HSBC Global Investment Funds - Global Emerging Markets Multi- Asset Income Share Class AM2

Transcription

1 HSBC Global Investment Funds - Global Emerging Markets Multi- Asset Income Share Class 3 Nov Nov 218 Risk Disclosure The Fund invests mainly in global emerging markets equities, bonds and other related investments. The Fund is subject to the risks of investing in emerging markets. Non-investment grade bonds and unrated bonds are subject to additional risks and volatility. The Fund may invest in onshore Chinese securities through various market access schemes and China A-shares Access Products. Such investments involve additional risks, including the risks associated with China s tax rules and practices. The Fund may invest in other funds and need to bear the underlying funds fees and expenses on top of the Fund s own fees and expenses. The Fund may invest in financial derivative instruments for investment purpose which may lead to higher volatility to its net asset value. The Fund may pay dividends out of capital or gross of expenses. Dividend is not guaranteed and may result in capital erosion and reduction in net asset value. Because the Fund, its investments and its classes of shares may be denominated in different currencies, investors may be affected adversely by exchange controls and exchange rate fluctuations. There is no guarantee that the currency hedging strategy applied to the relevant classes will achieve its desired result. The Fund s investments may involve substantial credit, currency, volatility, liquidity, interest rate, tax and political risks. Investors may suffer substantial loss of their investments in the Fund. Unit trusts are NOT equivalent to time deposits. 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. H Fund Objective and Strategy Investment Objective The Fund invests for income and moderate capital growth in a diversified portfolio of shares, bonds, money market instruments, cash and other investments. In normal market conditions, at least 9% of the Fund s assets are invested in assets from issuers in emerging markets. Investment Strategy The Fund can invest up to 1% of its assets in asset-backed securities (ABS) and mortgage-backed securities (MBS). The Fund may invest in shares of Chinese companies, including up to 15% of its assets in China A-shares. The Fund's maximum exposure to China A-shares and China B-shares is 3% of its assets. The Fund may invest in Chinese fixed income securities including up to 2% of its assets in fixed income securities from issuers in China and traded on the China Interbank Bond Market. There aren t restrictions on the market values of the companies held in the fund. The Fund can also invest up to 1% of its assets in contingent convertible securities. The Fund may invest up to 9% of its assets into other funds. See the Prospectus for a full description of the investment objectives and derivative usage. Performance (%) Performance (%) Fund Size Bloomberg Ticker Calendar Year Performance (%)⁵ Fund YTD 2 1M 3M 1Y 3Y¹ 5Y¹ Vol 3 S.R Past performance is not an indicator of future returns. The figures are calculated in the share class base currency, NAV to NAV basis with dividend reinvested, net of fees. If investment performance is not denominated in or, or based investors are exposed to exchange rate fluctuations. Source: HSBC Global Asset Management, data as at 3 November 218 Fund change that may have material impact on performance: 16 Nov Change in the manner of charging sales charge / switching charge. To download the offering documents from cuments/english/amhk_hgif.pdf Share Class Details UCITS V Compliant Distribution Type Distribution Frequency Dealing Frequency Min. Initial Investment Max. Initial Charge Management Fee Base Currency Domicile ISIN Inception Date NAV per Share Manager Yes Distributing Daily 1, 3.% 1.35% Luxembourg LU Jan ,682,224 HGEM LX David J McNay Nishant Upadhyay Zeke Anurag Diwan Nicholas Timberlake 1 Result is cumulative when calculation period is over one year. 2 The YTD return of the first year of the share class is calculated from the share class inception date. 3 Volatility since inception, a measure of how much a fund's price goes up or down as a percentage of its average performance. 4 Sharpe ratio since inception, a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations. 5 The calendar year return of the first year is calculated between share class inception date and calendar year end of first year if the share class has less than 5-year history.

2 Performance Commentary Summary After a difficult October, November saw global markets regain some of their poise. Global equities rose, supported by the outcome of the US midterm elections and hopes of a slower pace of Fed rate hikes. The MSCI All Country World index posted 1.46% returns in terms. As global equities recovered emerging market equities posted even stronger returns, the MSCI Emerging Market index rose 4.12% over the month. China led the way, with hopes of a trade deal with the US supporting sentiment. A number of emerging markets currencies including the South African rand, Indonesian rupiah and Indian rupee benefitted from a flat US dollar and lower oil prices. This fed through into positive returns for the EMD Local Currency asset class which gained 2.25%. Turkish assets have continued to deliver strong returns after the central bank intervention in September (raising rates 625bps). As macroeconomic fundamentals remain solid, and president Erdoğan s rhetoric calms, investors have begun to recognise that Turkish assets are trading at a significant discount to intrinsic value. Turkish equity markets delivered strong positive returns rising over 13% during the month. Meanwhile Turkish EMD assets also delivered positive returns. Local currency EMD produced particularly strong performance as the lira appreciated by more than 7% against the dollar. Oil prices fell significantly during November, (the international oil benchmark) Brent Crude fell below $6 a barrel. The fall was as a result of: 1) an unexpected increase in US oil output and reserves, 2) the US issuing Iran sanctions waivers which exceeded market expectations and 3) aggressive US rhetoric on recent price levels. Furthermore, easing global growth, and the increasing prevalence of alternative energy, further softened oil prices. Whether a country benefits from lower oil prices depends on whether they are a net importer or net exporter of oil. In general oil exporters will be hurt and importers helped by falling oil prices. A number of the largest emerging market economies are net oil importers and have felt very positive affects as a result of the November oil price fall. China, Indonesia and India are all net importers of oil, large holdings within the GEMMAI fund, and experienced very strong returns across their debt and equity assets during the month. Portfolio strategy The tactical asset allocation (TAA) of the fund remains unchanged: 2% equity, 45% EMD local currency, 3% EMD hard currency, and 5% cash. We continue to be constructive on emerging markets as an asset class. The macro picture remains strong, structural and demographic trends are positive and company earnings look healthy. We are confident in the monetary policy across Asian emerging markets, and believe that in general emerging market currencies are undervalued. Emerging Market Hard Currency Debt The compression in US Treasury yields was a significant factor in EMD performance in November and thus the lower beta, investment grade names outperformed. The strategy is largely underweight this segment due to very tight valuation levels, and as a result, this positioning detracted from performance during the month. Security selection in Mexico was the largest detractor from performance given the overweight to quasi-sovereign PEMEX, which suffered due to lower oil prices and rhetoric from AMLO which raised investor concern over support for the company. Overweight exposures to frontier countries, and more specifically oil exporters including Nigeria and Ghana, hurt relative in November as higher beta countries suffered in the risk-off environment combined with the drop in oil. Conversely, the underweight to Kazakhstan helped performance. Positive economic data in South Africa created a rally following months of underperformance. Exposure to Zambia also helped as the country retraced previous losses. During November duration was reduced in the portfolio. Positions in Mongolia, as well as mid-beta IG names in Russia and longer duration components in Uruguay were reduced over the month. This cash was reinvested in shorter-dated corporates in Peru, in diversified HY Frontier country Senegal, and sovereign bonds in Turkey. Emerging Market Local Currency Debt Local debt assets posted strong returns in November. The overweight to Indonesia local currency was the most significant driver of returns as the oil importer benefitted from the drop in oil prices and was further supported by the compression in US rates which helped Indonesia since the central bank had pre-emptively hiked local rates in H1. Similarly, the overweight to the Indian rupiah helped performance; India benefited from falling oil prices and lower US rates. The overweight exposure to the Turkish lira was another large contributor to returns as the currency was supported by the fall in oil prices and improving trade balance. The local rates portfolio is underweight to local duration of -.2 years with a focus on overweight positions in higher beta, higher yielding countries versus underweight positioning in lower yielding countries. The local currency portfolio is net long EM currency exposure of 6%, comprised of overweight positions in the Argentine peso, Colombian peso, Chilean peso, Indian rupee, Indonesian rupiah, and Turkish lira versus underweight positioning in the Czech koruna and Korean won. Emerging Market Equity The country and sector positioning is mainly a reflection of the bottom-up investment approach where we find attractive investment opportunities. The sleeve focuses on companies that offer an attractive combination of profitability and valuation. The companies undergo proprietary fundamental research integrating and Environmental Social and Governance (ESG) analysis to confirm the investment opportunity. Higher volatility can create investment opportunities where the fundamental outlook has been mispriced by the market. Currently our main country overweight is Russia. Russia presents several compelling investment opportunities: valuations are attractive in general relative to other EM countries and the domestic economic recovery continues to support earnings growth. Themes that currently run through the portfolio are the: China Supply Side reforms and favorable impact on commodity prices such as Steel, Cement, high quality Iron ore, and other base metals. The aim of the reforms is to improve efficiency and reduce pollution and surplus capacity. Some companies are better placed to benefit from this trend and would enjoy improved competitive positioning, and therefore improve profitability. IMO 22 regulations aim to reduce sulphur emissions in the shipping industry. As a result, the demand for high sulphur fuel oil will be reduced and demand for low sulphur alternative fuels such as low sulphur fuel oil and gas oil will increase and will support the margins of complex refiners.

3 Portfolio Portfolio Asset Allocation (%) Currency Exposure at Portfolio Level (%) Equity Fixed Income Cash 3.92 US dollar Hong Kong dollar Brazilian real Indonesian rupiah South Korean won Mexican peso Indian rupee Turkish lira South African rand New Taiwan dollar Other Currencies Equity Equity Characteristics Equity Average Market Cap Breakdown ( Mil, %) P/E Ratio , 7.41 Weighted Average Market Cap ( Mil) 76, ,-5, Dividend Yield ,-1, ,-25, 25, Equity Sector Allocation (%) Equity Geographical Allocation (%) Financials Information Technology Energy Materials Consumer Discretionary Telecommunication Services Industrials Real Estate Utilities Consumer Staples Health Care China South Korea Taiwan Brazil India Russia Hong Kong South Africa Indonesia Turkey Other Locations Cash & Others Equity Top 1 Holdings Location Sector Weight (%) SAMSUNG ELECTRONICS CO LTD South Korea Information Technology 1. TENCENT HOLDINGS LTD China Information Technology.94 ALIBABA GROUP HOLDING-SP ADR China Information Technology.82 TSMC LTD Taiwan Information Technology.74 BANCO BRADESCO SA-PREF Brazil Financials.67 CHINA CONSTRUCTION BANK China Financials.58 RELIANCE INDUSTRIES LTD India Energy.53 INDUSTRIAL AND COMMERCIAL BANK OF CHINA Hong Kong Financials.47 INFOSYS LTD India Information Technology.47 VALE SA Brazil Materials.45 Please note some securities are unclassified against these sector and/or country schemes and will therefore appear under the Cash & Others category. The data displayed in above sections is shown on a look-through basis. This means that the fund may not directly hold these securities and the investment in these securities may be via other funds. Source: HSBC Global Asset Management, data as at 3 November 218.

4 Fixed Income Fixed Income Characteristics Fixed Income Characteristics Average Yield to Maturity 6.6 Effective Duration 4.1 Portfolio Yield 6.47 Average Credit Quality BBB/BBB- Fixed Income Quality Rating Allocation (%) Fixed Income Sector Allocation (%) AAA Local FX AA 4.94 Local Sovereign Bonds 19.9 A Sovereign (Hard Ccy) BBB Corporate (Hard Ccy) 8.5 BB 6.37 Quasi (Hard Ccy) 6.65 B 7.6 Cash & Others Fixed Income Effective Duration Allocation by Location Fixed Income Geographical Allocation (%) Mexico 8. Turkey 6.25 Indonesia 5.71 Russian Federation 4.82 Brazil 4.59 Brazil Switzerland Other Locations South Africa India Colombia China Poland Other Locations Fixed Income Top 1 Holdings Location Instrument Type Weight (%) LETRA TESOURO NACIONAL 1-JAN-19 Brazil Treasury Bills 5.2 MEX BONOS DESARR FIX RT JUN-27 Mexico Government Bond 1.36 REPUBLIC OF SOUTH AFRICA FEB-31 South Africa Government Bond 1.33 NOTA DO TESOURO NACIONAL 1 1-JAN-21 Brazil Treasury Notes 1.26 RUSSIA GOVT BOND - OFZ AUG-23 Russian Federation Government Bond 1.25 RUSSIA GOVT BOND - OFZ JAN-23 Russian Federation Government Bond.99 REPUBLIC OF SOUTH AFRICA DEC-26 South Africa Government Bond.96 PERTAMINA PERSERO PT MAY-43 Indonesia Corporate Bond.96 INDONESIA GOVERNMENT MAR-24 Indonesia Government Bond.94 MONGOLIA INTL BOND DEC-22 Mongolia Government Bond.87 Please note that the fixed income allocation tables are calculated using contributions to the fixed income portion, with the equity portion excluded here. The data displayed in above sections is shown on a look-through basis. This means that the fund may not directly hold these securities and the investment in these securities may be via other funds. Source: HSBC Global Asset Management, data as at 3 November 218.

5 Important Information This document is prepared for general information purposes 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 it. Any views and opinions expressed are subject to change without notice. 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. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management (Hong Kong) Limited ( AMHK ) accepts no liability for any failure to meet such forecast, projection or target. AMHK has based this document on information obtained from sources it reasonably believes to be reliable. However, AMHK does not warrant, guarantee or represent, expressly or by implication, the accuracy, validity or completeness of such information. Investment involves risk. Past performance is not indicative of future performance. Please refer to the offering document for further details including the risk factors. This document has not been reviewed by the Securities and Futures Commission. Copyright HSBC Global Asset Management (Hong Kong) Limited 218. All rights reserved. This document is issued by HSBC Global Asset Management (Hong Kong) Limited.

6 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 fixed-income 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. Effective Duration, 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 1 basis-point 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 risk-adjusted 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, excluding strategic currency hedges for Portfolio/Benchmark calculations. Number is shown in percentage. Portfolio Yield, the lowest potential yield that can be received on a bond without the issuer actually defaulting, excluding strategic currency hedges for Portfolio/Benchmark calculations. Number is shown in percentage. Rating, rating of a debtor (credit rating) by rating agencies is based on specific criteria such as debt situation, country risk etc. Ratings from Moody's and Standard & Poor's is the most widely used systems in the international markets with range from AAA and Aaa (highest credit rating) to D ( Debtor in financial difficulties, repayment already distressed). NAV, stands for net asset value. It is used on funds and represents the value of all assets and receivables less debt, liability and costs. Typically, it is reported as a value per share. Swap, is a derivative contract through which two parties exchange financial instruments. E.g. in an interest swap, typically one contracting party pays a fixed interest while the other pays a variable interest. Futures, is a financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Shares, are units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends. The two main types of shares are common shares and preferred shares. Physical paper stock certificates have been replaced with electronic recording of stock shares, just as mutual fund shares are recorded electronically. Bond, is a fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debt holders, or creditors, of the issuer. Price Earnings (P/E) Ratio, is the price paid for a share divided by the annual profit earned by the firm per share. Dividend Yield, represents the ratio of distributed income over the last 12 months to the fund s current Net Asset Value. Market capitalization, refers to the total dollar market value of a company's outstanding shares. Commonly referred to as "market cap," it is calculated by multiplying a company's shares outstanding by the current market price of one share. Non-investment grade bond, a rating attributed to a security that is deemed speculative, i.e. less certain in respect of the preservation of capital, in the opinion of a credit rating agency such as Fitch Ratings, Moody s or Standard & Poor s.

7 HSBC Global Investment Funds - Global Emerging Markets Multi- Asset Income Supplement Information Sheet 3 Nov 218 Share Class AM3ORMB AM3ORMB AM3ORMB AM3ORMB Base Currency CNH CNH CNH CNH Distribution Frequency Dividend ex-date Dividend Amount Annualised Yield (Distribution is not guaranteed and may be paid out of capital) 3 Nov % 31 Oct % 28 Sep % 29 Aug % 26 Jul % 29 Jun % 25 May % 27 Apr % 4 Apr % 28 Mar % 28 Feb % 3 Nov % 31 Oct % 28 Sep % 29 Aug % 26 Jul % 29 Jun % 25 May % 27 Apr % 4 Apr % 28 Mar % 28 Feb % 3 Nov % 31 Oct % 28 Sep % 29 Aug % 26 Jul % 29 Jun % 25 May % 27 Apr % 4 Apr % 28 Mar % 28 Feb % 3 Nov % 31 Oct % 28 Sep % 29 Aug % 26 Jul % 29 Jun % 25 May % 27 Apr % 4 Apr % 28 Mar % 28 Feb % 3 Nov % 31 Oct % 28 Sep % 29 Aug % 26 Jul % 29 Jun % 25 May % 27 Apr % 4 Apr % 28 Mar % 28 Feb % 3 Nov % 31 Oct % 28 Sep % 29 Aug % AM3ORMB CNH 26 Jul % AM3ORMB CNH 29 Jun %

8 HSBC Global Investment Funds - Global Emerging Markets Multi- Asset Income Supplement Information Sheet 3 Nov 218 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 ex-dividend date) x n, n depends on the distributing frequency. Annually distribution is 1; semi-annually 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.