Transcript Investment performance - Hong Kong Baptist University

HSBC Asset Management
Hong Kong Baptist University
1998 Superannuation Fund
Investment review
HSBC Asset Management (Hong Kong) Limited
Level 22, HSBC Main Building, 1 Queen’s Road Central, Hong Kong
Telephone: +852 2284 1111
Facsimile: +852 2845 0226
Web site: www.assetmanagement.hsbc.com.hk
September 2004
HSBC Asset Management
Agenda

Investment performance

Market outlook and investment strategy

Factors for consideration before switching
hkbu28e_wh08
2
HSBC Asset Management
Investment performance
hkbu28e_wh08
3
HSBC Asset Management
Market statistics: July 2004 (YTD, in HKD terms)
%
2.1
Currencies
-3.4
-4.1
JP Yen
Euro
-6.6
Aus Dollar
UK GBP
% Change (against HKD)
%
0.7
1.2
0.9
3.0
2.8
-1.2
Bonds *
1.9
2.5
-1.4
-4.5
US
UK
Japan
-4.3
Germany
Mkt price return % (Local)
%
6.1
0.6
-0.5
Equities **
-0.5
-0.9
US
-1.4
UK
% Change (Local)
Australia
Mkt price return % (HKD)
7.3
2.5
-1.8
-5.8
Germany
Canada
5.0 5.5
7.2 6.3
Malaysia
Singapore
0.2
-2.7 -2.7
Japan
Hong Kong
Australia
% Change (HKD)
hkbu28e_wh08
* Bonds: Citigroup World Government Bond Indices
** Equities: 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
4
HSBC Asset Management
Market statistics: 1 year to July 2004 (in HKD terms)
%
13.1
8.2
7.0
JP Yen
Euro
8.1
Currencies
UK GBP
Aus Dollar
% Change (against HKD)
%
15.6
3.9
3.9
5.6
2.1
Bonds *
US
-2.3
Japan
UK
Mkt price return % (Local)
11.5
4.2
Germany
5.2
11.7
11.5
3.3
Canada
Australia
Mkt price return % (HKD)
%
11.3
Equities **
US
11.3
6.2
20.1
UK
11.7 19.5
18.4 28.1
20.8 20.8
14.1 23.3
15.7 15.7
21.4 24.0
Germany
Japan
Hong Kong
Australia
Malaysia
Singapore
% Change (HKD)
hkbu28e_wh08
% Change (Local)
* Bonds: Citigroup World Government Bond Indices
** Equities: 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
5
HSBC Asset Management
Risk profile of various investment options
More suitable for
risk tolerant staff
Long-term potential return
High
Growth Fund
Balanced Fund
More suitable for
risk averse staff
Stable Fund
Global Money Funds (HKD/USD)
Risk (short-term volatility)
hkbu28e_wh08
Low
High Growth Fund
High
6
HSBC Asset Management
Investment performance: January to July 2004
4
Return %
2
1.2
0.8
0.7
0.1
0.1
1.1
0.0
0
-2
-0.9
-0.5
-1.0
-1.7
-1.6
-4
High Growth
Fund
Growth
Fund
Balanced
Fund
GMF – USD
Fund
Benchmark
hkbu28e_wh08
HKBU
Stable Fund GMF – HKD
Fund
Source: HSBC Asset Management
Past performance is not necessarily a guide to future performance
7
HSBC Asset Management
Investment performance: 1 year to July 2004
40
Return %
30
21.8
20
17.3
15.6
18.5
15.5
12.1
10
9.8
12.0
0.3
0.0
0.7
1.1
0
High Growth
Fund
Growth
Fund
Balanced
Fund
HKBU
Stable
Fund
GMF – HKD
Fund
GMF – USD
Fund
Benchmark
hkbu28e_wh08
Source: HSBC Asset Management
Past performance is not necessarily a guide to future performance
8
HSBC Asset Management
Investment performance since inception (March 1998 to July 2004)
40
Return %
28.2
30
29.1
22.3
20
17.6
18.0
15.7
10
0
High Growth
Fund
Growth Fund
Balanced
Fund
HKBU
Stable Fund
GMF – HKD
Fund
GMF – USD
Fund
(3/99)
hkbu28e_wh08
Source: HSBC Asset Management
Past performance is not necessarily a guide to future performance
9
HSBC Asset Management
Investment performance: 1Q 2004
Peer group comparison
6
Return %
4.8
4.7
4.0
4
4.2
3.0
3.4
2.7
2.7
2
0.5
0.0
0
High Growth
Fund
Growth Fund Balanced Fund
HKBU
Stable Fund
0.1
GMF - HKD
Fund
0.1
GMF - USD
Fund
Wyatt Median
hkbu28e_wh08
Source: HSBC Asset Management, Watson Wyatt Managed Fund Report
Past performance is not necessarily a guide to future performance
10
HSBC Asset Management
Investment performance: 2Q 2004
Peer group comparison
5
Return %
2.5
0.0
0
0.0
0.3
0.0
-2.5
-3.5
-2.9
-3.3
-2.8
-3.3
-2.8
-3.1
-2.9
-5
High Growth
Fund
Growth
Fund
Balanced
Fund
HKBU
Stable Fund
GMF - HKD
Fund
GMF - USD
Fund
Wyatt Median
hkbu28e_wh08
Source: HSBC Asset Management, Watson Wyatt Managed Fund Report
Past performance is not necessarily a guide to future performance
11
HSBC Asset Management
Asset allocation – 31 July 2004
HKBU
High Growth
HKBU
Growth
HKBU
Balanced
HKBU
Stable
Fund
(%)
Bmk
(%)
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
31.3
13.9
12.1
16.6
16.7
90.6
24.0
9.0
9.0
14.0
14.0
70.0
24.7
10.5
8.9
12.4
12.9
69.4
17.0
6.5
6.5
10.0
10.0
50.0
17.2
7.4
7.0
8.6
9.1
49.3
10.0
4.0
4.0
6.0
6.0
30.0
9.9
5.2
4.2
4.7
5.3
29.3
Bonds
US Bonds
Non US Bonds
Total
1.6
5.4
7.0
0.8
4.6
5.4
5.7
19.3
25.0
3.5
19.5
23.0
10.3
34.7
45.0
6.0
34.8
40.8
13.6
46.4
60.0
8.7
48.1
56.8
Cash
3.0
4.0
5.0
7.6
5.0
9.9
10.0
13.9
Fund
(%)
hkbu28e_wh08
Bmk
(%)
HKBU GMF
HKD / USD
100.0
12
HSBC Asset Management
Market outlook
hkbu28e_wh08
13
HSBC Asset Management
US
–
–
–
–
–
–
–
–

Slowdown in second quarter of 2004 GDP growth and worse than expected consumption
Residential and business investment remained strong
Falling unemployment, and rising household income
Budget deficit could be slightly lower than expected due to increased revenues
But geopolitical issues and strong oil price weigh on markets
Margins at 40-year highs, earnings may come under pressure
Valuations are looking more attractive
Balance sheet repair makes meaningful increases in dividends possible
Outlook
– US - Moderate Underweight
– GDP growth forecast for 2004 (+4.3%); 2005 (+3.6%)
hkbu28e_wh08
Data as at 4 August 2004
14
HSBC Asset Management
Europe



Euroland
– Recovery continues although at a gradual pace
– Sluggish domestic demand; but growth driven by exports
– Earnings growth revised upwards on higher forecast revenues, not cost cutting
– More attractive valuations but oil price concern still lingers
UK
– Annualised second quarter of 2004 growth at 3.7%, fastest seen in four years
– Impact of higher interest rates on consumption is key
– Generally strong earnings report, but profit-taking to continue in the short term
– Valuations not stretched
hkbu28e_wh08
Outlook
– Europe - Neutral; UK - Neutral
– GDP growth forecast for 2004 and 2005: Europe (+2.0%, +2.4%); UK (+3.5%, +2.4%)
Data as at 4 August 2004
15
HSBC Asset Management
Japan
– June data pointed to a slowing pace of growth
– Official view still positive; consensus for 2004 GDP growth forecasts increased slightly to
4.2%
– Deflation continues to ease, consensus predicts zero inflation in 2005
– Good quarterly earnings, but cautious company guidance due to higher energy and
materials costs
– Market is becoming more sensitive to potential risks
– Valuation is reasonable with markets trading at 18 times of price earning

Outlook
– Japan - Neutral
– GDP growth forecast for 2004 (+4.0%) and 2005 (+2.0%)
hkbu28e_wh08
Data as at 4 August 2004
16
HSBC Asset Management
Asia (ex-Japan)
–
–
–
–
–
–
–
–

Trade and retail data still indicate that Asia, including China, is heading for a soft landing
Moderation in growth momentum expected in second half of 2004 following US slowdown
However, growth still remains strong driven by domestic consumption
Despite rising oil prices, inflationary pressures still benign
Recent market weakness was due to sector specific issues
Investors are concerned about earnings growth next year
Due to overcapacity, Technology drags the market most
Asia still seems cheap, in both relative and absolute terms
Outlook
hkbu28e_wh08
– Asia (ex-Japan) – Moderate Overweight
Data as at 4 August 2004
17
HSBC Asset Management
Asia (ex-Japan)

Hong Kong (moderate overweight)
–
–
–
–
–

Falling unemployment rate, easing deflationary and strong retail sales
Upward earnings revisions to resume with positive management guidance
Successful property launches rejuvenate the sagging property sector
Market consolidation may continue in the coming month
Remain sanguine on the Hong Kong on a 12-month view
Korea (underweight)
– Market unlikely to turn around in near future despite historical low market valuations
– Suffering from high crude oil prices
– Negatives: second half of 2004 export growth might decline, earnings forecast reductions, struggling local
consumption

Taiwan (underweight)
hkbu28e_wh08
– Market still lacks catalysts
– Negatives: PC seasonality trend yet to confirm, earnings downgrades, weak investor confidence
– Valuation becomes more attractive
Data as at 4 August 2004
18
HSBC Asset Management
Bond market outlook
US
– Economy retains a strong underlying momentum despite soft data
– Expect 0.5% of rate hikes in 3 months, and 2% total over 12 months
Euroland
– Improving domestic economic activity prompts Central Bank to reduce policy stimulus
– Expect the European Central Bank to commence tightening monetary policy in 12 months
Japan
– No policy changes within the next 3 or 12 months
– Possible measured reduction in quantitative stimulus should current economic recovery
continue
hkbu28e_wh08
Data as at 4 August 2004
19
HSBC Asset Management
HSBC Asset Management Investment Strategy
Asset class rating :
Underweight
Neutral
Overweight
Bonds
Equities
Cash
Market preference :
Underweight
Fixed
income:
US, Japan
US,
Australia
Neutral
Moderate
Overweight
Overweight
Europe, UK
Australia,
GEM, Canada,
Europe, UK,
Japan, Canada
Hong Kong,
Asia, GEM
hkbu28e_wh08
Equity:
Moderate
Underweight
Data as at 4 August 2004
20
HSBC Asset Management
Factors for consideration
before switching
hkbu28e_wh08
21
HSBC Asset Management
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
hkbu28e_wh08
– very low short term volatility
22
HSBC Asset Management
Please remember

Identify personal factors
– Establish risk / return profile
– Understand investment choices
– Make investment decisions using a long-term approach
hkbu28e_wh08
Do not time / chase markets!
23
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
hkbu28e_wh08
Different people have different needs!!
24
HSBC Asset Management
Range of investment choices

Different people have different needs
Therefore
Investment choices are provided for different risk profiles
hkbu28e_wh08
25
HSBC Asset Management
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.
hkbu28e_wh08

26
HSBC Asset Management
HSBC Asset Management (Hong Kong) Limited
hkbu28e_wh08
27