1/8 1/9 1/1 1/11 1/12 1/13 1/14 1/15 % yoy

5 China s economy today: more domestic demand and consumption driven Contribution of net exports to China s economic growth has declined post global financial crisis Authorities are committed to moving the economy away from credit-fuelled, investment-driven and resourcesintensive growth model toward a more balanced and sustainable one There has been internal economic re-balancing with consumption contributing more to GDP growth in 214/H1 215 amid weakness in investment Consumption has slowed but been relatively resilient than investment and external trade The share of household consumption has edged up while that of investment has peaked off % Household consumption Gross capital formation Net exports Government consumption -5-1 Net exports (ppt) Investment (ppt) Consumption (percentage points; ppt) GDP growth (%, yoy) (1H) Source: CEIC, HSBC Global Asset Management, data as of September

6 Demographic challenges China has witnessed a demographic transition and changes in the labour market dynamics, as evidenced by a mismatch of skills as well as labour shortages and rising wages for unskilled workers China faces the demographic challenges as its population is ageing and the size of the labor force has peaked off As a result, the government has started to focus on social financing and safety nets, as well as healthcare reform Unit labour costs (OECD competitiveness indicator) 1995=1 3 China India 25 Indonesia Korea 2 Brazil Population is ageing and working-age population has peaked off Million persons Working-age population*, lhs Old-age dependency ratio**, rhs % Source: UN World Population Prospects (the 214 revision), Bloomberg, HSBC Global Asset Management, data as of September

7 Headwinds from high leverage and capital misallocation A sharp increase in domestic investment and production capacity fuelled by debt and cheap credit, as well as misallocation of capital has created excess capacity The trend in productivity of capital has deteriorated Lower growth in productivity of capital and labour has contributed to slowing total factor productivity growth Rising leverage and declining productivity of capital % TSF % GDP, lhs Incremental capital output ratio, rhs Slowing productivity growth % yoy Total factor productivity (TFP) -5 Labour productivity Note: simplistically, ICOR measures additional capital required to increase one unit of output (1% of GDP growth) Source: UN World Population Prospects (the 214 revision), Bloomberg, HSBC Global Asset Management, data as of September

8 Increasing use of RMB in international transactions China has accelerated capital market opening-up to foster RMB internationalisation and deepen the offshore market This has been facilitate by China s growing weight in global trade, the size of its economy and its role as the world s largest creditors CNH bond issuance in Hong Kong increased significantly CNY bn New CNH bond issuance in Hong Kong Fast development in offshore CNH market CNY bn 18, 16, 14, 12, 1, 8, 6, 4, 2, Cross-border RMB trade settlement (accumulated), lhs RMB deposits in Hong Kong, rhs RMB CDs outstanding in Hong Kong, rhs Source: CEIC, HSBC Global Asset Management, data as of July 215. CNY bn 1,2 1, RMB deposits in selected offshore markets RMBbn RMBbn 4 Singapore, lhs 1,2 35 Taiwan, lhs 1, 3 Hong Kong, rhs /5 1/7 1/9 1/11 1/13 1/15

9 Potential to include the RMB in the IMF s SDR To meet a key criterion for the RMB s SDR inclusion, that the RMB is freely usable in international capital transactions, China needs to accelerate capital account liberalisation, FX regime reform and domestic financial reforms An inclusion in the SDR may be seen as a symbolic milestone in China's emergence as a key player in the global financial system, and an important step forward in RMB internationalisation (promoting the role of the RMB as a reserve currency) China is one of the largest exporters of goods and services in the world The CNY is the world s 5 th most used currency in global payments processed by SWITF USDbn 2,5 2, 1,5 1, average US China Germany Japan France UK Note: SWIFT Society for Worldwide Interbank Financial Telecommunication Source: IMF, SWIFT, HSBC Global Asset Management, data at of March USD EUR GBP JPY CNY CAD AUD CHF HKD SGD THB SEK NOK PLN ZAR DKK Use in SWIFT transaction (December 214) %

10 CNY fixing adjustment: a big step towards RMB internationalisation The PBoC announced a one-off adjustment to the fixing and the daily fixing mechanism for onshore USD-CNY exchange rate on 11 August This is accompanied by the accelerating pace of capital account liberalisation Capital account liberalisation could potentially improve the efficiency of capital/resources allocation; enable Chinese residents and corporates to diversify their asset portfolios; help to increase financial market depth; and is an inevitable part of domestic reform Fast development in offshore CNH market Approved investment funds by Chinese authorities (accumulated amount) CNY bn 18, 16, 14, 12, 1, 8, 6, 4, 2, Cross-border RMB trade settlement (accumulated), lhs RMB deposits in Hong Kong, rhs RMB CDs outstanding in Hong Kong, rhs CNY bn 1,2 1, RQFII (CNY bn), lhs QFII (USD bn), rhs 35 QDII (USD bn), rhs /4 1/6 1/8 1/1 1/12 1/ Source: Bloomberg, HSBC Global Asset Management, data at of 14 August 215 Source: CEIC, HSBC Global Asset Management, data as of June 215 1

11 RMB currency has been incredibly strong Despite recent concerns over the recent adjustment, the RMB has been relatively strong compared to other currencies Jan 21 = Trade weighted currencies - Real broad Jan 21 = Australia Brazil China Euro area Japan Korea Switzerland United Kingdom United States 6 Source: BIS, HSBC Global Research 11

12 Explosive e-commerce growth has driven a new consumption culture In China s e-commerce 12th Five-Year Plan ( ), the government unveiled policies to make China a global e-commerce leader, in line with China s transition from an investment-led growth model towards a more consumption-driven one The rise of on-line transactions and the increasingly important roles of social media and mobile devices are reshaping the ways Chinese consumers purchase goods and services The number of Internet users in China has grown rapidly, although the Internet penetration is still below 5% (48.8% as of June-215 in aggregate for both urban and rural areas) The e-commerce market is becoming an increasingly important channel for consumption CNY trn E-commerce (retail sales), rhs E-commerce (B2B), lhs CNY trn The Internet market has grown rapidly Million persons % No of Internet user (urban), lhs No of Internet user (rural), lhs Internet penetration rate (rural), rhs Internet penetration rate (urban), rhs Source: CEIC, HSBC Global Asset Management, data as of September

13 Effective reform implementation is key to unleash China s growth potential Area Key initiatives and goals Fiscal reform ** Introduction of a unified and comprehensive budgetary system consisting of both the general budget and previous extra-budget items ** To improve the transparency with mandatory public disclosure of government budgets ** Municipal bonds will provide local governments with more transparent, stable, lower-cost and longer-maturity sources of financing and reduce their reliance on borrowing from bank loans and shadow banking credit ** To redistribute fiscal revenues and expenditures between central and local governments, to improve local governments' fiscal sustainability ** To strengthening management and supervision of local government debt and addressing risks associated with LGFVs ** To improve the tax system Financial reform ** Lending rate has been deregulated. Deposit insurance scheme has been launched, paving way for the liberalization of deposit rate ** A deposit insurance scheme will help reduce the risk of a systemic bank run should one bank faces liquidity or solvency problems ** Crucial to substantially raise the efficiency of credit allocation and the returns to investment, and to help ensure credit risk is appropriately priced. ** Expect more market-based pricing of credit and the diversification of credit channels, via the development of a multi-layer onshore capital market, including a municipal bond market ** To accelerate CNY capital account converbility and internationalisation ** Approval for private investors to establish commercial banks SOE reform ** To promote mixed ownership to improve SOE efficiency and corporate governance, and to also attract additional capital ** To increase competition in some SOE-monopolistic sectors via private sector participation ** To allow non-public capital to take equity stakes in public sector-led investment projects ** To improve the state-owned asset management system ** To increase dividend payout ratio Deregulation ** Market-based resources pricing to improve the efficiency of resource allocation as well as promote energy conservation and renewable resources ** To lower entry barriers for private companies and foreign investment ** To simplify investment approval procedures for private investors Hukou reform ** To transfer qualified rural migrant population to urban residents through a gradual process and grant them the access to the urban housing and social security system ** Hukou reform and rural land reform are key to the new urbanisation, which should help release the effective demand of migrators for property, boost their consumption, and sustain job creation ** According to the urbanisation reform plan unveiled at end-july, rural people no longer need to give up their property rights to rural land and collective undertakings when obtaining urban Hukou ** The State Council s draft residence permit regulation will allow people to obtain residence permits in the place of their residence to access to basic social security/welfare services Land reform ** Aims to improve the land-use efficiency and to protect farmers' interest in land transaction by giving farmers more rights over collectively owned rural land **... and to increase farmers' income, which will effectively reduce the urban-rural income gap One child policy ** Incremental population growth to help slow the speed of ageing of the economy 13

14 Where are the investment opportunities?

15 Monetary policies and lower rates provide support for equity market The easing in China s monetary polices has been driving the short-end rate curve lower, which provides a positive backdrop for equities Meanwhile, the local government debt swap scheme marks a major step in local government debt reform and restructuring. It could lower funding costs and interest burden for local governments, extend their debt maturities, and reduce their financing/liquidity risk in the near term China interbank rates % /11 1/12 1/13 1/14 1/15 7-day repo 1-year IRS (7-day repo) 3-month Shibor 7-day reverse repo Source: Bloomberg, HSBC Global Asset Management, data as of as of September

16 Monetary policies and lower rates provide support for equity market Since last November, the benchmark lending rate in China has been cut by 115 bps and RRR (the reserve requirement ratio) for major commercial banks were down by 15 bps in an attempt to support growth and lower real financing costs Real interest rate remains high in China while it is close to zero or negative in key developed markets such as the US, Eurozone and Japan Ample room for further rate cuts, with CPI at only 2% and PPI at -5.9% in August China s real interest rate vs Japan, Eurozone and the US /6 12/7 1/9 2/1 3/11 4/12 5/13 6/14 7/15 US Real China Real Eurozone Real Japan Real Note: Data using local 3 month interbank rates minus local CPI inflation as a proxy for real interest rate Source: HSBC Global Asset Management, Bloomberg, data as of September

17 Plenty of room for RRR cut At 18%, the reserve requirement ratio (RRR) of China remains one of the highest in the world, even after the RRR cut in August 215 There remains plenty of room for RRR cut to ensure sufficient liquidity and credit support for the economy, lower corporate funding costs, and stabilise economic growth and financial markets Reserve requirement ratio (%) 25 RRR (%) Note UK N.A. No reserve requirements Germany France Italy Japan Korea US China Brazil Canada N.A. No reserve requirements Germany 1. France 1. Italy 1. For liabilities with maturity up to two years; with various deductions For liabilities with maturity up to two years; with various deductions For liabilities with maturity up to two years; with various deductions Japan 1.2 For time deposits more than 2.5 trillion yen Korea 2. For Time deposits, installment savings, mutual installments, housing installments, CDs US 1. For net transaction accounts more than $13.6m China 18. For large banks Brazil 2. Demand deposits 45%; time deposits 2% Source: CICC, data as of August

18 SOE reform could drive an improvement in ROE and re-rating A significant proportion of market cap is made up by SOEs in China By aiming to enhance efficiency and control cost, SOE reform will potentially improve ROE of SOEs and drive market re-rating In the past 5 years, state owned enterprises (SOEs) underperformed privately owned enterprises (POEs) by 9%; However, SOEs have outperformed POEs by 8% in the past 12 months SOEs have outperformed POEs in the past year SOE reform 2% Asset injection (only 1/3 of SOE assets are listed; 2/3 will likely be injected eventually) 15% 1% 5% % -5% 16% 13% 11% 9% 8% 5% 4% 1% -1% -3% -3% -4% 5yr CAGR 3yr CAGR 1yr CAGR YTD CAGR Asset disposal of non-performing assets Mixed ownership structure (private enterprises becoming major investors and providing new incentives to the SOE employees) M&As to address and tackle overcapacity Group listing Deleverage Increase dividend payout ratio POE POE (excl Tencent) SOE Note: Any forecast, projection or target contained in this presentation is for information purpose only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purpose only. Investment involves risks. Past performance is not indicative of future performance Source: HSBC Global Research, data as of August

19 Chinese A-share market will potentially be included into global benchmarks On 9 June, MSCI decided to defer a move on A-shares inclusion, saying A shares would be included in its global benchmarks once some market access issues are resolved This followed an announcement by FTSE Russell last month to launch two new emerging market indices with 5% weighting of A-shares, paving the way for the inclusion of A-shares in its global benchmarks within two years We expect China to be 1/3 of EM and APJ in 2 years after ADR and A-share inclusion (5% inclusion factor). The potential inclusion of A-shares into global equity benchmarks may attract billions of fund flows from abroad and provide long-term support to the market We expect China to be around 1/3 of EM and APJ in 2 years after ADR and A-share inclusion (5% inclusion factor) Pro-forma weight in indices 5% 46.% 45% 44.% 4% 35% 5.3% 1.5% 31.% 3% 4.9% 1.4% 28.% 24.% 25% 22.% 2% 15% 1% 5% % MSCI EM MXAPJ MSCI China China ADR China A (IF = 5%) All China (A-share 5%) All China (A-share China's pro-forma weight A-share inclusion factor MSCI EM MXAPJ 5% 31% 28% 1% 32% 29% 2% 34% 31% 3% 35% 33% 4% 37% 35% 5% 39% 37% 6% 41% 38% 7% 42% 4% 8% 43% 41% 9% 45% 42% 1% 46% 44% Source: MSCI, Bloomberg, Goldman Sachs, data as of June 215. Any forecast, projection or target contained in this presentation is for information purpose only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purpose only. 19

20 The global high speed rail and infrastructure boom Impact of One Belt, One Road programme The USD4bn silk road fund and USD1bn Asia infra investment bank may likely bring an estimation of USD45bn/annum incremental overseas revenue impact to Chinese E&Cs, or about 2-9% 216 EPS accretion China plans to construct 34,6km of HSR for itself and 34,7km for other countries (37.2% of the global total plan). In particular, the One Belt One Road program will involve HSR construction of 26,3km. As such, Chinese HSR companies could account for 74.2% (69,4km) of the global total plan and their overseas revenue could reach as much as 5% of their total revenue Map of the New Silk Road Plan Source: Citi Research, Xinhua, United Nations, data as of December 214 2

21 One Belt One Road (OBOR) strategy The OBOR strategy involves developing trade and infrastructure networks linking Asia and Europe through a landbased belt and maritime routes The OBOR strategy is consistent with the rapid growth of China s outward investment as Chinese companies are pursuing global expansion opportunities The OBOR could generate demand for China s exports, help China export excess capacity, invest more in the less developed central and western regions of China, as well as have a positive impact on China s industrial upgrading and economic transformation in the long term It can also serve as another channel to promote the RMB internationalisation China s increasing outward direct investment USDbn Non-financial sectors (annual), lhs Financial sector (annual), lhs Non-financial sectors (accumulated), rhs USDbn Source: CEIC, HSBC Global Asset Management, data as of June

22 Positive impact of One Belt, One Road programme The Asia Infrastructure Investment Bank (AIIB) and Silk Road Fund (SRF) may create around USD33-35bn of incremental investment altogether, which can translate into an average annual spending of USD45bn assuming a 8-year investment cycle This represents ~1/3 of China s overseas contract business Railway equipment and E&C sectors which have stronger overseas franchise, larger overseas exposure and higher absolute margin levels, stand to benefit Sensitivity analysis on key assumptions of AIIB and SRF Source: Goldman Sachs Global investment Research, Gao Hua Securities Research, data as of December 214. For illustrative purpose only and does not constitute investment advice 22

23 Mutual recognition of funds a milestone of financial market liberalisation International asset managers will be allowed to sell their Hong Kong-registered fund products directly to Chinese retail investors for the first time and likewise, China-registered fund products will be made available to international investors as well Mutual funds domiciled in Hong Kong or mainland China with at least RMB2 million AUM (around USD32 million) and established for more than one year can apply for authorisation starting from July 215 A diversification opportunity for local investors as they have more channel to invest in overseas securities like bonds, fixed income and multi-asset products. Overseas investors have more opportunities to invest in local assets The financial sector, namely asset managers, will likely to benefit from this measure which aims to further open China's capital market About 6% of eligible funds in Hong Kong under MRF mechanism are equity funds Fixed income 17% Mixed allocation 2% Money market 2% Equity 61% Over 5% of all eligible funds are focused on China/Hong Kong US 1% European region 1% Japan 1% Asia Pacific region 14% Others 17% Global 15% China 18% Hong Kong 33% Source: Bloomberg, Wind, CICC, data as of June

24 Implications for asset management

25 Heightened volatility in Chinese equity markets The volatility of Chinese equity remains heightened in Q3 amid weak China macro data, concerns over reform prospects, and global de-risking FX also adds another layer of complexity for Chinese stocks after the one-off devaluation in mid August The weakness in the economy is broadly in line with our expectations. We continue to expect downward earnings revision in selective sectors like autos and consumer staples due to margins compression and slower than expected top-line growth Performance of Chinese equities in 215 CSI 3 5,4 MSCI China ,9 8 4,4 75 3, ,4 6 2,9 1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15 9/15 55 CSI 3 (LHS) MSCI China (RHS) Source: Bloomberg, data as of 3 September 215. Any forecast, projection or target contained in this presentation is for information purposes only and is not guaranteed in anyway. HSBC accepts no liability for any failure to meet such forecasts, projections or targets. Investment involves risks. Past performance is not indicative of future performance. 25

26 Market inefficiencies provide opportunities for stock pickers In the short-term, equity markets are inefficient; sector and stock valuation anomalies tend to correct over the longer-term Concentrating overweight positions within profitable sectors and stocks at below-average valuations and ignoring mainstream fairly valued stocks and associated market chatter will enhance returns As stock pickers we believe that volatility affords us an opportunity to uncover mispriced stocks that could potentially deliver long term returns 26

27 China s economic conditions more stable than during the 199s cycle Compared to 199s cycle, China currently has: Better debt profile large part of the debt build-up has been in domestic instead of external lower inflation current benign inflation offers flexibility for PBoC to maintain easing bias Stronger current account surplus Larger FX reserves China s current macro data vs 1996/ latest External debt (% of GDP) CPI (yoy %) Current account balance (% of GDP) FX reserve (% of GDP) Source: Morgan Stanley, data as of August

28 ..yet current valuation of Chinese equities is lower than GFC level MSCI China is trading at 1.21x P/B a level lower than the 1.51x P/B in Oct 8 (global financial crisis) and the 1.22x P/B seen in April 23 (SARS episode) Price-to-book (x) x in Apr x in Oct x in Jun x in Sep 15.43x in Aug 98.54x in Feb MSCI China - trailing price-to-book (x) Source: MSCI, Credit Suisse, data as of 3 September

29 and attractive versus history MSCI China is trading at 9.1x forward P/E and 1.2x P/B vs 1-year average of 12.5x and 2.1x Valuations for Chinese equities are attractive compared to history Forward price-to-earnings (x) Price-to-book (x) 3 MSCI China stdev: 16.3x 15 Average: 12.5x 1-1 stdev: 8.8x 5 1/5 1/6 1/7 1/8 1/9 1/1 9/11 9/12 9/13 9/14 9/ MSCI China +1 stdev: 2.8x Average: 2.1x -1 stdev: 1.4x 1/5 1/6 1/7 1/8 1/9 1/1 9/11 9/12 9/13 9/14 9/15 Source: Bloomberg. Data as of end September

30 Price-to-book (x) Offshore Chinese equities remain cheap and at attractive profitability levels Offshore Chinese equities remain attractive from a valuation perspective, with higher profitability when compared to the Asia Pacific ex Japan region Price-to-book vs return-on-equity relative to Asia Pacific ex Japan India Philippines 2.5 Indonesia 2. China (A-share) Malaysia Australia Thailand Taiwan 1.5 Asia Pacific ex Japan Singapore Asia ex Japan Hong Kong China (offshore) 1. 8% 1% 12% 14% 16% 18% 2% Return on equity Source: HSBC Global Asset Management, data as of September 215. Investment involves risks. Past performance is not indicative of future performance. 3

31 Offshore RMB bond market often offers higher yields Offshore RMB bonds are on average yielding 5.%, while average duration is only 2.7 years Bonds denominated in CNH tend to have higher yields, compared to bonds in other major currencies such as USD and EUR, even when comparing the same issuer with very similar tenor Company 1: Total (bond issued on 12 Sep 213) Same bond in different currencies Yield (%) on 24 Aug 215 Total 3.75% 9/24/218 (CNH) 4.7 Total 2.125% 8/1/218 (USD) 1.69 Total 4.875% 1/28/219 (EUR).28 Company 2: BPLN (bond issued on 2 Oct 213) Same bond in different currencies Yield (%) on 24 Aug 215 BPLN 3.95% 1/8/218 (CNH) 4.63 BPLN 2.241% 9/26/218 (USD) 1.89 BPLN 2.994% 2/18/219 (EUR).56 Source: HSBC Global Asset Management; Bloomberg, data as at 28 Jan 215. The data presented is for information and illustration purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or investment strategy 31

32 Yields in the offshore market are attractive on a risk adjusted basis Duration of the market is only around 2.7 years Therefore the duration-adjusted yield is attractive Yield comparison Asian hard currency bond vs offshore RMB bond (%) Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 HSBC Asian US Dollar Bond Index BofA Merrill Lynch Euro Corporate Index BofA Merrill Lynch US Corporate Index HSBC Offshore RMB Bond Index Historical yield (duration adjusted) Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 HSBC Asian US Dollar Bond Index BofA Merrill Lynch Euro Corporate Index BofA Merrill Lynch US Corporate Index HSBC Offshore RMB Bond Index Source: HSBC Global Asset Management; Bloomberg, data as of 31 August

33 Key risks and disclosures

34 Key risks Investor sentiment may be susceptible to macro concerns, including the Eurozone debt Investor should be reminded that investment in some of the developing Asian countries may involve special considerations and risks. Below could affect adversely the economies of such countries or the value of the investment Political changes Government regulation Social instability Diplomatic development Global economic development etc. Emerging markets can be significantly more volatile than developed markets, so that the value of investments may be subject to larger fluctuations Currency movement and market condition may affect the value of investments 34

35 Explanatory notes and disclaimers The document is confidential and is supplied to you solely for your information. This document should not be reproduced or further distributed to any person or entities, whether in whole or in part, for any purpose. Investment involves risk and past performance is not indicative of future performance. Please refer to the offering document for further details including the risk factors. The document has not been reviewed by the Securities and Futures Commission. The material contained herein is not intended to provide professional advice and should not be relied upon in that regard. Readers should seek appropriate professional advice where necessary. The opinions expressed herein should not be considered to be a recommendation by HSBC Global Asset Management (Hong Kong) Limited to any reader of this material to buy or sell securities, commodities, currencies or other investments referred to herein. HSBC Global Asset Management (Hong Kong) Limited, its ultimate and intermediate holding companies, subsidiaries, affiliates, clients, directors and/or staff may, at any time, have a position in the markets referred to herein, and may buy or sell securities, currencies, or any other financial instruments in such markets. HSBC Global Asset Management (Hong Kong) Limited has based this document on information obtained from sources it believes to be reliable but which it has not independently verified. HSBC Global Asset Management (Hong Kong) Limited and the HSBC Group make no guarantees, representations or warranties and accept no responsibility or liability as to its accuracy or completeness. Information in this report is subject to change without notice. This presentation is intended for Professional Investors as defined in the Securities and Futures Ordinance in Hong Kong. 35

36 Appendix

37 HSBC Global Asset Management (Hong Kong) Limited Address: Level 22, HSBC Main Building, 1 Queen s Rd Central, Hong Kong Telephone: Facsimile: Website: 37