China Insights Monthly update on Chinese markets

Transcription

1 China Insights Monthly update on Chinese markets February 217 Summary The PBoC hiked interest rates on its lending facilities, signally a shift to focus on controlling leverage, as growth stabilises. Growth stability is still an important policy objective and we don t expect substantially or sustainably higher rates. China s activity data remained resilient in early 217, and a sharp uptick in PPI inflation is supportive of an improvement in industrial corporate profits. Offshore Chinese equities got off to a strong start in 217; RMB bonds retreated on higher funding costs. Hot topic: China s monetary policy shifts to focus on risk control China has increased the interest rates on its lending facilities, in the latest sign that the central bank is adopting a slight tightening bias in its monetary policy stance. The PBoC has, at the same time, been injecting liquidity in the markets. We believe the latest moves signal a policy focus on financial deleveraging and controlling financial risks, given that near term growth outlook has stabilised recently. Here, we discuss our latest outlook for China s monetary policy and the investment implications of the latest interest rate increases. PBoC hikes rates on reverse repos, SLF and MLF On 24 January, the PBoC raised the 1-year and 6-month Medium-term Lending Facility (MLF) rate by 1bps each, while injecting CNY245.5bn into the financial system via open market operations, to meet high seasonal/holiday cash demand. Subsequently, the central bank also increased interest rates on its reverse repo agreements and the Standing Lending Facility (SLF). The 7-day, 14-day and 28-day reverse repo were each hiked by 1 bps, the 7- day and 1-month SLF rate was also hiked by 1 bps, and the overnight SLF rate was hiked by 35 bps. While these are not the benchmark deposit/lending rates, China has moved away from administering these rates since the completion of the interest rate liberalisation in October 215. China s monetary policy is in transition to a framework in which the PBoC manages market rates through its interest rates on lending facilities and open market operations. As a result, the SLF rates, rates at which banks can obtain liquidity from the PBoC, represent a ceiling for interbank rates, while the reverse repo rates create a centre of gravity for interbank rates. Any forecast, projection or target contained in this presentation is for information purposes 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. The rate moves have shifted the structure of the interest rate corridor upwards. The latest hike in selected policy rates sends signal of targeted tightening % D reverse repo 28D reverse repo 7D SLF 14D reverse repo O/N SLF 1M SLF Note: SLF = Standing Lending Facility; MLF = Medium-term Lending Facility; PSL = Pledged Supplementary Lending; o/s = outstanding Source: CEIC, HSBC Global Asset Management, data as of February 217. (Continued on next page)

2 China Insights February 217 (Continued: China s monetary policy shifts to focus on risk control) Policy focus on financial deleveraging and risk control, as growth stabilises The Chinese economy ended 216 on a solid footing. In 216, the economy grew 6.7%, meeting the government s % growth target, amid fiscal stimulus and strong credit growth. Consumer spending has been resilient, old economy sectors have seen a recovery, while exports and manufacturing sectors have benefitted from higher commodity prices and PPI reflation. The annual Central Economic Work Conference highlighted that stability is the key for 217 economic planning, with containing financial risks a high priority. We think the growth target for this year is likely to be set at around 6.5%. Given a relatively stable near-term growth outlook and lower real borrowing costs on a strong PPI rebound, policy has recently shifted to focus on reining in leverage both in the real economy and the financial system and containing financial risks (asset bubbles, shadow banking and capital outflows, etc.) as well as managing inflation expectations, the key intentions behind the latest interest rate increases. Higher nominal GDP growth, amid PPI reflation, has helped improve corporate profits % yoy % As a result, we also do not expect interest rates to go substantially or sustainably higher, as rate hikes are constrained by high debt levels. Financial institutions ranging from smaller banks and securities houses to asset managers and wealth management products (WNPs), corporates and local governments are all vulnerable to higher rates. The Chinese economy heavily depends on credit growth for growth and there are high refinancing needs coming down the pipeline. Investment Implications While the latest rate moves send a strong policy signal, the impact on the corporate sector s real financial burden should be limited. Unlike the benchmark deposit/lending rates which would affect the broader economy more directly, the recent money market rate hikes mainly impact financial institutions. The rate adjustments are small and reflation has helped push real interest rates lower. The increase in interbank rates could eventually push up the mortgage rate, with banks likely to reduce discounts on new mortgages, but the impact should be small, barring any significant or persistent rises in short-term market rates. China s highly-leveraged economy and financial system/institutions are highly vulnerable to interest rate increases. Thus, we expect the authorities approach to deleveraging to remain calibrated and gradual and the PBoC to actively manage liquidity conditions to prevent the risk of credit crunch or any persistent sharp moves in market rates Industrial profits (LHS) Nominal GDP (RHS) Industrial profits (ytd) (LHS) Source: CEIC, HSBC Global Asset Management, data as of February 217 Prudent and neutral monetary policy stance with a slight bias towards liquidity tightening While the size of the rate increases are modest, it signals that the monetary policy stance is prudent and neutral with a slight tightening bias. We expect interbank rates to remain volatile and see limited room for rates to fall in the near term, unless there are clear signs of financial deleveraging or economic growth slowing. Higher rates could also help ease RMB depreciation pressure by widening the China-US/global bond yield spread. Meanwhile, the PBoC is providing sufficient (medium-to-longterm) liquidity to maintain overall stable credit growth, striking a tight liquidity supply-demand balance. Growth stability is still an important policy objective in a year of leadership transition, although we believe fiscal policy will likely do most of the lifting. The economy also continues to face structural challenges, but it needs structural reforms, such as faster SOE reforms to shut down zombie SOEs and accelerate debt resolution, rather than monetary stimulus In the near term, policy focus on deleveraging could increase money market volatility and lead to periodic bouts of liquidity tightness, weighing on bonds in the near term as the pool of funds available for bond investments, especially leverage trades, will likely shrink. As such, we believe yields may remain elevated in the near term, with no near term catalysts for a major trend reversal. That said, we are not expecting excessive tightening measures. In addition, PPI living materials have remained stable and therefore the recent rebound is not expected to pass onto higher CPI inflation pressures. This, along with moderate growth, means that we believe current bond yields are at relatively high levels and will revert lower later this year as economic conditions and inflation pressure start to show signs of easing. More broadly, financial deleveraging is positive for the markets in the long run and improve the likelihood of more healthy and sustainable growth. The small hikes in interest rates on the PBoC s liquidity tools should have limited impact on corporate earnings broadly. On the back of higher bond yields, banks should see net interest margin (NIM) expansion on the back of higher interest rates. However, concerns about further liquidity tightening and future policy/regulatory uncertainty could impact sentiment. Earnings recovery and structural reforms (e.g. SOE reform and supply-side reform/excess capacity cuts, etc.) will likely be the main catalysts for Chinese equities, with diminished liquidity support.

3 China Insights February 217 In the spotlight Chinese economy resilient in early 217; PPI inflation sees notable uptick Resilient activity data; recovery in output prices and profitability of mining and metal industries The Chinese economy ended 216 on a firm footing, supported by resilient domestic demand on the back of fiscal stimulus and strong credit growth, as well as a recovery in output prices for and profitability of the upstream/overcapacity industries driven by supply discipline. Commodity restocking and a modest global growth recovery support China s exports and manufacturing in the near term, despite considerable uncertainties over the strength of global demand and from potential US protectionist policies. Activity data, such as trade and PMI, continued to look resilient at the start of 217, although we caution that the distortions from the Lunar New Year holiday make it a challenge to interpret the data. Recent PPI reflation supportive of industrial corporate profits and mitigates financial risks in near-term The most notable data print has been a sharp turn in PPI, ending five consecutive years of deflation and with PPI inflation surging to 6.9% yoy in January, the highest since August 211. PPI reflation has been driven by a strong rebound in upstream industries such as mining and raw materials, given a combination of a low base, rising import prices due to higher global oil and commodity prices and RMB depreciation vs. the USD in 216, and overcapacity cuts in the domestic market. However, PPI for consumer goods stayed modest at.8%. PPI reflation has been more related to rising supply-side costs than demand strength. The yoy PPI inflation is likely to stay elevated in the near term, although the sequential mom rate of increase may have peaked. Energy and commodity prices may be supported by supply factors such as excess capacity reductions or output restrictions, or improving global demand and broadly stable domestic demand in China (particularly robust infrastructure investment helping to offset an anticipated softening of property investment). Exchange rate movement will also affect imported inflation. PPI reflation helps improve industrial corporate profits (particularly upstream industries) and mitigate financial risks in the near term, as these industries tend to be highly leveraged. The rise of non-performing loans has slowed somewhat among these industries. However, in the near term, a faster increase in input costs than in output prices would hurt margins of downstream producers. Furthermore, any potential supply response could limit the upside of commodity price inflation. While the government s supply-side reforms will likely expand beyond the coal and steel industries to others such as cement, aluminum, glass and shipbuilding this year, the risk is that if margins are attractive enough on elevated prices, closed capacities may be restarted. CPI inflation expected to remain benign So far there is little sign of the sharp reflation in the industrial sector spreading to the non-industrial part of the economy. The large increase in headline CPI inflation in January was mainly driven by price increases in Lunar New Year holiday-related goods and services (e.g. food, tourism and transportation). However, core (ex. food & energy) and services CPI inflation have also been rising steadily. The PBoC survey showed household inflation expectations rose for a third straight quarter in Q We think a moderate CPI reflation has been and is likely to be driven by the lagged effects from monetary easing and strong housing price gains in 216, higher energy/fuel prices, deregulation of pricing in some services sectors (e.g. healthcare, transportation, electricity and oil & gas), and a modest pass-through from PPI to CPI. CPI inflation is also supported by resilient consumer demand and the expectations of a potential global reflation cycle, although external demand risks persist. Food price volatility remains a key factor for the CPI outlook. However, slower wage growth, a cooling housing market, and a moderate slowdown in economic growth, could contain the PPI feed-through to CPI. Prudent monetary policy keep inflationary pressures in check; broad-based tightening not expected in the near term We do not expect the PBoC to react to the sharp PPI reflation with broad-based policy tightening unless we see more signs of a broad-based and sustainable rise in inflationary pressures. However, rising inflation reinforces the recent monetary policy shift toward maintaining a tight liquidity bias and tolerating higher volatility in money market rates aimed at financial deleveraging and containing financial risks. Such policy bias should also help contain inflationary pressure. PPI reflation driven more by supply-side cost push Modest pass-through from PPI to CPI; CPI has been than strengthening demand rising but remains benign % yoy 4 PPI breakdown % yoy % yoy Aggregate Mining Raw material Manufacturing CPI (LHS) PPI (LHS) Consumer goods Core CPI (LHS) Import prices (RHS) Source: CEIC, HSBC Global Asset Management, as of February

4 China Insights February 217 Equity market Improving fundamentals have lent some support to the markets. With earnings bottoming out and valuations coming down, we are finding opportunities in selective areas. Chinese equities rose further into February 217 on stronger growth prospects. Offshore markets delivered a 4.1% return, while MSCI China has booked 11% in gains year-to-date. Financial names led the markets for the month (+7.9%), while material stocks extended their run (+4.1% in February, y-t-d 24.1%). Onshore markets underperformed offshore markets, with CSI 3 Index edging up 1% for February. Gains in consumer staples and industrials were offset by declines in energy and healthcare names. (All data as of 17 February 217.) Onshore market China s securities regulator tightened regulations on private placements to curb growth of excessive and frequent fundraising. Under the new regulations, private share placements must not exceed 2% of the company s share base, and the fundraising company should wait at least 18 months after its previous private share placements. Also, non-financial companies cannot hold long-term and high-value financial assets for trading when applying for additional fundraising. Listed companies raised RMB1.18 trillion via private placement in 216, jumping fivefold from 213, while the IPO market raised just RMB147.6 billion last year. The new regulation may free up liquidity to the IPO market and cool down speculation on companies with placement-driven growth. Improving fundamentals have lent some support to the markets. With earnings bottoming out and valuations coming down, we are finding opportunities in selective areas. Cyclical plays that are positioned to benefit from a potential reflationary theme over the medium term will likely be in the limelight. We also like selective growth stocks with good earnings growth potentials and inexpensive valuations. Offshore market Mainland investors have become major participants in the HK market Encouragingly, the money is much less speculative in nature Our optimism for Hong Kong-listed Chinese equities in 217 remains intact. The Shenzhen-Hong Kong Stock Connect launched in December, with no aggregate quota. Mainland investors have become major participants in the HK market, representing around 1% of the market turnover now. Encouragingly, the money is much less speculative in nature, due to the increasing participation of insurance firms, commercial banks, mutual funds and pensions. We think the Hong Kong market, with a high dividend yield and low valuation, will attract more meaningful southbound inflows. We favour sectors/stocks that will deliver positive earnings surprise amid the current industrial reflation trend, benefit from the economy rebalancing and SOE/supply side reforms, and are less vulnerable to RMB depreciation and the property down-cycle. We are overweight in materials, which should see sustained demand from ongoing fiscal stimulus (government-led infrastructure spending) and improving margins on the back of supply-side reform. We believe global supply-demand dynamics may improve following OPEC s agreement to cut production. We are overweight the healthcare space, preferring names with a strong product pipeline and/or have the potential to win market share from foreign brands. We suggest to become more selective in the auto sector, as we think demand growth could moderate going into 217 purchases may have been frontloaded before the change in the new car purchase tax at year-end. 4

5 1-year cumulative total return Fwd price-to-earnings (x) China Insights February 217 Equity market Chinese equities off to a strong start in 217 4% 3% 2% 1% % -1% -2% -3% 2/16 4/16 6/16 8/16 1/16 12/16 2/17 Source: Bloomberg, HSBC Global Asset Management, as of 2 February 217. Total return in local currency terms. Investment involves risks. Past performance is not indicative of future performance. Sector views CSI 3 MSCI China /7 7/8 12/9 5/11 1/12 3/14 8/15 1/17 CSI 3 MSCI China Sector Consumer Discretionary Consumer Staples Energy Healthcare Industrials Information Technology Materials Property Telecommunication Utilities Comment Demand growth could moderate going into 217 purchases may have been front-loaded before the change in the new car purchase tax at year-end Rich valuations offer little upside to share prices in this sector, while fierce price competition and sales headwinds are likely to threaten the longer term outlook of the sector We believe global supply-demand dynamics may improve following OPEC s agreement to cut production. We also believe chemical margins will remain strong given a tight demand-supply situation We are overweight the healthcare space, preferring those with a strong product pipeline and/or have the potential to win market share from foreign brands We suggest to be selective on industrials, concentrating our exposures to names with attractive fundamentals and a decent dividend profile. Some industrial firms may also benefit from supply side discipline and a pickup in PPI, which should improve pricing power We are finding attractive opportunities within the IT sector, as we think selective names will potentially benefit from China s economic rebalancing and consumption upgrade We are overweight materials, which should see sustained demand from ongoing fiscal stimulus (governmentled infrastructure spend) and improving margins on the back of supply-side reform We have turned cautious on the property sector. Further tightening measures implemented in selective tier-1 and tier-2 cities to rein in prices will likely weigh on the outlook of the sector. Telecoms may benefit from potential secular growth driven by rising smartphone penetration, 4G penetration and data usage. At the same time, selective names may potentially increase their payout going forward. Poor utilisation rates on the back of weak demand and potential tariff cut pose downside risks to sector earnings Source: HSBC Global Asset Management, as of 2 February 217. For illustrative purposes only and does not constitute any investment recommendation in the above mentioned asset classes, indices or currencies. The views and opinions expressed herein are subject to change at any time. 5

6 1-year cumulative total return Yield (%) China Insights February 217 Fixed income Onshore RMB bonds declined by.33% in January and.6% in February. Offshore RMB bonds followed a similar trend, declining by.42% in January and moving slightly higher by.12% in February (in RMB terms, as of 2 February 217). Offshore market We continue to see value in offshore RMB bonds which offer attractive yields with low duration. We adopt a relatively defensive strategy in the near term, but are waiting for entry opportunities as we believe current bond yields are relatively high. After a short-term surge in early January, offshore CNH funding costs have come down, albeit remaining at relatively high levels. Tight liquidity conditions have been partly caused by tightened regulations over moving funds from onshore to offshore, hence reducing offshore liquidity. High funding costs is a disincentive for dealers to hold CNH bonds. Liquidity conditions have improved slightly. As such, after declining in January, offshore bonds recovered slightly in February. In general, we continue to see value in this market which offers attractive yields with low duration. Onshore market PBoC hiked interest rates on reverse repos, Standing Lending Facilities (SLF) and Medium-term Lending Facilities (MLF), pushing interest rates up and impacting yields across the curve. An increase in short term borrowing costs has weighed on long term bonds partly because investors are discouraged from borrowing short term to fund long term bond investments for yield carry. With CPI and PPI inflation rebounding, reflation concerns has been another factor behind the pick up in bond yields in recent months. 1-year government bond yields rose 31 bps in January and remained roughly flat in February, as a result. In the long term, the PBoC s focus on controlling leverage in both the economy and the bond market is a positive development, improving the likelihood of more healthy and sustainable growth. Given that growth stability is a clear objective, we also don t expect interest rates to move substantially higher or policy to tighten excessively from here. Furthermore, PPI living materials have remained stable and so we aren t overly concerned with PPI reflation translating into CPI inflation pressures. As such, we believe current bond yields are relatively high and will revert lower later this year as economic conditions and inflation pressure start to show signs of easing. RMB bonds declined on higher funding costs 8% 6% 4% 2% -1% % 2/16 5/16 8/16 11/16 2/17 ChinaBond New Composite Markit iboxx ALBI China Offshore Source: Bloomberg, HSBC Global Asset Management, as of 2 February 217. Investment involves risks. Past performance is not indicative of future performance. For illustrative purposes only and does not constitute any investment recommendation in the above mentioned asset classes, indices or currencies. 6 2/7 7/8 12/9 5/11 1/12 3/14 8/15 1/17 CNY China 1Y Govt Bond Yield CNH China 1Y Govt Bond Yield

7 China Insights February 217 Currency Recent FX reserves and balance of payments data indicated continued capital outflows, but stricter capital control measures helped mitigate the risk. USD trend is key to the RMB outlook. In the near term, upbeat Chinese activity data, higher yields in the onshore bond market since late last year, the introduction of a series of administrative measures to tighten FX outflows, and reduced concerns about US- China trade tensions support the RMB. The CNY advanced against the USD by 1.% year-to-date (as of 2 February), while the CFETS index fell moderately by.6%. FX reserves fell USD12bn to slightly below USD3trn in January, the lowest since February 211, despite the positive valuation effect. The SAFE attributed the decline to the PBoC s supply of foreign currencies to meet the seasonal demand from residents for overseas travels and consumption around the Lunar New Year holidays and corporate debt settlement. We believe it also reflected the PBoC s intervention in the market to stabilise the RMB at the start of the year. At the current level, FX reserves are still adequate, but data showed capital outflow pressures persisted, despite a favourable backdrop of a broadly weaker USD and stricter capital-outflow controlling measures easing RMB depreciation expectation. The overall balance of payments registered a large deficit of USD149bn in Q4 216, resulting in a record deficit of USD444bn ( 4.% of GDP) in the full year of 216. The current account surplus in 216 fell to USD21bn (1.9% of GDP) from USD331bn (3.% of GDP) in 215. Net FDI recorded an outflow of -.6% of GDP in 216. Net FDI inflows turned negative for the first time on record, as outward direct investment outpaced FDI inflows. In the near term, the current account balance may get some support from a modest export recovery and the lagged effect of CNY real effective exchange rate (REER) depreciation through much of 216. However, the service account deficit could widen further on robust overseas tourism with Chinese household income rising. Capital outflows may moderate, due to stricter enforcement of capital controls and possibly the recent rise in onshore interest rates, which prevented a further narrowing of the interest rate differential with the US. In the near term, upbeat Chinese activity data, higher yields in the onshore bond market since late last year, the introduction of a series of administrative measures to tighten FX outflows, and reduced concerns about US-China trade tensions support the RMB. FX reserves fell in January, despite tailwind from broadly weaker USD and stricter capital controls USD bn Estimated capital flows (LHS) USD bn 4.5 FX reserves (RHS) Overall balance of payments came under pressure from capital outflows; current account surplus fell USD bn Q4 1Q6 1Q8 1Q1 1Q12 1Q14 1Q16 Source: Bloomberg, CEIC, HSBC Global Asset Management, as of January 217. Investment involves risks. Past performance is not indicative of future performance. 7 Errors & omissions Net FDI Overall balance Non-FDI financial account Current account

8 China Insights February 217 Indicator Data watch Industrial production (IP) Fixed asset investment (FAI) (year-todate, yoy) Retail sales Exports (USD) Imports (USD) Trade Balance (USD) CPI inflation PPI inflation Data as of Actual Consensus Prior Analysis Dec 6.% 6.1% 6.2% Dec 8.1% 8.3% 8.3% Dec 1.9% 1.7% 1.8% Jan +7.9% +3.2% -6.2% Jan +16.7% +1.% +3.1% Jan 51.4bn 48.5bn 4.7bn Jan 2.5% 2.4% 2.1% Jan 6.9% 6.5% 5.5% Narrower mining IP contraction was offset by lower manufacturing and utility IP growth. Production of selected commodities such as cement, steel and autos all decelerated somewhat, but the overall IP trend remained fairly stable. The government will increase its targets for capacity cuts in steel and coal in 217, while extending such efforts to industries such as cement, aluminum, glass and ship building in 217. FAI growth deceleration was led by a notable slowdown in infrastructure FAI. Manufacturing FAI picked up amid a favourable comparison base, improving industrial profits and lower real interest rates. Growth in real estate FAI and new housing starts rebounded, while home sales also reaccelerated. This suggests property sales in selected lower-tier cities likely remained resilient thanks to differentiated property policies and continued government support for inventory destocking. However, we still expect real estate FAI growth to soften in 217. Following policy tightening in several cities, weaker property and land sales, selling prices and buyer sentiment should eventually lead to slower investment with some time lag. Infrastructure investment should remain supportive of growth in 217 with a likely pickup in public-private-partnership (PPPs). The front-loading of auto sales, ahead of an increase in the purchase tax on autos (engines of less than 1.6 litres) from 5.% to 7.5% in 217, boosted retail sales in late 216. Auto sales growth will likely come under pressure in the coming months as policy support fades. Household real disposable income growth slowed from 7.4% in 215 to 6.3% in 216. The strong yoy trade growth rebound was helped by a low base effect due to the different timing of the Lunar New Year holidays and front-loading of shipments ahead of the holidays. We prefer to look at combined January- February data to assess the underlying trend. Overall, the data reflected higher (commodity) prices, some improvement in external demand, and resilient domestic activity. A mild global growth recovery could support China s exports in the near term, but there are considerable uncertainties over the strength of global demand and from potential US protectionist policies. Weaker investment growth in 217 could curb real import growth. The acceleration of PPI inflation to its highest reading since August 211 continued to be driven by the price rebound in upstream industries such as mining and raw materials, while PPI for consumer goods remained stable and modest at.8% yoy. PPI reflation has been more related to rising supply-side costs than strengthening demand. PPI yoy inflation is likely to stay elevated in the near term, given broadly stable domestic demand, the government s overcapacity cut efforts and the base effects. Domestic investment growth, global commodity price trend, and exchange rate volatility are also important factors driving PPI. The pass-through from upstream price pressure to downstream sectors and CPI inflation is likely to be contained by tepid aggregate demand and policy bias to maintain tight liquidity in the near term. The rise in headline CPI inflation largely reflected the holiday effects. Core inflation edged up to 2.2% from 1.9%. Manufacturing PMI (Official) Nonmanufacturing PMI (Official) Total social financing (TSF) (RMB) New yuan loans (RMB) Jan Jan Jan 3,74.bn 3,.bn Jan 2,3.bn 2,44bn 1,626. bn 1,4. bn The mild decline likely reflected seasonal effects around the Lunar New Year holidays. The reading still indicates stable momentum in production activity. The input price sub-index pulled back modestly after rising for a sixth straight month to the highest since February 211, but remains high. A rise in services PMI (to 53.5 in January from 53.2 in December), partly reflecting the Lunar New Year holiday effects, offset a fall in construction PMI (to 61.1 from 61.9) TSF jumped to a record high, on strong bank loans, bankers acceptance bills and trust loans. Credit data is highly seasonal as banks tend to compete in offering loans to high-quality projects and corporate borrowers with a renewed quota at the start of the year. The high levels of mediumto-long-term corporate and household loans suggest strong credit demand and that property sales may be resilient. Meanwhile, off-balance sheet lending also jumped, despite the central bank's intension to rein in its growth through the Macro Prudential Assessment (MPA) framework. Indicates improved data on month-on-month/quarter-on-quarter/year-on-year basis Indicates worsened data on month-on-month/quarter-on-quarter/year-on-year basis Indicates no change in data on month-on-month/quarter-on-quarter/year-on-year basis Source: Bloomberg, HSBC Global Asset Management, as of 2 February 217 Any forecast, projection or target contained in this presentation is for information purposes only and is not guaranteed in any way. HSBC accepts no liability for any 8

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