HSBC Global Investment Funds - India Fixed Income

Transcription

1 HSBC Global Investment Funds India Fixed Income SG Share Class 30/04/2018 Fund Objective and Strategy The Fund aims to provide longterm total return (meaning capital growth and income) by investing in a portfolio of Indian bonds. In normal market conditions, at least 90% of the Fund s assets are invested in investmentgrade bonds (rated as such by a credit ratings agency), noninvestment grade or unrated bonds (which carry more risk) and other similar securities. The Fund can invest in bonds issued the Indian government, its government agencies, and Indian companies. The Fund s assets can be denominated in Indian rupee and the US dollar. The Fund can also invest in other instruments, e.g. structured notes referencing underlying exposure to Indian Rupee bonds and cash. Investment in Indian domestic fixed income securities may from time to time be restricted by Indian domestic regulation and hence the Fund may have substantial exposure to nonindian Rupee denominated investments outside of India. The Fund can also invest up to 10% of its assets in contingent convertible securities. These are bonds that convert to equities (carrying increased risk) if the issuer runs into difficulty. However, this exposure is not expected to exceed 5%. See the Prospectus for a description of derivative usage. Since Inception Performance (%) Fund Share Class Details UCITS V Compliant Subscription Mode Distribution Type Distribution Frequency Dealing Frequency Valuation Time Min. Initial Investment Yes Cash Distributing Annually Daily 17:00 Luxembourg 1,000 Annual Management Fee 1.10% Performance (%) YTD 1M 3M 1Y 3Y¹ 5Y¹ Since Inception¹ Domicile Luxembourg (Net) ISIN Inception Date LU Jan 2013 Calendar Year NAV per Share Performance (%) Fund Size 934,533, Bloomberg Ticker HSIFAUI LX (Net) Manager Gordon Rodrigues Past performance is not an indicator of future returns. The figures are calculated in the share class base currency, dividend reinvested. 1 Result is annualised when calculation period Source: HSBC Global Asset Management, data as at 30 April 2018 is over one year. Risk Disclosure 2 Net of relevant prevailing sales charge General Investment Risk: The value of investments and any income from them can go down as well as up and you may not get back the amount originally invested. Contingent Convertible Security (CoCo) Risk: Under certain circumstances CoCos can be converted into shares of the issuing company, potentially at a discounted price, or the principal amount invested may be lost. Derivative Risk: A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. Investing in derivatives involves leverage. High degrees of leverage can magnify the impact of asset price or rate movements. Emerging Market Risk: Emerging markets are subject to greater illiquidity and volatility than developed markets. Exchange Rate Risk: Changes in currency exchange rates will cause the value of investments to fluctuate. Fixed Income Risk: As interest rates rise debt securities will fall in value. All credit instruments have potential for default. High Yield risk: Higher yielding securities characteristically bear greater credit risk than investment grade securities. Interest Rate Risk: Relative yield and the capital values may be reduced by rising interest rates. Max. Initial Charge Base Currency 3.00%

2 HSBC Global Investment Funds India Fixed Income Share Class 3Year Risk Measures 5Year Risk Measures Volatility 6.4% Volatility 9.9% Sharpe Ratio 0.40 Sharpe Ratio 0.16 Tracking Error Tracking Error Information Ratio Information Ratio Characteristics Fund Characteristics Fund Current Yield (Gross) 7.46 Number of Holdings ex Cash 80 Modified Duration to Worst 5.01 Average Coupon 7.32 Maturity Average 7.06 Option Adjusted Duration Number of Issuers 31 (O) Yield to Worst (Gross) 8.07 Yield to Maturity (Gross) 8.07 Credit Quality Rating Allocation (%) Fund Sovereign Quasisovereign Financial BBB Oil & Gas 7.40 BB 1.54 US dollar 5.98 NR Utility 5.88 AAA 0.96 Bank 5.55 Cash 0.97 Sorted from highest to lowest rating. Cash is not included in United States dollar Industrial 0.31 any rating. Cash 0.97 Maturity Breakdown (O) Fund Sorted from largest to smallest per market values of weight. 02 years years years years 1.04 Cash 0.00 Total 5.04 Sorted from shortest to longest per the length of maturity. Sector Allocation (%) Fund 3 O, Option Adjusted Duration, excludes interest rate futures, bond futures and excess return from interest rate swaps. Source: HSBC Global Asset Management, data as at 30 April 2018

3 HSBC Global Investment Funds India Fixed Income Share Class Monthly Performance Commentary Review The Indian government bond market extended their rally in early April as inflation forecasts were revised down in the April MPC meeting. However, the market subsequently fell with the rise in oil prices and unexpected hawkish MPC April minutes. Domestic government bond yields ended the month higher by around 35 bps on average. Amid broad dollar strength, the rupee weakened against the by around 2.2%, which was also partly driven by concerns about rising oil prices and potential policy uncertainty with the upcoming elections. Separately, following the announcement of a reduction in government security issuance in H1 FY , the Reserve Bank of India (RBI) announced in early April that it will allow banks to spread out marktomarket losses on their investment portfolio. In addition, the central bank will increase the ceiling on foreign investment in government securities gradually to 6% of outstanding securities over the next two years from 5% currently. In late April, the RBI announced the removal of the residual maturity restrictions on foreign investments in government securities and state government loans. The debt quota auction mechanism will also be withdrawn effective from 1 June Coming to the April MPC meeting, the RBI kept the repo rate unchanged at 6% and maintained its neutral policy stance. Meanwhile, while the forecast for FY 19 GDP was kept unchanged at 7.4%, it revised down its inflation estimates for H1 FY 19 and H2 FY 19 by 45 bps and 15 bps respectively. This took the full year forecast to 4.7% from 5% in the previous policy statement. However, the subsequently released meeting minutes were slightly more hawkish than expected. Unquantified risks around inflation and optimism about growth were the main themes for the meeting minutes, with some hawkish comments from individual members in the committee. Portfolio strategy The fund retreated in April in terms, tracking the overall market direction. The fund s exposure to domestic government bonds weighed on the fund s performance while the currency exposure to the rupee also took a toll on the fund s return given the depreciation in the currency. Year to date, the return of the fund ended in negative territories. The negative performance was mostly reflective of the market volatility, which has seen Indian 10 year government bond yields rising from 7.33% at the beginning of the year to about 7.77% at the end of April. At the same time, the INR has also weakened against the US dollar by 4.19% and further weighed on the fund s performance in US dollar terms. Over the month, our strategies remained largely unchanged. We continued to add selectively to state government loan (SDL) securities for their attractive spread against central government bonds. Meanwhile, we favour corporate bonds to maintain carry in a stable interest rate environment. However, we still favour domestic government bonds given balanced growthinflation dynamics and expectation of the RBI to remain on hold in the near term. As of now, we still remain cautious of denominated corporate bonds with expectations of continued US monetary policy normalisation. However, with US Treasury yields having reached relatively attractive levels and some spreads having widened out as well, going forward we may tactically add to bonds in this space as synthetic INR yields have started to look attractive for some of these bonds on a tax adjusted basis. Outlook While upward risks to inflation still persist particularly with the recent rise in crude oil prices and uncertainty in Minimum Support Price, it is still not our base scenario that the RBI will tighten its monetary policy in the near term. Headline CPI inflation continued to moderate in March to 4.3% yoy, falling well within the RBI s band of 26% and keeping real interest rates at relatively high levels. At its latest MPC meeting on 5 Apr, the central bank also revised down its inflation projections. An unexpected moderation in global GDP growth or crude oil prices could lead to downward surprise in headline inflation. Given the significant pickup in yields since Q4 2017, we think it a very good entry point for the Indian bond market, with yields providing good risk premium and pricing in excessive monetary tightening by the RBI to us. Meanwhile, supply demand dynamics have improved lately, after lack of participation from domestic banks and concerns about bond supply drove up bond risk premium. After the government addressed bond supply concerns by reducing its issuance target, the RBI subsequently announced in early April that it will allow banks to spread out marktomarket losses on their investment portfolio. In addition, the central bank will gradually increase the ceiling on foreign investment in government securities while in late April it announced several changes in the constraints currently placed on the investments by foreign portfolio investors. We believe that these measures should be overall positive for demand for the strategy from foreign investors and domestic banks over the medium to long run. That said, in the near run, as election season kicks off with Karnataka on 12th May, there could be volatility in the domestic Indian bond market and the currency. We will closely monitor the election results and assess the impact on India s political balance and fiscal policy setting heading into general elections in 2019.

4 HSBC Global Investment Funds India Fixed Income Share Class Important Information This document does not constitute an offering document and should not be construed as a recommendation, an offer to sell or the solicitation of an offer to purchase or subscribe to any investment. This document is for information only and is not an advertisement, investment recommendation, research, or advice. Any views and opinions expressed are subject to change without notice. It does not have regard to the specific investment objectives, financial situation, or needs of any specific person. Investors and potential investors should not invest in the Fund solely based on the information provided in this document and should read the prospectus (including the risk warnings) and the product highlights sheets, which are available upon request at HSBC Global Asset Management (Singapore) Limited ( AMSG ) or our authorised distributors, before investing. You should seek advice from a financial adviser. Investment involves risk. Past performance of the managers and the funds, and any forecasts on the economy, stock or bond market, or economic trends that are targeted by the funds, are not indicative of future performance. The value of the units of the funds and income accruing to them, if any, may fall or rise and investor may not get back the original sum invested. Changes in rates of currency exchange may affect significantly the value of the investment. AMSG has based this document on information obtained from sources it reasonably believes to be reliable. However, AMSG does not warrant, guarantee or represent, expressly or by implication, the accuracy, validity or completeness of such information. HSBC Global Asset Management (Singapore) Limited 21 Collyer Quay #0601 HSBC Building Singapore Telephone: (65) Facsimile: (65) Website: Company Registration No R Terms of Glossary Convertible bond, is a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value. Corporate bond, is bond issued by a company in order to raise financing. Coupon, the annual interest rate paid on a bond, expressed as a percentage of the face value. Credit quality, one of the principal criteria for judging the investment quality of a bond or bond mutual fund. Developed markets, countries that are most developed in terms of its economy and capital markets. Duration, a measure of the sensitivity of the price (the value of principal) of a fixedincome investment to a change in interest rates. Emerging markets (EM), nations' economies in the process of fast economic growth. Investments in emerging markets are generally considered to be with higher risk. Government bond or Gilt, a loan to a national government in return for regular payments (known as the coupon) and a promise that the original investment (principal) is paid back at a specified date. Gilts are loans to the UK government. High yield bond, is fixed income security with a low credit rating from a recognised credit rating agency. They are considered to be at higher risk of default, but have the potential for higher rewards. Information ratio, is a ratio of portfolio returns above/under the returns of a benchmark to the volatility of those returns. Investment grade bond, is considered investment grade or IG if its credit rating is BBB or higher by Standard & Poor's or Baa3 or higher by Moody's. Maturity, the period of time for which a financial instrument remains outstanding. Modified duration to worst, the lowest potential duration that will achieve on a bond without the issuer actually defaulting. Option adjusted duration (O), is a duration value based on the probability of early redemption call by the bond issuer. Option adjusted spread duration (OASD), estimates the price sensitivity of a bond to a 100 basispoint movement (either widening or narrowing) in its spread relative to Treasuries, taking into account the likelihood of early redemption. Sharpe ratio, a measure for calculating riskadjusted return, and this ratio has become the industry standard for such calculations. Tracking error, a measure of how closely a portfolio follows the index to which it is benchmarked. Volatility, a measure of how much a fund's price goes up or down as a percentage of its average performance. Yield to maturity, the total return anticipated on a bond if the bond is held until the end of its lifetime. Yield to worst, the lowest potential yield that can be received on a bond without the issuer actually defaulting.

5 HSBC Global Investment Funds India Fixed Income Supplement Information Sheet Performance (%) Return Currency YTD 1M 3M 6M 1Y 3Y 1 5Y 1 Since Inception 1 AC AC (Net) ACSGD SGD ACSGD (Net) 2 SGD (Net) AM AM2 (Net) AM3OSGD SGD AM3OSGD (Net) 2 SGD ID ID (Net) Calendar Year Performance (%) Return Currency AC AC (Net) ACSGD SGD ACSGD (Net) 2 SGD (Net) AM2 AM2 (Net) 2 AM3OSGD SGD AM3OSGD (Net) 2 SGD ID ID (Net) Result is annualised when calculation period is over one year. 2 Net of relevant prevailing sales charge Past performance is not an indicator of future returns. The figures are calculated in the share class base currency, dividend reinvested. Share Class Base Currency Distribution Frequency Dividend exdate Last Paid Dividend Annualised Yield Annually 07 Jul % AC ACSGD SGD AM2 Monthly 27 Apr % AM3OSGD SGD Monthly 27 Apr % ID Annually 07 Jul % The above table cites the last dividend paid within the last 12 months only. Dividend is not guaranteed and may be paid out of capital, which will result in capital erosion and reduction in net asset value. A positive distribution yield does not imply a positive return. Past payout yields and payments do not represent future payout yields and payments. Historical payments may be comprised of both distributed income and capital. The calculation method of annualised yield: (dividend value / NAV per share or unit as of exdividend date) x n, n depends on the distributing frequency. Annually distribution is 1; semiannually distribution is 2; quarterly distribution is 4; monthly distribution is 12. The annualised dividend yield is calculated based on the dividend distribution on the relevant date with dividend reinvested, and may be higher or lower than the actual annual dividend yield.

6 HSBC Global Investment Funds India Fixed Income Supplement Information Sheet Share Class Inception Date ISIN AC ACSGD AM2 AM3OSGD ID Base Currency Min. Initial Investment NAV per Share Annual Management Fee Distribution Type 25 Jan 2013 LU , % Distributing 20 Aug 2012 LU , % Accumulating 03 Dec 2015 LU SGD SGD 1, % Accumulating 29 Jun 2017 LU , % Distributing 30 Jun 2017 LU SGD SGD 1, % Distributing 28 Jun 2013 LU ,000, % Distributing Different classes may have different performances, dividend yields and expense ratios. For hedged classes, the effects of hedging will be reflected in the net asset values of such classes. Expenses arising from hedging transactions may be significant and will be borne by the relevant hedged classes. Hedged class performs the required hedging on a best efforts basis. Source: HSBC Global Asset Management, data as at 30 April 2018