hsbc global asset management september 2009 global …€¦ · global house view: market outlook...
TRANSCRIPT
Global House View: Market OutlookSeptember 2009HSBC GLOBAL ASSET MANAGEMENT
2
16088/HSB1395a
Contents
Market performanceMacro-economic PictureMarket Views: high level asset allocationMarket Views: Equity Regional AllocationConcluding RemarksSummary of views
Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Market Performance
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Key markets performance
Source: Bloomberg, DataStream, MSCI, Merrill Lynch, Citigroup. Total Returns in local currencies. Performance from the past should not be seen as an indication of future returns. The value of investments and any income from them can go down as well as up. Data as of September 3rd 2009.Note: Indices and sources used to represent each asset class shown are (from left to right): MSCI World (World equities), MSCI US (US Equities), MSCI EMU (Eurozone Equities), MSCI UK ( UK Equities), MSCI Japan (Japan Equity), MSCI Emerging Markets (Emerging Markets equity), US WTI Crude Oil spot price (Oil); Citigroup World Government Bond Index (World Government Bonds); Merrill Lynch Global Investment Grade (Global Investment Grade); Merrill Lynch Global High Yield (Global High Yield); Yen spot price vs US Dollar Spot price (Yen vs US Dollar), Sterling spot price vs US Dollar Spot price (Sterling vs US Dollar); Euro spot price vs US Dollar spot price (Euro vs US Dollar)
Equities Fixed Income CurrencyCommodity
15.213.6
16.012.4 11.1
43.3
52.4
0.7
13.2
42.7
19.9
-2.1
11.8
2.0
-10
0
10
20
30
40
50
60
World US Eurozone UK Japan EmergingMarkets
Oil WorldGovt
Bonds
GlobalInvest.Grade
GlobalHighYield
EmergingDebt
JPY vsUSD
GBP vsUSD
EUR vsUSD
Tota
l ret
urn,
in lo
cal c
urre
ncy
(%)
Year-to-date
Macro-economic Picture
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-10-505
1015202530
Dec
-00
Aug
-01
Apr
-02
Dec
-02
Aug
-03
Apr
-04
Dec
-04
Aug
-05
Apr
-06
Dec
-06
Aug
-07
Apr
-08
Dec
-08
Aug
-09
% c
hang
e Yo
Y
Korea retail sales China retail sales -25-20-15-10
-505
101520
Mar
-02
Jul-0
2N
ov-0
2M
ar-0
3Ju
l-03
Nov
-03
Mar
-04
Jul-0
4N
ov-0
4M
ar-0
5Ju
l-05
Nov
-05
Mar
-06
Jul-0
6N
ov-0
6M
ar-0
7Ju
l-07
Nov
-07
Mar
-08
Jul-0
8N
ov-0
8M
ar-0
9Ju
l-09
% c
hang
e Yo
Y
Existing home sales Pending home sales
-2-0.3
-3.1
0.1
-3.4
-7-8.4
-10.1 -9.4
1.6
5.9 5.7
2.3 1.9
-12-10
-8-6-4-202468
Jun-
08
Jul-0
8
Aug
-08
Sep-
08
Oct
-08
Nov
-08
Dec
-08
Jan-
09
Feb-
09
Mar
-09
Apr
-09
May
-09
Jun-
09
Jul-0
9
% c
hang
e M
oM
Economic data continues to show signs of global stabilization…
China and Korea retail sales (YoY % change) US existing and pending home sales (YoY % change)
Source: DataStream, HSBC Global Asset Management, as of September 3rd 2009Past performance should not be seen as an indication of future returns. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way
Japan industrial production (MoM % change) US industrial production (MoM % change)
0.8 1.3
-4.5
0.8
-6.2
-1-2.6
-3.7-5.2
-0.8-1.7
1.8
-2.5
4.9
-8
-6
-4
-2
0
2
4
6
Jun-
08
Jul-0
8
Aug
-08
Sep-
08
Oct
-08
Nov
-08
Dec
-08
Jan-
09
Feb-
09
Mar
-09
Apr
-09
May
-09
Jun-
09
Jul-0
9
% c
hang
e M
oM
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…..but we are not clear of danger yet!
65
70
75
80
85
90
Aug
-89
Jun-
90A
pr-9
1Fe
b-92
Dec
-92
Oct
-93
Aug
-94
Jun-
95A
pr-9
6Fe
b-97
Dec
-97
Oct
-98
Aug
-99
Jun-
00A
pr-0
1Fe
b-02
Dec
-02
Oct
-03
Aug
-04
Jun-
05A
pr-0
6Fe
b-07
Dec
-07
Oct
-08
Aug
-09
US
indu
stria
l cap
itici
ty u
tilis
atio
n (%
)
US industrial capacity utilisation (%) US consumption expenditure (YoY % change)
Source: DataStream, HSBC Global Asset Management, as of September 3rd 2009. Consumption data based on constant pricePast performance should not be seen as an indication of future returns. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way
US household leverage (debt to personal income ratio)
5060708090
100110120130140
Jun-
59N
ov-6
1M
ar-6
4A
ug-6
6D
ec-6
8M
ay-7
1Se
p-73
Jan-
76Ju
n-78
Oct
-80
Mar
-83
Jul-8
5N
ov-8
7A
pr-9
0A
ug-9
2Ja
n-95
May
-97
Oct
-99
Feb-
02Ju
n-04
Nov
-06
Mar
-09U
S ho
useh
old
debt
to p
erso
nal
inco
me
(in %
)
-4
-2
0
2
4
6
8
10
Sep-
64
Dec
-66
Mar
-69
Jun-
71
Sep-
73D
ec-7
5
Mar
-78
Jun-
80Se
p-82
Dec
-84
Mar
-87
Jun-
89
Sep-
91D
ec-9
3M
ar-9
6
Jun-
98Se
p-00
Dec
-02
Mar
-05
Jun-
07
Sep-
09
Con
sum
ptio
n ex
pend
iture
% Y
oY)
8
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2
3
4
5
6
7
8
9
10
11
Sep-
64De
c-66
Mar
-69
Jun-
71Se
p-73
Dec-
75M
ar-7
8Ju
n-80
Sep-
82De
c-84
Mar
-87
Jun-
89Se
p-91
Dec-
93M
ar-9
6Ju
n-98
Sep-
00De
c-02
Mar
-05
Jun-
07Se
p-09
Unem
plom
ent r
ate
(%)
0
1
2
3
4
5
6
Sep-
64De
c-66
Mar
-69
Jun-
71Se
p-73
Dec-
75M
ar-7
8Ju
n-80
Sep-
82De
c-84
Mar
-87
Jun-
89Se
p-91
Dec-
93M
ar-9
6Ju
n-98
Sep-
00De
c-02
Mar
-05
Jun-
07Se
p-09
Unem
plom
ent r
ate
(%)
..and poor labour market conditions continue to cloud horizon for consumption
9.7% (Aug-09)
Japan unemployment rate (%)
5.7% (Jul-09)
US unemployment rate (%)
Source: DataStream, HSBC Global Asset Management, as of September 3rd 2009..Past performance should not be seen as an indication of future returns. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way
10
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GDP growth expectations for 2010: a case of excessive optimism?
Consensus 2010 GDP forecast in March 2009 vs August 2009
Source: DataStream, Consensus Economics, August 2009 report.Any forecast, projection or target where provided is indicative only and is not guaranteed in any way
1.7
0.5 0.5 0.7
2.92.5
7.88.3
2.3
0.60.9
1.3
3.7
2.8
7.2
9.3
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
USA Eurozone UK Japan Brazil Russia India China
2010
Con
sens
us G
DP
grow
th fo
reca
st (i
n %
)
March 2010 GDP forecast August 2010 GDP forecast
+0.6
+0.4+0.6
+0.8 +0.3
+1.0
+0.1
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-2-10123456
Sep-
04N
ov-0
4Ja
n-05
Mar
-05
May
-05
Jul-0
5Se
p-05
Nov
-05
Jan-
06M
ar-0
6M
ay-0
6Ju
l-06
Sep-
06N
ov-0
6Ja
n-07
Mar
-07
May
-07
Jul-0
7Se
p-07
Nov
-07
Jan-
08M
ar-0
8M
ay-0
8Ju
l-08
Sep-
08N
ov-0
8Ja
n-09
Mar
-09
May
-09
Jul-0
9
CPI
(%
YoY
)
US Core CPI US CPI all times
Inflation outlook remains positive to moderate
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
Nov
-07
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep-
08
Nov
-08
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep-
09
Oil
pric
e (y
-o-y
% c
hang
e)
0
20
40
60
80
100
120
140
160
Oil
pric
e (U
S$/b
rl)
y-o-y % change in oil price Oil price (US$/brl)
Source: DataStream, UK Office of National Statistics, HSBC Global Asset Management, as of September 3rd 2009Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Performance from the past should not be seen as an indication of future returns
US core vs. all items CPI (% YoY)Oil price vs. year-on-year percentage change
0
1
2
3
4
5
6
Sep-
04N
ov-0
4Ja
n-05
Mar
-05
May
-05
Jul-0
5Se
p-05
Nov
-05
Jan-
06M
ar-0
6M
ay-0
6Ju
l-06
Sep-
06N
ov-0
6Ja
n-07
Mar
-07
May
-07
Jul-0
7Se
p-07
Nov
-07
Jan-
08M
ar-0
8M
ay-0
8Ju
l-08
Sep-
08N
ov-0
8Ja
n-09
Mar
-09
May
-09
Jul-0
9
CPI
(%
YoY
)
UK CPI all items UK Core CPI
UK core vs. all items CPI (% YoY)
12
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Consensus Inflation forecasts for 2009 & 2010
-0.5
0.3
1.8
-1.2-0.5
6.2
10.8
4.4
1.81.2 1.7
-0.6
2.1
5.9
9.2
4.3
-2
0
2
4
6
8
10
12
US Euro Zone UK JP China India Russia Brazil
2009 Consensus inflation 2010 Consensus inflation
2009 & 2010 Consensus Inflation Forecasts
Source: Consensus Economics, HSBC Global Asset Management, August 2009 report.Any forecast, projection or target where provided is indicative only and is not guaranteed in any way
Market Views: high level asset allocation
15
16088/HSB1395a
Equity valuations no longer at bargain levels
MSCI World P/E
Source: Thomson Financial, HSBC Global Asset Management, weekly data as of September 3rd 2009Past performance should not be seen as an indication of future returns. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.
MSCI Emerging Markets P/E
8
13
18
23
28
33
38
Dec
-93
Sep-
94Ju
n-95
Mar
-96
Dec
-96
Sep-
97Ju
n-98
Mar
-99
Dec
-99
Sep-
00Ju
n-01
Mar
-02
Dec
-02
Sep-
03Ju
n-04
Mar
-05
Dec
-05
Sep-
06Ju
n-07
Mar
-08
Dec
-08
Sep-
09
MSC
I 12
PE
ratio
MSCI 12Mth forward PE MSCI 12Mth trailing PE
5
10
15
20
25
30
35
40
Dec
-95
Sep-
96Ju
n-97
Mar
-98
Dec
-98
Sep-
99Ju
n-00
Mar
-01
Dec
-01
Sep-
02Ju
n-03
Mar
-04
Dec
-04
Sep-
05Ju
n-06
Mar
-07
Dec
-07
Sep-
08Ju
n-09
MSC
I 12
PE
ratio
MSCI 12Mth forward PE MSCI 12Mth trailing PE
16
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Earnings expectations for 2010: another case of excessive optimism?
2010 Earnings Momentum (World)
Source: DataStream, IBES, HSBC Global Asset Management, data as of September 3rd 2009Past performance should not be seen as an indication of future returns. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
Sep
-04
Jan-
05
May
-05
Sep
-05
Jan-
06
May
-06
Sep
-06
Jan-
07
May
-07
Sep
-07
Jan-
08
May
-08
Sep
-08
Jan-
09
May
-09
Sep
-09
% c
hang
e in
201
0 E
PS fo
reca
st
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2010
EPS
upg
rade
s/do
wng
rade
s ra
tio
3mth % change 6mth % change Upgrade/downgrade ratio
2010 2009
Earnings growth estimates (in %)
Percentile relative to historical
estimates (1)
Earnings growth estimates (in %)
Percentile relative to historical
estimates (1)
MSCI World 24.9 100% -10.4 0%
MSCI Germany 35.8 90% -9.2 15
MSCI Japan 15.4 50% -2.0 0%
MSCI U.S.A 21.0 85% -8.5 0%
MSCI UK 21.0 85% -34.4 0%
MSCI Emerging Markets 27.5 90% -7.9 0%
MSCI Brazil 25.1 51% -15.6 1%
MSCI China 20.4 92% 8.1 31%
MSCI India 20.7 53% 15.6 40%
MSCI Russia 28.5 91% -40.4 0%
Notes (1): A Higher number indicates a more optimistic prospect
2010 and 2009 Earnings growth estimates
17
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Support from cash reserve liquidity to be possibly weaker
Net % overweight cash vs. average cash balance (%)
Source: Merrill Lynch, Fund Manager Survey Global, August 19th 2009Past performance should not be seen as an indication of future returns.
18
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Government Bonds: Yield curve shift since Jan 2009
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5Current Yield Curve 31-Dec-08 Yield Curve
Source: Thomson Financial, Bloomberg, HSBC Global Asset Management, data as of September 10th 2009Past performance should not be seen as an indication of future returns.
US Yield Curve shift UK Yield Curve shift
6 M
1YR
2YR
3YR
5YR
7YR
10YR 30Y
Bon
d yi
eld
(in %
)
3 M
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5Current Yield Curve 31-Dec-08 Yield Curve
6 M
1YR
2YR
3YR
5YR
7YR
10YR 30Y
Bon
d yi
eld
(in %
)
3 M
19
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Significant contraction in spreads but overall valuations are still attractive
Source: Barclay’s Capital, HSBC Global Asset Management, data as of September 3rd 2009. Pre-Lehman OAS is given as of September 12th 2008.Past performance should not be seen as an indication of future returns.
Investment Grade vs. High Yield EM sovereign vs. EM corporate
-
500
1,000
1,500
2,000
2,500
3,000
Sep-
04Ja
n-05
May
-05
Sep-
05Ja
n-06
May
-06
Sep-
06Ja
n-07
May
-07
Sep-
07Ja
n-08
May
-08
Sep-
08Ja
n-09
May
-09
Corp
orat
e EM
D - O
AS in
bps
0
100
200
300
400
500
600
700
800
900
1000
EMD
Sove
reig
n - O
AS in
bps
Global Corporate EMDEMD Sovereign
Global Corp. EMD Pre-Lehman OAS 843 bps
EMD Sovereign Pre-Lehman OAS
334 bps
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Sep-
04Ja
n-05
May
-05
Sep-
05Ja
n-06
May
-06
Sep-
06Ja
n-07
May
-07
Sep-
07Ja
n-08
May
-08
Sep-
08
Jan-
09M
ay-0
9
Glo
bal H
igh
Yiel
d/ C
orpo
rate
EM
D - O
AS in
bps
0
100
200
300
400
500
600
Glo
bal A
ggre
gate
Cor
pora
tes/
EM
D S
over
eign
- O
AS
in b
ps
Global High Yield IndexGlobal Aggregate - Corporates Index
Global High Yield Pre-Lehman OAS
756 bps
Global Invest. Grade Pre-Lehman OAS
268 bps
Market Views: Equity Regional Allocation
21
16088/HSB1395a
4
5
6
7
8
9
10
11
12
13
14
Mar
-96
Sep-
96
Mar
-97
Sep-
97
Mar
-98
Sep-
98
Mar
-99
Sep-
99
Mar
-00
Sep-
00
Mar
-01
Sep-
01
Mar
-02
Sep-
02
Mar
-03
Sep-
03
Mar
-04
Sep-
04
Mar
-05
Sep-
05
Mar
-06
Sep-
06
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Valuations continue to diverge but no strong signal
Source: Thomson Financial, HSBC Global Asset Management, September 3rd 2009Past performance should not be seen as an indication of future returns. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.
Dispersion in global valuations
22
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Interesting valuation-driven opportunities in defensives sector and Latam
Latin America discount to Emerging Asia (based on MSCI 12 trailing PE)
Global sector valuation levels (from cheapest to most expensive)
Past performance does not guarantee future results. Any forecast, projection or target where provided is indicative only and is not guaranteed in any waySource: DataStream, IBES, HSBC Global Asset Management, as of September 3rd 2009
Sectors 12 month forward PE
Telecommunications & Services 11.5
Health Care 11.8
Utilities 12.3
Energy 12.7
Consumer Staples 13.9
Financials 15.6
Industrials 16.6
IT 17.8
Materials 19.5
Consumer Discretionary 20.7
-55%
-45%
-35%
-25%
-15%
-5%
5%
15%
Aug-
04
Dec-
04
Apr-0
5
Aug-
05
Dec-
05
Apr-0
6
Aug-
06
Dec-
06
Apr-0
7
Aug-
07
Dec-
07
Apr-0
8
Aug-
08
Dec-
08
Apr-0
9
Aug-
09
Trai
ling
PE d
isco
unt
Average discount from 31-Aug-04 to31- Aug- 09
Concluding Remarks
24
16088/HSB1395a
Concluding Remarks
Key word remains uncertainty with any recovery in 2010 likely to be fairly weak
Weak growth picture poses a challenge for earnings, hence suggests cautious stance on equities
Within fixed income space, preference for corporate debt on valuations grounds
Moderately negative on Sterling vs. Euro
Summary of views
26
16088/HSB1395a
Summary of views
Source: HSBC Global Asset Management, as of September 3rd 2009Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.
Overweight
Equity Cash
Govt Bonds High YieldInvest. Grade
EM debt
GBP EUR
Underweight
Strong Moderate Neutral Moderate Strong
UK Gilt UK Infl-Linked
High YieldInvest. Grade
Latin America Equity
Global Health Care / Utilities /
Telecom &Svs
Cyclical Sectors Equity
Emerging Asia Equity
27
16088/HSB1395a
Firm Disclosure
The contents of this presentation are confidential and may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose.
The material contained in this presentation is for information only and does not constitute investment advice or a recommendation to any reader of this material to buy or sell investments. It is intended for investment professionals only and not for distribution to Retail Clients.
HSBC Global Asset Management (UK) Limited has based this presentation on information obtained from sources it believes to be reliable but which it has not independently verified. HSBC Global Asset Management (UK) Limited and HSBC Group accept no responsibility as to its accuracy or completeness.
This presentation is intended for discussion only and shall not be capable of creating any contractual or other legal obligations on the part of HSBC Global Asset Management (UK) Limited or any other HSBC Group company. Care has been taken to ensure the accuracy of this presentation but HSBC Global Asset Management (UK) Limited accepts no responsibility for any errors or omissions contained therein.
This presentation and any issues or disputes arising out of or in connection with it (whether such disputes are contractual or non/contractual in nature, such as claims in tort, for breach of statute or regulation or otherwise) shall be governed by and construed in accordance with English law.
Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target. Any performance information shown refers to the past and should not be seen as an indication of future returns.
The value of investments and any income from them can go down as well as up. Where overseas investments are held the rate of exchange may cause the value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets. Stockmarket investments should be viewed as a medium to long term investment and should be held for at least five years.
This presentation is approved for issue in the UK by HSBC Global Asset Management (UK) Limited authorised and regulated by the Financial Services Authority. 17366/0909/FP09-1012www.assetmanagement.hsbc.com/uk