HSBC GIF Managed Solutions - Asia Focused Conservative Quarterly fund report Q3 2016

Transcription

1 HSBC GIF Managed Solutions - Asia

2 Quarterly market review Asian assets have performed well in an interesting third quarter of Late in Q2 the surprise vote for the UK to leave the European Union created an atmosphere of uncertainty and led to fears that with other concerning events ahead, in particular the US Presidential election, markets could have a difficult patch. In fact the opposite has turned out to be the case. Global equities have returned over 4% during Q3 with emerging markets outperforming. The MSCI Asia Pacific ex Japan index returned 8.8% with China and Hong Kong putting in particularly strong performances. Across Asia only the Philippines and Singapore stock markets showed negative returns during the quarter. Central bank actions were closely watched with the US Fed keeping interest rates on hold but indicating a likely rise before year end, while the Bank of Japan moved to a policy of managing the ten year bond yield as part of its monetary approach, as well as committing to overshoot its 2% inflation target. Currency markets reacted to these actions by moving the Yen slightly higher (+1.4%) against the US dollar over the quarter. Asian currencies were mixed with the Korean Won the best performer (+4.6% against the dollar) while the Philippine Peso was the weakest at -2.7%. The Chinese Renminbi fell by just 0.4% against the USD over the quarter, maintaining its recent trend of gradual weakening against a basket of currencies. Bond markets in Asia performed well against the background of a zero return for global government bonds. The JACI Investment Grade Bond index returned 2.2% for the quarter while the Non-Investment Grade index returned 3.2%, returns that take credit spreads (the extra yield earned on a corporate bond compared to a comparable government bond) back towards the lowest levels seen in recent years. Asian local currency bonds also performed well, returning 2.3% for the quarter. Overview of historic performance Since Inception 2 (Net) 1 Since Inception 2 (Gross) 31/07/2012 MTD (Net) 1 MTD (Gross) QTD (Net) 1 QTD (Gross) HGIF Managed Solutions - Asia Focused Conservative Note: MTD= Month-To-Date; QTD= Quarter-To-Date 1 Performance Net of Total Expense Ratio (TER). 2 The since inception return is calculated from 15 March 2013 to 30 September Source: HSBC Global Asset Management as at 30 September For illustrative purposes only and does not constitute any investment recommendation. Past performance is not indicative of future returns. 2

3 Quarterly performance In Q3 the Managed Solutions Asia Focused Conservative Fund continued to deliver a favourable return with all the asset classes in the fund ending in positive territory. Asian equities have seen a quick and strong recovery after a global sharp sell-off of risky assets toward the end of Q2 which was triggered by the surprise vote result for the UK to leave European Union. Given the risk-on environment, Asian corporate bonds and other global assets were also supportive to the positive performance. Asian equities posted a strong return of 12.8% over the quarter. The concerns over the uncertainty of the Brexit have faded in Q3 as the market spotlight has once again shifted to global economic growth. The Q2 Asian corporate earnings generally beat market expectation which drove up the market risk appetite to invest in riskier assets in the region. Hong Kong equities performed well supported by the approval of Shenzhen-Hong Kong stock connect which is expected to be launched at the end of this year. Korean Won, Taiwanese dollar and Indian Rupee rose against the US dollar over the quarter providing another source of positive performance. Our tactical allocation in Japanese equities also performed well during the quarter on the back of further monetary policies implemented by the central bank. In Q3, government bond yields rebounded globally. Despite that, yield seeking activity continued and corporate earnings were generally better than expectations which further compressed credit spreads, giving a positive return for the corporate bonds in the fund. Global high yield bonds and Asian investment grade bonds returned 5.1% and 2.3% respectively. Global emerging market local debts posted a positive return of 1.7% with the yields ending lower over the quarter. This fall in yields was driven by the general increase in global risk appetite. However, Mexican Peso and Brazilian Real were weak against the US dollar which subdued the positive performance. Portfolio positioning and activity Market strength during Q3 has surprised many who looked for a setback in stock markets following the Brexit vote and with the US Presidential election looming. As bond returns fade (the close to zero return of global government bonds in Q3 is something investors may need to get used to) the relative attractiveness of equities may see a flow of money into stock markets despite the risks that these markets represent. For some time Asian equities have looked attractive on valuation grounds, and this value may now start to be realised in the form of higher prices. The recent flow of macroeconomic data suggests global economic activity remains resilient. Meanwhile, global inflationary pressures are building, particularly in the US, as the overhang of spare capacity following the Global Financial Crisis is eroded and oil-price base effects fade. Therefore, developed market bond yields remain too low in our view, and the case for being strategically underweight in this asset class remains compelling. In this environment, we continue to prefer maintaining an overweight exposure to a diversified basket of risk assets, including equities and local currency Asian and EM debt, within the context of a well-diversified multi-asset portfolio, from a strategic and longterm perspective. We also remain overweight Asian credit risk for the time being (with a preference for short-duration bonds), although recent spread compression amid rising default risks implies the margin of safety has narrowed further, warranting a slightly more cautious stance. 3

4 Current asset allocation Weightings (%) Asian Investment Grade Bond Hong Kong Government Bond Asian Ex Japan Equity Global Emerging Market Local Debt 4.99 Global High Yield Bond 9.97 Japanese Equity 0.92 Cash* 4.01 Total * The cash position includes strategic holding and cash in the underlying asset allocation sleeves pending investment when attractive investment opportunities arise. Source: HSBC Global Asset Management as at 30 September Data shown is for illustrative purposes only and does not constitute any investment recommendation. Past performance is not indicative of future returns. Note: The above weightings (%) are rounded up figures. 4

5 Appendix: Overview of investment process The Asia Fund aims to maximize the long-term total return We look for long-term stable returns by investing flexibly in diversified portfolio of asset classes, primarily based in the Asia Pacific ex-japan region The investment process can be described as follows: Return assessment Asset allocation Portfolio construction Risk monitoring Assess risk adjusted total returns available in the different asset classes Make allocations between different asset classes with a min exposure of 70% in Asia Pacific (ex Japan) oriented assets Build portfolio through underlying asset classes managed by HSBC investment specialists Review portfolio regularly to monitor asset class and overall portfolio risk Source: HSBC Global Asset Management as at 30 September For illustrative purposes only. Risk Disclosure The value of investments can go down as well as up and investors in the funds may not get back the amount originally invested. Changes to currency exchange rates may also cause fluctuations in the value of the funds. The funds invest a proportion of their assets in emerging markets which are, by their nature, higher risk and potentially more volatile than those inherent in some established markets. The proportion of the investment in these markets varies by fund. For a full list of risks, please refer to the Prospectus. 5

6 Disclaimer This document is prepared for general information purposes only and the opinions expressed are subject to change without notice. The opinions expressed herein should not be considered to be a recommendation by HSBC Global Asset Management (Singapore) Limited to any reader of this material to buy or sell securities, commodities, currencies or other investments referred to herein. It is published for information only and does not have any regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. This document does not constitute an offering document. Investors should not invest in the Fund solely based on the information provided in this document and should read the offering document of the Fund for details. Investors may wish to seek advice from a financial adviser before purchasing units in the fund. In the event that the investor chooses not to seek advice from a financial adviser, he should consider whether the fund in question is suitable for him. Investment involves risk. The past performance of any fund and the manager and any economic and market trends/forecasts are not necessarily indicative of the future or likely performance of the fund. The value of investments and units may go down as well as up, and the investor may not get back the original sum invested. Investors and potential investors should read the Prospectus (including the risk warnings) and the product highlights sheets which are available at HSBC Global Asset Management (Singapore) Limited or its authorised distributors, before investing. Changes in rates of currency exchange may affect significantly the value of the investment. HSBC Holdings plc, its subsidiaries and other associated companies which are its subsidiaries, and including without limitation HSBC Global Asset Management (Singapore) Limited (collectively, the HSBC Group ), affiliates and clients of the HSBC Group, and directors and/or staff of any of the foregoing 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 (Singapore) Limited has based this document on information obtained from sources it believes to be reliable but which it has not independently verified. Care has been taken to ensure the accuracy and completeness of this presentation but HSBC Global Asset Management (Singapore) Limited and HSBC Group accept no responsibility or liability for any errors or omissions contained therein. HSBC Global Asset Management (Singapore) Limited 21 Collyer Quay #06-01 HSBC Building Singapore Telephone: (65) Facsimile: (65) Website: Company Registration No R 6