Transcript No Slide Title - Hong Kong Baptist University

HSBC Asset Management
Hong Kong Baptist University
1998 Superannuation Fund
January to July 2003 investment review
HSBC Asset Management (Hong Kong) Limited
15/F Citibank Tower, 3 Garden Road, Hong Kong
Telephone: +852 2284 1111
Facsimile: +852 2845 0226
Web site: www.assetmanagement.hsbc.com.hk
5 September 2003
HSBC Asset Management
Agenda

Investment performance

Market outlook

Factors for consideration before switching
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Investment performance
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Market statistics: January - July 2003
%
15.1
7.3
-0.1
-1.5
Currencies
JP Yen
Euro
UK GBP
Aus Dollar
% Change (against HKD)
%
0.9
Bonds *
-0.8
0.7
2.3
0.5
-0.8
2.2
UK
Japan
M kt price return % (Local)
%
Germany
Canada
US
20.6
5.5 5.3
UK
Germany
20.2
11.5 9.8
8.7 8.7
Japan
Hong Kong
11.5 11.5
16.2 14.7
M alaysia
Singapore
4.4
Australia
% Change (HKD)
Salomon Smith Barney World Government Bond Indices
USA (S&P 500), UK (FTSE-100), Germany (DAX), Japan (Nikkei 225), Hong Kong (HSI), Australia (All Ordinaries), Malaysia
(KLSE Composite), Singapore (STI)
Source: Thomson Financial Datastream
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% Change (Local)
Australia
M kt price return % (HKD)
29.3
Equities **
1.8
-1.1
US
12.6 12.6
17.2
14.7
9.8
* Bonds:
** Equities:
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Risk profile of various investment options
More suitable for
risk tolerant staff
Long-term potential return
High
Growth Fund
More suitable for
risk averse staff
Balanced Fund
Stable Fund
Global Money Funds (HKD/USD)
Risk (short-term volatility)
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Low
High Growth Fund
High
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Investment performance: January to 27 August 2003
Return %
20
15.5
15
12.7
9.3
10
6.3
5
0.7
0.6
GMF – HKD
Fund
GMF – USD
Fund
0
High Growth
Fund
Growth Fund
Balanced Fund
Stable Fund
HKBU
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Source: HSBC Asset Management
Past performance is not necessary a guide to future performance
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Investment performance: January to June 2003
Return %
15
10
7.7
8.4 8.6
8.4 8.1
7.2
7.6
6.8 7.2
6.4 6.4
7.1
5
0.6 0.5
0.0
0.5 0.5 0.6
GMF – HKD
Fund
GMF – USD
Fund
0
High Growth
Fund
Growth Fund
Wyatt Median
Stable Fund
Benchmark
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HKBU
Balanced Fund
Source: HSBC Asset Management, Thomson Financial Datastream
Past performance is not necessary a guide to future performance
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HSBC Asset Management
Investment performance since inception (Mar 98 to July 03)
Return %
35
28.7
25
17.2
16.7
15
5
9.1
0.3
0.1
High Growth
Fund
Growth Fund
-5
-15
Balanced Fund
HKBU
Stable Fund
GMF – HKD
Fund
GMF – USD
Fund
(3/99)
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Source: HSBC Asset Management, Thomson Financial Datastream
Past performance is not necessary a guide to future performance
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HSBC Asset Management
Asset allocation – 31 July 2003
HKBU
High Growth
HKBU
Growth
HKBU
Balanced
Fund
(%)
Bmk
(%)
Fund
(%)
Bmk
(%)
Fund
(%)
Equities
Hong Kong
Japan
Other Asia Pac.
N. America
Europe
Total
30.0
12.0
12.0
18.0
18.0
90.0
25.1
9.1
18.0
19.3
18.4
89.9
24.0
9.0
9.0
14.0
14.0
70.0
20.5
6.9
14.1
16.0
14.9
72.4
17.0
6.5
6.5
10.0
10.0
50.0
13.5
4.4
10.1
10.9
10.3
49.2
Bonds
US Bonds
Non US Bonds
Total
1.6
5.4
7.0
1.1
4.8
5.9
5.7
19.3
25.0
4.0
16.9
20.9
Cash
3.0
4.2
5.0
6.7
Bmk
(%)
HKBU GMF
HKD / USD
Fund
(%)
Fund
(%)
10.0
4.0
4.0
6.0
6.0
30.0
8.5
2.4
6.7
7.3
6.8
31.7
0.0
45.0
7.4
31.6
39.0
13.6
46.4
60.0
10.1
43.1
53.2
0.0
5.0
11.8
10.0
15.1
100.0
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Bmk
(%)
HKBU
Stable
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Market outlook
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US
– Due to the impact of combined monetary and fiscal stimulus, economic data
continue to improve (i.e. Q2 GDP, ISM, durable goods, factory orders)
– Overall corporate earnings results were better than expected
– Expecting a stronger growth in H2 driven by short-term rebuilding of
inventories
– High unemployment rate remains a concern

Outlook
– Neutral in US
– GDP growth forecast for 2003 (+2.2%); 2004 (+3.2%)
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Data as at 5 August 2003
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Euroland
– Economy remains weak but with improving outlook such as household confidence,
IFO & ZEW Surveys
– Growth has been downgraded further
– Earnings growth improved, driven by a cost cutting rather than top line growth
UK
Two-tier economy remain:
– Robust consumer spending holding up despite some weakness in the housing
market
– Manufacturing PMI indicates the sector is picking up
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Outlook
– Euroland - moderate underweight; UK - moderate overweight
– GDP forecast (2003) : Euroland (+0.7%); UK (1.8%)
Data as at 5 August 2003
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Japan
– Experiencing cyclical upswings after years of stagnation
– Tankan Survey showed slight improvement, while business conditions were
broadly unchanged in the non-manufacturing sector
– Revised up our earnings growth forecasts to mid-single digit
– Foreign fund managers reducing underweight position
– Structural problems remain: rising unemployment and low capacity utilisation

Outlook
– Underweight in Japan
– GDP growth forecast (2003) : 1.0%
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Data as at 5 August 2003
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Asia ex-Japan
–
–
–
–
–

The economic situation in Asia remains relatively positive
Driven by higher beta, lower quality stocks, this may lead to consolidation
Monetary and fiscal policies remain supportive
Asian economies to benefit from outsourcing trend
Undemanding valuation
Outlook
– Moderate overweight in Asia (ex Japan)
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Data as at 5 August 2003
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Asia ex-Japan
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Hong Kong (neutral)
– Market driven by ample liquidity and improving sentiment
– Positive news flow: relaxation of travel arrangement for mainland residents, CEPA initiatives & the
construction of bridge linking HK / Macau / China serve as additional catalysts
– Remain cautious on the back of subdued economic fundamentals
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Korea (overweight)
–
–
–
–

Liquidity and positive performance in US market - main driver of the market
Momentum remains positive as exports continue to be the major growth engine
Monetary & fiscal policy remain accommodative
Earnings upgrade to be witnessed in key technology companies
Taiwan (overweight)
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– Favourable liquidity environment and the potential MSCI review of Limited Investability Factor (LIF)
of Taiwan serve as the major drivers to the market
– Pre-election pump-priming measures provide further boost to the economy and market sentiment
– Concerns: valuation look stretched for selective tech stocks & need to see upward revisions in
corporate earnings for a sustainable rally
Data as at 5 August 2003
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Bond market outlook
– U.S. : On the back of Greenspan’s recent upbeat comments and better-than-expected
economic data reinforced our belief that the rate-cutting cycle has come to an end. We
expect no change in interest rates in the 3-month and 12-month period. Our short-tointermediate view is for falling yields.
– Euroland : As economic data continue to display softness, the ECB is expected to reduce
official rates by 0.25% in 3 months. Gradual economic recovery forecast for 2004, coupled
with low inflation, should keep rates on hold at 1.75% for the 12-month period. With risk
premium and flow / market positions becoming more positive, we turn more positive on
Euroland bonds.
– Japan : We see little chance of any move in short-term interest rates in both the short- and
medium-term. Bonds are now more equally valued to equities and real interest rates have
risen; we have retained our negative view on the market.
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Data as at 5 August 2003
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HSBC Asset Management
HSBC Asset Management Investment Strategy
Asset class rating :
Overweight
Neutral
Equities,
Bonds &
Cash
Underweight
Equity market rating :
Most
preferred
market(s)
Overweight
Least
preferred
market(s)
Neutral
Moderate
Underweight
Underweight
UK,
Asia (ex Jp/HK),
GEM
US,
Canada,
Australia,
HK
Europe
Japan
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Moderate
Overweight
Data as at 5 August 2003
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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.

Please also note that investment involves risk and past performance is not indicative of future performance.

The opinions expressed herein should not be considered to be a recommendation by HSBC 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 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 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 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.
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HSBC Asset Management (Hong Kong) Limited
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Factors for consideration
before switching
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Principles of retirement investment
3 major types of investment instruments

Equities
– Ownership of companies
– Returns from dividends & capital appreciation
– High short term volatility

Bonds
– Debt instruments issued by governments/corporations
– Returns from interest payments
– Short term volatility lower than equities

Cash
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– very low short term volatility
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Please remember

Identify personal factors
– Establish risk / return profile
– Understand investment choices
– Make investment decisions using a long-term approach
Do not time / chase markets!
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HSBC Asset Management
A guide to investing

Factors to consider
– Years to retirement
– Other personal assets
– Planned uses for retirement assets
– Financial and other personal circumstances
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Different people have different needs!!
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Range of investment choices

Different people have different needs
Therefore
Investment choices are provided for different risk profiles
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