global outlook 2016 - hsbc · source: hsbc global asset management multi asset, january 2016. the...

Date: February 2016Bill Maldonado

CIO Asia-Pacific

Identifying opportunities in a ‘fragile equilibrium’

Global outlook 2016

Presentation only intended for professional investors as defined by MIFID.

2

Performance of equity markets in 2015 and 2016 (in USD unless stated otherwise)

Performance of global equities in 2015 and 2016

Source: Bloomberg, HSBC Global Asset Management, as at 28 January 2016. Total return in USD terms unless otherwise specified. Past performance is not a reliable indicator of future performance

70

80

90

100

110

120

130

Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-2015 Jan-2016

31 Dec 2014 =100

MSCI US MSCI EM MSCI Europe EUR MSCI Europe

Global equity markets were characterized by significant volatility in 2015 and early 2016

Volatility hit Emerging Markets harder than Developed Markets

European equities fared better, boosted by the ECB’s indications of monetary policy easing

Non contractual document


3

Performance of fixed income markets in 2015 (in USD unless stated otherwise)

Performance of global bonds in 2015 and 2016

Source: Bloomberg, HSBC Global Asset Management, as at 28 January 2016. Total return in USD terms unless otherwise specified. Past performance is not a reliable indicator of future performance

80

85

90

95

100

105


31 Dec 2014 = 100

Global bond US Treasury US IG European bond EM hard currency EM local currency Asian USD

Bond markets also experienced significant volatility in 2015

Rates were first driven by deflationary fears, before fluctuating with the Fed expected rate policy

Credit and EM spreads were impacted by corporate re-leveraging; China and Fed-related outflows widened constantly until a peakin September


4

We remain in a ‘fragile equilibrium’…

’Severe SecularStagnation’

‘Fragile Equilibrium’‘Strong Demand

Recovery’

Description

Very weak demand growth Negative real interest rates are

required Corporates face a problem with

top-line (sales) growth There is a meaningful threat to

fundamentals and balancesheets

There is just enough demandrelative to supply

We have a low growth/lowinflation mix. The interest ratecycle will be “slow-and-low”

To a certain extent, self-equilibrating mechanisms pullus back from low inflation orrapid growth extremes

Demand is too strong relative toavailable supply

Output gaps go positive (growthis above potential) andpressure on real interest ratesrises

Bond yields move back tohistoric levels

Primary Source China/EM US

Impact

Positive for: Developed MarketGovernment Bonds, IG Credits

Negative for: EM andcommodity-linked Equity, EMcurrencies

Fragile equilibrium ismaintained

USD overshoots, May be positive for EM Equity

and EM Local FX Debt Negative for: Developed Market

Government Bonds, InvestmentGrade Credit

Source: HSBC Global Asset Management Multi Asset, January 2016. The commentary and analysis presented in this document reflect the opinion of HSBC Global Asset Management on the markets, according to the informationavailable to date. They do not constitute any kind of commitment from HSBC Global Asset Management. Consequently, HSBC Global Asset Management (France) will not be held responsible for any investment or disinvestmentdecision taken on the basis of the commentary and/or analysis in this document..

Nov 2015Market

PerceptionsOf Risk Environment

Jan 2016

Our base case remains for a ‘fragile equilibrium’, but scope for asset class re-rating as market shifts between differentpriced scenarios


5

Current pecking order of asset classes

What are long term risk/return expectations telling us?

Note: Global Fixed Income assets are shown hedged to USD. Local EM debt, Equity and Real Estate assets are shown unhedgedSource: HSBC Global Asset Management as at end December 2015. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.

Equities are the preferred asset class, especially over government bonds and cash

Cash US TIPSUK IL GiltsUS Tsy

UK GiltsGerman BundsJapan JGBs

US Corp

US HY

GBP CorpEUR Corp

EM Sovs USD

EM Credit US Equity

UK EquityJapan Equity

EM Equity

AC World Equity

Asia ex Japan Equity

Euro ABS

US 5y TsyUK 5y Gilts

Local EM Debt

Europe x UK Equity (H)UK Equity (H)

Japan Equity (H)

Canada Equity

Canada Equity (H)

Asia IG Credit

Asia HY Corporate

Global HY

0

1

2

3

4

5

6

7

8

9

10

0 2 4 6 8 10 12 14 16 18 20 22 24 26

Expected Volatility (%)

Sharpe Ratio = 0.25

Sharpe Ratio = 0.10

Expected Asset Class Returns (%, Nominal, USD)


Equity and bond outlook: themes, driversand views

7

Fed signals a more gradual pace of tightening in their latestprojections

The US unemployment rate is close to the Fed’s estimate oflong-run unemployment rate

All eyes on the Fed

Source: Bloomberg, HSBC Global Asset Management, as at 4 January 2015. Past performance is not a reliable indicator of future performance. Any forecast, projection or target where provided is indicative only and is not guaranteedin any way. The commentary and analysis presented in this document reflect the opinion of HSBC Global Asset Management on the markets, according to the information available to date. They do not constitute any kind ofcommitment from HSBC Global Asset Management. Consequently, HSBC Global Asset Management (France) will not be held responsible for any investment or disinvestment decision taken on the basis of the commentary and/oranalysis in this document.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18

%

Fed 'Dots Chart', Median projection, December 2015Fed 'Dots Chart', Median projection, September 2015Fed 'Dots Chart', Median projection, June 2015Bloomberg consensus estimatesMarket implied estimate

The US economic recovery remains on track as the unemployment rate falls to long term forecast levels

The Fed could hike again in 2016

We don’t think the timing makes a big difference – the path is much more important


8

MSCI World and S&P 500 during 2004-06 Fed tightening

Equity performance and rising rates – its about growth expectations

Source: Bloomberg, Nomura Strategy, HSBC Global Asset Management, as at December 2015. Past performance is not a reliable indicator of future performance

0

1

2

3

4

5

6

90

100

110

120

130

140

150

160

170

180

190

200

210

Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07

Fed funds target rate (%)31 Dec 03 = 100

S&P 500 MSCI AC World MSCI AC Asia ex Japan Fed funds target rate (%, RHS)

Historical data shows that periods of rising interest rates are not necessarily bad for equities

Periods of inflation are often accompanied by strong growth, which is positive for equities


9

The ECB aims to increase the balance sheet back to thelevel of 2012, possibly even more

Low inflation in the Eurozone provides room for the ECB tocut rates

-1

0

1

2

3

4

5

6

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Eurozone HICP InflationInflation Expectations (EUR Inflation Swap 5Y5Y)ECB TargetEurozone CPI Core Inflation

ECB action supports European equities

Source: HSBC Global Asset Management, as at 9 December 2015Past performance is not indicative of future performance

Source: ECB, Bloomberg, Eurostat, HSBC Global Asset Management, as at 9 December 2015. Any forecast,projection or target contained in this presentation is for information purposes only and it not guaranteed in any way.HSBC accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purpose only

%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

SMP OMT LTROTLTRO APP

Forecast

EUR

Assuming EUR60bn purchasesa month until March 2017

SMP OMT LTRO TLTRO APP

The European Central Bank (ECB) extended its asset purchasing programme by six months and cut the deposit rate further to ahistoric low of -0.3% at its December meeting

Economic and earnings data has also been positive recently, providing further support to European equities


10

SOE reform

Fiscal/tax reform

Financial reform

Capital market liberalisation/RMB internationalisation

Household registration system (Hukou) reform

Land reform

Relaxation of one-child policy

“One Belt, One Road” and Free-Trade Zones

China: Rebalancing the economy for sustainable growth

Preference for Asia anchored in fundamentals (i.e. reform agenda)

Source: HSBC Global Asset Management, data as of September 2015

Goods and services tax (GST)

Labour market reform

Diesel pricing deregulation

Coal and mining

Inflation-targeting/ new monetary policy framework

Government transparency and ease of doing business

Aadhar/UID

“Make in India” and “Digital India”

India: Voted for change with strongest mandate in 30 years

Fiscal/fuel subsidy reform

Increasing spending on infrastructure

Increasing spending on health and education

Anti-corruption and better governance

Institutional reform to improve efficiency of SOEs

Reducing bureaucracy for business start-ups

Agriculture/rural development (including land reform)

Improving financial inclusion

Indonesia: Voted for redistribution and accelerated reform

Tax measures to encourage corporates to pay moredividends, raise wage or increase capex

Overhaul of the inflexible labour market

Regulatory reforms

Reform of the public pension system

Reform of the educational system

Nurturing the service sector

Economic democratisation (reform of chaebols)

Korea: Restructuring for stronger fundamentals


11

Cyclicals vs defensives P/B ratio gap widensAsia ex-Japan equity valuations close to previous lows

Asian equity valuations appear to be attractive

Source: Credit Suisse, as of January 2016. Any forecast, projection or target contained in this presentation is for information purposes only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet suchforecasts, projections or targets. For illustrative purpose only. The commentary and analysis presented in this document reflect the opinion of HSBC Global Asset Management on the markets, according to the information available todate. They do not constitute any kind of commitment from HSBC Global Asset Management. Consequently, HSBC Global Asset Management (France) will not be held responsible for any investment or disinvestment decision taken onthe basis of the commentary and/or analysis in this document. Past performance is not a reliable indicator of future performance.

Asia ex-Japan equity valuations are now at levels last seen during the global financial crisis

However, it’s hard to argue that the region’s fundamentals justify such low valuations

On a sector level, cyclicals appear to be very attractive when compared to defensive stocks

Price-to-book ratio Price-to-book ratio gap

0.5

1.0

1.5

2.0

2.5

3.0

Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13

Asia ex-JP - Trailing PB

1.24xnow

1.23x inFeb 090.94x in

Aug 98

1.22x inMar 03

1.19x inSep 01

12-month return114%

12-month return14%

12-month return72%

12-month return84%

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15

Asia ex-JP Trailing PB - Cyclicals less Defensives

-0.74 Dec 2008

-0.59xnow

-0.82x Jul 2015

12-month return?


12

Equity volatility is rising

Source: Bloomberg, HSBC Global Asset Management, data as of 27 January 2016. Past performance is not a reliable indicator of future performance

0

10

20

30

40

50

60

70

80

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

MSCI ACWI 30-day annualised volatility 5-year average

Equity volatility has increased in early 2016

Macro risk indicators show that risk aversion is now above average and rising

Average in thefirst 5 years:

17.4%

Average in thesecond 5 years:12.5%


13

10y-2y yield curves

US vs Euro vs UK curves

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

US Germany Japan

G3 bond markets: upward pressure on yields

Source: Bloomberg, data as at 31 December 2015. The views and opinions above are provided by and represents those of HSBC Global Asset Management and are subject to change without notice. Any forecast, projection or targetcontained in this presentation is for information purposes only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections or targets. Past performance is no guarantee of future results

0.0

0.5

1.0

1.5

2.0

1.0

1.5

2.0

2.5

3.0

Jan-13 Aug-13 Mar-14 Oct-14 May-15 Dec-15

US Treasury 10Y yield, LHS UK Gilt 10Y yield, LHS

German Bund 10Y yield, RHS Japan JGB 10Y yield, RHS

We expect US yields to move higher following the Fed ratehike in December

There is no upward pressure on Euro yields with ECBpurchases providing support

Japanese 10 year yields are likely to remain extremely low

The US curve should flatten again as the Fed moves furtherafter the first policy rate increase

Euro curve movements more likely to be directional

While successful reflation from ECB measures might lead toa steeper curve, negative short term bond yields increasethe attractiveness of longer dated bonds


14

Split between IG and HY in emerging market index

Performance of Emerging Markets currencies

The USD strength was the common driving factor in 2015

With floating FX regimes, emerging countries have letcurrencies adjust when confronted with lower growth

Latin American currencies were more affected as a result ofBrazil specific challenges and being a commodity exportingregion

The upgrade/downgrade ratios have turned negative withsome very significant downgrades (Russia and Brazil)

For countries no longer supported by mega trends, egcommodity prices, industrial globalisation and credit-leddemand, structural adjustments will take time and macroand credit pressures are likely to remain

Emerging bond markets: currency depreciation a major factor

Source: HSBC Global Asset Management, Bloomberg, JP Morgan as at 31 December 2015. The views and opinions above are provided by and represents those of HSBC Global Asset Management and are subject to change withoutnotice. Any forecast, projection or target contained in this presentation is for information purposes only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections or targets. Pastperformance is no guarantee of future results

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

2001 2003 2005 2007 2009 2011 2013 2015

USD/ELMI historical USD/ELMI theoretical


15

Global High Yield BB-B spreads by rating

Global Investment Grade spreads by rating

Investment Grade spreads have moved higher recently withthe US suffering from significant supply

We see value in lower rated Investment Grade – BBB

– Attractive valuations

– Should be less vulnerable to potential treasury yield increases thanhigher rated credit

– EUR spreads supported by the ECB and less shareholder-friendlyinitiatives

High Yield spreads have also risen with Europe lessexposed to commodity-related/Energy companies

Lower end of the IG spectrum appears attractive

Source HSBC Global Asset Management and Barclays Live, as at 31 December 2015. The views and opinions above are provided by and represents those of HSBC Global Asset Management and are subject to change without notice.Any forecast, projection or target contained in this presentation is for information purposes only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections or targets. Pastperformance is no guarantee of future results

0

1

2

3

4

5

6

7

8

2001 2003 2005 2007 2009 2011 2013 2015

Global Aggregate Corporate Aaa Global Aggregate Corporate AaGlobal Aggregate Corporate A Global Aggregate Corporate Baa

0

5

10

15

20

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

US High Yield Ba US High Yield B

Euro High Yield BB (USD) Euro High Yield B

EM USD Aggregate: High Yield

(%)

(%)


16

Global high yield bond spreadGlobal investment grade bond spread

Relative valuations of Asian credit are attractive

Source: US and Europe indices: Merrill Lynch US Corporate Index and Merrill Lynch Euro Corporate Index; Asia indices: JACI Investment Grade Corporate Index . Data as of 29 December 2015

Investment grade Non investment grade

Yield (%) Spread (bps) Credit rating Yield (%) Spread (bps) Credit rating

Asia 4.19 216 A3 8.09 597 B1

US 3.71 173 A3 8.92 696 B1

Europe 1.45 133 A3 5.57 521 BB3

Spread Spread

0

50

100

150

200

250

300

Dec-1

3

Jan

-14

Feb-1

4

Mar-

14

Ap

r-14

May-

14

Jun

-14

Jul-1

4

Au

g-1

4

Se

p-1

4

Oct

-14

Nov-1

4

Dec-1

4

Jan

-15

Feb-1

5

Mar-

15

Ap

r-15

May-

15

Jun

-15

Jul-1

5

Au

g-1

5

Se

p-1

5

Oct

-15

Nov-1

5

US IG Corp Asia IG Corp EU IG Corp

0

100

200

300

400

500

600

700

800

Dec-1

3

Jan

-14

Feb-1

4

Mar-

14

Ap

r-14

May-

14

Jun

-14

Jul-1

4

Au

g-1

4

Se

p-1

4

Oct

-14

Nov-1

4

Dec-1

4

Jan

-15

Feb-1

5

Mar-

15

Ap

r-15

May-

15

Jun

-15

Jul-1

5

Au

g-1

5

Se

p-1

5

Oct

-15

Nov-1

5

Euro HY Corp US HY Corp Asia HY Corp

Asian high yield corporates are now yielding around 8.1% when European high yield corporates are yielding only 5.6%

Asian credit spreads are also trading wider than US and Europe with similar or better credit ratings


17

Making sense of the current commodity market rout

Source: International Energy Agency, HSBC Global Asset Management, last update January 2016

Commodity price boom/bust dynamic Oil production and consumption relative to 10-year trend

Risk assets sold off at the beginning of 2016 in reaction to tumbling commodities

Weak commodity prices is often interpreted as signalling further economic slowdown in China

However, the current situation is better explained by excess supply, across the commodity spectrum

Commodities typically follow a boom/bust cyclical dynamic

The current weakness is exacerbated by the surge in short positions among speculators


China: our perspective

19

Performance of Chinese equities

Market volatility in China has been a major concern

Source: Bloomberg, data as of 27 January 2016. Any forecast, projection or target contained in this presentation is for information purposes only and is not guaranteed in anyway. HSBC accepts no liability for any failure to meet suchforecasts, projections or targets. Investment involves risks. Past performance is not indicative of future performance. The commentary and analysis presented in this document reflect the opinion of HSBC Global Asset Management onthe markets, according to the information available to date. They do not constitute any kind of commitment from HSBC Global Asset Management. Consequently, HSBC Global Asset Management (France) will not be held responsiblefor any investment or disinvestment decision taken on the basis of the commentary and/or analysis in this document.

45

50

55

60

65

70

75

80

85

90

2,800

3,300

3,800

4,300

4,800

5,300

5,800


CSI 300 (lhs) MSCI China (rhs)

Chinese equities had its worst ever start to the year, likely triggered by a combination of (1) concerns over the health of theChinese economy, (2) concerns over a further depreciation of the RMB, and (3) global risk aversion arising from lower oil prices

The plunge in Chinese stocks triggered two newly introduced circuit breakers in the first four trading sessions, which consequentlyprompted authorities to reverse course and suspend the mechanism at the end of the week

The authorities also introduced new rules to prevent a sudden reduction of holdings by large shareholders ahead of the expirationof the selling ban on 8 January, while there were signs of state-controlled funds/entities buying to support the market

CSI 300 MSCI China


20

Credit growth continues to outpace China’s GDP growthRapid buildup of leverage

Rapid buildup of leverage and credit mispricing are risks

Source: CEIC, WIND, HSBC Global Asset Management, data at of December 2015Source: CEIC, WIND, HSBC Global Asset Management, data at of October 2015

Increased credit support should help reduce near term growth risks, but may cause a resurgence in credit-driven growth and re-leveraging in China

Default risks could surface, particularly in sectors suffering overcapacity and local SOEs

% of GDP

0%

50%

100%

150%

200%

250%

2007 2008 2009 2010 2011 2012 2013 2014

Central governmentLocal governmentHouseholdNon-financial corporate

0

5

10

15

20

25

30

35

1Q03 1Q05 1Q07 1Q09 1Q11 1Q13 1Q15

% yoy

TSF oustanding Bank loans Nominal GDP


The commentary and analysis presented in this document reflect the opinion of HSBC Global Asset Management on the markets, according to the information available to date. They do not constitute any kind of commitment fromHSBC Global Asset Management. Consequently, HSBC Global Asset Management (France) will not be held responsible for any investment or disinvestment decision taken on the basis of the commentary and/or analysis in thisdocument.

21


The Internet market has grown rapidlyThe e-commerce market is becoming an increasinglyimportant channel for consumption

Opportunities exist for willing stock pickers eg e-commerce

Source: CEIC, HSBC Global Asset Management, data as of December 2015

0

2

4

6

8

10

12

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2007 2008 2009 2010 2011 2012 2013 2014

CNYtrnCNYtrn

E-commerce (retail sales), rhs E-commerce (B2B), lhs

China unveiled policies to make China a global e-commerce leader, in line with China’s transition from an investment-led growthmodel towards a more balanced consumption-driven one

The rise of online transactions and the increasingly important roles of social media and mobile devices are re-shaping the waysChinese consumers purchase goods and services

0

10

20

30

40

50

60

70

80

0

100

200

300

400

500

600

700

800

2007 2008 2009 2010 2011 2012 2013 2014 2015

%Million persons

No of Internet user (rural), lhs No of Internet user (urban), lhs

Internet penetration rate (rural), rhs Internet penetration rate (urban), rhs


22


Trade-weighted currencies rebased

Increasing flexibility of the RMB as PBoC shifts focus to trade-weightedexchange rate

Source: BIS, HSBC Global Asset Management, data as of as of December 2015.

The weakening of the RMB against the USD is mainly a result of continued USD strength and the PBoC’s shifting focus to theCNY effective exchange rate from the USD-CNY bilateral rate

Despite recent volatilities, the RMB remains relatively stable on a trade-weighted basis

Australia

Brazil

China

Euro area

Japan

KoreaSwitzerland

United KingdomUnited States

60

70

80

90

100

110

120

130

140

2010 2011 2012 2013 2014 2015

Jan 2010 = 100

Australia Brazil China Euro area Japan Korea Switzerland United Kingdom United States

RMB fixing adjustment


23

The commentary and analysis presented in this document reflect the opinion of HSBC Global Asset Management on the markets, according to the information available to date. They do not constitute any kind of commitment fromHSBC Global Asset Management. Consequently, HSBC Global Asset Management (France) will not be held responsible for any investment or disinvestment decision taken on the basis of the commentary and/or analysis in thisdocument. Past performance is not a reliable indicator of future performance.

Yield comparison – Asian hard currency bond vs offshore RMB bond

Historical yield (duration adjusted)

Yields in the offshore market are attractive on a risk adjusted basis

Source: HSBC Global Asset Management; Bloomberg, data as of 29 December 2015

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

HSBC Asian US Dollar Bond Index BofA Merrill Lynch Euro Corporate Index BofA Merrill Lynch US Corporate Index HSBC Offshore RMB Bond Index

0.0

0.5

1.0

1.5

2.0

Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

HSBC Asian US Dollar Bond Index BofA Merrill Lynch Euro Corporate Index BofA Merrill Lynch US Corporate Index HSBC Offshore RMB Bond Index

Duration of the market is only around 2.7 years

Therefore the duration-adjusted yield is attractive

(%)


24

China’s economy is still undergoing a major transition:

– Growth in China has slowed following the GFC, as the economy reasonably shifts from its previous relianceon investment driven growth, to a more sustainable path, promoting domestic consumption

– Economic growth is expected at around 6-7% in 2016

Authorities have additionally pursued a substantial reform agenda - improving productivity in theagricultural sector, pursuing efficiency in previously bloated SOEs, whilst liberalising anddeepening domestic capital markets

Simultaneously, policy easing has provided ample liquidity

However, Chinese authorities have to manage the difficult task of supporting growth in capitalmarkets whilst preventing the dangers of excess

We see value and long term investment opportunities in Chinese asset classes

The China story is far from over..



25

Fragile equilibrium to continue – global growth and inflation is likely to remain relatively low,with potential periodic scares triggering bouts of stock market volatility

Risks and uncertainties remain – slow and uneven growth has been the norm in the last fewyears, and has been driven by a range of factors such as unexpected shocks, de-leveraging,constrained capital spending and slower than expected growth in emerging markets

Scope for upside surprise – if growth and earnings surprise on the upside in 2016 the marketmay deliver stronger returns although we don’t see evidence for this today

Equities preferred over government bonds and cash – While long term returns are notspectacular, its better to be invested than not

Opportunities are selective – as volatility lingers, investment opportunities will emerge; carefulcredit and stock selection will be critical to delivering returns

Summary: so where are we now?



26

Uncertainty in the global economy and changing valuations should result in greater dispersionand higher volatility

This provides active investment experts with opportunities to identify and uncover value

We continue to think that the environment remains relatively positive for risk assets, thoughglobal growth remains modest

However, as volatility is likely to continue, investors should consider their risk appetite and goalsbefore seeking the appropriate solutions

Staying appropriately diversified will help investors manage volatility whilst working towards theirlong term return objectives

Key considerations for investors



27 Non contractual document

Important information

This presentation is distributed by HSBC Global Asset Management (France) and is only intended for professional investors as defined by MIFID.The information contained herein is subject to change without notice. Allnon-authorised reproduction or use of this commentary and analysis will be the responsibility of the user and will be likely to lead to legal proceedings. This document has no contractual value and is not by any meansintended as a solicitation, nor a recommendation for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The commentary and analysis presented in this document reflectthe opinion of HSBC Global Asset Management on the markets, according to the information available to date. They do not constitute any kind of commitment from HSBC Global Asset Management. Consequently,HSBC Global Asset Management (France) will not be held responsible for any investment or disinvestment decision taken on the basis of the commentary and/or analysis in this document.

All data from HSBC Global Asset Management (France) unless otherwise specified. Any third party information has been obtained from sources we believe to be reliable, but which we have not independently verified.

The performance figures displayed in the document relate to the past and past performance should not be seen as an indication of future returns. It is important to remember that the value of investments and any incomefrom them can go down as well as up and is not guaranteed. Capital is not guaranteed. Where overseas investments are held the rate of exchange may cause the value to go down as well as up. Investments inemerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets. Funds that invest in securities listed on a stock exchange or market could be affected by generalchanges in the stock market. The value of investments can go down as well as up due to equity markets movements.

Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices.The MSCI information is provided on an 'as is' basis and the user of this information assumes the entire risk of any use it may make or permit to be made of this information. Neither MSCI, any of its affiliates or any otherperson involved in or related to compiling, computing or creating the MSCI information (collectively, the 'MSCI Parties') makes any express or implied warranties or representations with respect to such information or theresults to be obtained by the use thereof, and the MSCI Parties hereby expressly disclaim all warranties (including, without limitation, all warranties of originality, accuracy, completeness, timeliness, non-infringement,merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental,punitive, consequential or any other damages (including, without limitation, lost profits) even if notified of, or if it might otherwise have anticipated, the possibility of such damages.

Important information for Luxembourg investors: HSBC entities in Luxembourg are regulated and authorised by the Commission de Surveillance du Secteur Financier (CSSF).

Important information for Swiss investors: This presentation is intended exclusively towards qualified investors in the meaning of Art. 10 para 3, 3bis and 3ter of the Federal Collective InvestmentSchemes Act (CISA).

The above document has been approved for distribution/issue by the following entities :

HSBC Global Asset Management (France)

421 345 489 RCS Nanterre. Portfolio management company authorised by the French regulatory authority AMF (no. GP99026) with capital of 8.050.320 eurosPostal address: 75419 Paris cedex 08, France.Offices:Immeuble Coeur Défense, 110, esplanade du Général Charles de Gaulle, 92400 Courbevoie - La Défense 4 . (Website: www.assetmanagement.hsbc.com/fr).

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Non contractual document, updated in February 2016 - AMFR_Ext_85_2016

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global outlook 2016 - hsbc · source: hsbc global asset management multi asset, january 2016. the...

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