march 2006
DESCRIPTION
Hong Kong Baptist University 1998 Superannuation Fund. Investment review. HSBC Investments (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.hsbcinvestments.com.hk. March 2006. Agenda. - PowerPoint PPT PresentationTRANSCRIPT
March 2006
HSBC Investments (Hong Kong) LimitedLevel 22, HSBC Main Building, 1 Queen’s Road Central, Hong KongTelephone: +852 2284 1111 Facsimile: +852 2845 0226Web site: www.hsbcinvestments.com.hk
Hong Kong Baptist University1998 Superannuation FundInvestment review
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Agenda
Market performance
Investment choice
Fund performance
Peers review
Asset allocation
Investment strategy
Factors for consideration before switching
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Market performance
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Currencies
Bonds *
Equities **
* Bonds: Citigroup World Government Bond Indices, HSBC HKD Bond Index (Overall)** Equities: USA (S&P 500), UK (FTSE-100), Germany (DAX), Japan (Nikkei 225), Hong Kong (HSI), Australia (All Ordinaries), Taiwan (WPI), Korea (KOSPI)Source: Thomson Financial Datastream, Bloomberg
Market statistics: 3 months to December 2005 (in HKD terms)
-2.2 -3.0-4.0-4.0
JP Yen Euro UK GBP Aus Dollar
%
% Change (against HKD)
1.1
-0.3
0.4 0.92.8
-0.1
2.00.20.7 0.9
-2.4
0.7
-2.1-3.8
US UK Japan Germany Canada Australia Hong Kong
%
Mkt price return % (Local) Mkt price return % (HKD)
2.6
18.7
-3.6
13.07.0
2.57.2
1.6
-0.5
13.9
-3.6
16.38.1
1.5 4.8
-1.6
US UK Germany Japan Hong Kong Australia Taiwan Korea
%
% Change (Local) % Change (HKD)
5
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Currencies
Bonds *
Equities **
* Bonds: Citigroup World Government Bond Indices, HSBC HKD Bond Index (Overall)** Equities: USA (S&P 500), UK (FTSE-100), Germany (DAX), Japan (Nikkei 225), Hong Kong (HSI), Australia (All Ordinaries), Taiwan (WPI), Korea (KOSPI)Source: Thomson Financial Datastream, Bloomberg
Market statistics: 1 year to December 2005 (in HKD terms)
-13.4-10.8
-6.7
-13.4
JP Yen Euro UK GBP Aus Dollar
%
% Change (against HKD)
5.4 7.0
-1.4
2.5
-3.7
9.5
-1.4
2.8 0.75.78.0
-8.8-12.8
-1.3
US UK Japan Germany Canada Australia Hong Kong
%
Mkt price return % (Local) Mkt price return % (HKD)
16.7
40.2
4.5
54.0
6.716.2
27.1
3.0 4.121.4
4.5
57.3
2.72.7 10.0 8.4
US UK Germany Japan Hong Kong Australia Taiwan Korea
%
% Change (Local) % Change (HKD)
6
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Currencies
Bonds *
Equities **
* Bonds: Citigroup World Government Bond Indices, HSBC HKD Bond Index (Overall)** Equities: USA (S&P 500), UK (FTSE-100), Germany (DAX), Japan (Nikkei 225), Hong Kong (HSI), Australia (All Ordinaries), Taiwan (WPI), Korea (KOSPI)Source: Thomson Financial Datastream, Bloomberg
Market statistics: 3 months to January 2006 (in HKD terms)1.4
0.51.3
-0.5
JP Yen Euro UK GBP Aus Dollar
%
% Change (against HKD)
0.9
3.9 4.2
2.43.4
0.2
1.8
0.21.2
2.41.71.3
3.2
-0.3US UK Japan Germany Canada Australia Hong Kong
%
Mkt price return % (Local) Mkt price return % (HKD)
8.3
22.4
9.5
20.913.310.6
15.16.1 8.8
21.8
9.5
30.4
19.0
6.1
16.812.0
US UK Germany Japan Hong Kong Australia Taiwan Korea
%
% Change (Local) % Change (HKD)
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Currencies
Bonds *
Equities **
* Bonds: Citigroup World Government Bond Indices, HSBC HKD Bond Index (Overall)** Equities: USA (S&P 500), UK (FTSE-100), Germany (DAX), Japan (Nikkei 225), Hong Kong (HSI), Australia (All Ordinaries), Taiwan (WPI), Korea (KOSPI)Source: Thomson Financial Datastream, Bloomberg
Market statistics: 1 year to January 2006 (in HKD terms)
-7.4 -6.3-2.9
-12.1
JP Yen Euro UK GBP Aus Dollar
%
% Change (against HKD)
3.3 4.81.2 2.1
13.1
-0.4
1.7
-0.1
5.69.0
-0.4-4.3-12.2
2.6
US UK Japan Germany Canada Australia Hong Kong
%
Mkt price return % (Local) Mkt price return % (HKD)
18.7
46.2
14.8
50.1
9.018.8
33.4
8.4 11.328.5
14.8
58.7
7.87.823.5 15.4
US UK Germany Japan Hong Kong Australia Taiwan Korea
%
% Change (Local) % Change (HKD)
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Investment choice
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More suitable forrisk tolerant staff
Balanced FundMore suitable forrisk averse staff
High Growth Fund
Growth Fund
Risk (short-term volatility)
Global Money Funds (HKD/USD)
High
Low High
Stable Fund
Lo
ng
-ter
m p
ote
nti
al r
etu
rn
Risk profile of various investment options
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Fund performance
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5.1 2.38.0
19.2
80.0
47.1
5.12.0
7.8
18.5
88.5
59.0
0
20
40
60
80
100
Jan-06 4Q 2005 3Q 2005 1 Year 3 Year Since26Apr02
Return %
HKBU Benchmark
Source: HSBC InvestmentsPerformance is net of fees return in HKD.Past performance is not necessarily a guide to future performance
Investment performance: HKBU 1998 – High Growth FundCumulative return to 31 Jan 2006
12
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4.31.3
6.2
13.7
63.6
44.3
4.21.1
5.8
13.2
69.5
54.2
0
20
40
60
80
Jan-06 4Q 2005 3Q 2005 1 Year 3 Year Since 26Apr02
Return %
HKBU Benchmark
Source: HSBC InvestmentsPerformance is net of fees return in HKD.Past performance is not necessarily a guide to future performance
Investment performance: HKBU 1998 –Growth FundCumulative return to 31 Jan 2006
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3.40.6
4.58.2
45.5
37.4
3.40.3
3.8
7.9
52.448.3
0
20
40
60
Jan-06 4Q 2005 3Q 2005 1 Year 3 Year Since 26Apr02
Return %
HKBU Benchmark
Source: HSBC InvestmentsPerformance is net of fees return in HKD.Past performance is not necessarily a guide to future performance
Investment performance: HKBU 1998 –Balanced FundCumulative return to 31 Jan 2006
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2.5
-0.5
2.4 3.0
30.6 30.8
2.5
-0.4
1.9 3.3
36.5
41.6
-10
0
10
20
30
40
50
Jan-06 4Q 2005 3Q 2005 1 Year 3 Year Since 26Apr02
Return %
HKBU Benchmark
Source: HSBC InvestmentsPerformance is net of fees return in HKD.Past performance is not necessarily a guide to future performance
Investment performance: HKBU 1998 – Stable FundCumulative return to 31 Jan 2006
15
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0.3
0.80.6
2.2
3.2
4.5
0.20.5
0.3
1.2 1.2 1.4
0
2.5
5
Jan-06 4Q 2005 3Q 2005 1 Year 3 Year Since 26Apr02
Return %
HKBU Benchmark
Source: HSBC InvestmentsPerformance is net of fees return in HKD.Past performance is not necessarily a guide to future performance
Investment performance: HKBU 1998 – Money Market FundCumulative return to 31 Jan 2006
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0.30.8
0.5
2.3
4.2
5.4
0.4
1.00.7
3.0
5.9
7.2
0
2
4
6
8
Jan-06 4Q 2005 3Q 2005 1 Year 3 Year Since 26Apr02
Return %
HKBU Benchmark
Source: HSBC InvestmentsPerformance is net of fees return in HKD.Past performance is not necessarily a guide to future performance
Investment performance: HKBU 1998 – USD Money Market FundCumulative return to 31 Jan 2006
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Peers review
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Investment performance: Year 2005
Source: HSBC Investments, Watson Wyatt Managed Fund Report, December 2005.Portfolio net of fees performance in HKD term.Past performance is not necessarily a guide to future performance
11.2
6.9
2.9
-1.1
1.9 2.5
13.3
9.5
5.3
1.9 2.0 2.0
-5
5
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High GrowthFund
Growth Fund Balanced Fund Stable Fund GMF-HKD GMF-USD
Return %
HKBU Watson Wyatt Median
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Asset allocation
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Asset allocation as at 31 January 2006 Hong Kong Baptist University 1998 Superannuation Fund
High Growth Growth Balanced StableBenchmark Fund Benchmark Fund Benchmark Fund Benchmark Fund
Equities
Hong Kong 30.0 27.9 24.0 22.6 17.0 15.9 10.0 10.2
Japan 12.0 13.9 9.0 12.7 6.5 9.6 4.0 6.5
Other Asia Pacific 12.0 16.7 9.0 12.4 6.5 12.1 4.0 6.3
N. America 18.0 16.8 14.0 13.7 10.0 7.7 6.0 5.4
Europe inc. UK 18.0 18.9 14.0 14.8 10.0 10.3 6.0 6.3
Others 0.0 2.0 0.0 0.3 0.0 0.0 0.0 0.0
Sub-total 90.0 96.2 70.0 76.5 50.0 55.6 30.0 34.7
Bonds
US 0.5 4.4 8.7 10.7
Non-USD 3.1 16.4 30.4 39.7
Sub-total 7.0 3.6 25.0 20.8 45.0 39.4 60.0 50.4
Cash 3.0 0.2 5.0 2.7 5.0 5.0 10.0 14.9
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Investment strategy
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Equity market outlook
Low returns during Fed tightening cycle
Strong returns expected if economy soft lands
Equity market valuation remains attractive against other asset classes– Favour Asia & Emerging markets on
growth & valuation basis
5%
10%
15%
20%
25%
30%
35%
40%
1.0 1.5 2.0 2.5 3.0 3.5
Price To Book
Re
turn
On
Eq
uity
Russia
Thailand
India
China
Korea
Australia
Taiwan
Japan
US
Germany
France
U
Singapore
Brazil
EXPENSIVE
CHEAP
US Equity Market
ReturnDuring FED Tightening Cycle
First half
3%Second Half
-1%
12 Months After FED Stops Tightening
Soft Landing
15%Hard Landing
-14%
Emerging markets remain cheap
Monetary pause favours equities
Hong Kong
Europe
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Bond and currency outlook
Bond marketValuations improved but real yields still lowBonds offer cash-like returnsRange trading expected
Currency marketUS dollar rally in 2005 driven by higher US ratesInterest rates differential narrowing coupled with record twin deficits, US dollar expected to resume longer term weakening
1999 2000 2001 2002 2003 2004 20050
1
2
3
4
5
6
7
8
85
90
95
100
105
110
115
120
125
US FED FundsUSD Trade weighted index (RHS)
21/11/05
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 051.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
5.50
US real bond yield
Average real bond yield
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
5.50
Attractive
Expensive
Record US deficit fully financed by portfolio flows
Source: Thomson Financial Datastream Source: Thomson Financial Datastream Source: Morgan Stanley Research. Trailing four-quarter average as of 2Q05
Dollar supported by higher ratesBonds are becoming less expensive(%) (%)(%)
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Summary
Global growth to moderate with gradual increase in inflation in 2006. US Fed to raise rates 50 basis points in 1Q and pause thereafter. China remains the key driver.
Equity markets remain favourable as profit growth is sound, valuations supportive and rate cycle likely to pause.
Asian and emerging market equities remain attractively priced and domestic fundamentals in Asia strong.
Bond yields are expected to range trade.
US dollar expected to weaken in 2006.
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Asset Class Outlook
Equities Fundamental conditions are positive for financial markets, particularly equities
Cash We moderately underweight cash
Bonds Bond returns to be around cash levels
Asia Expect domestic consumption and asset reflation as prominent themes
Japan Positive earnings revision compensate for market appreciation
Eurozone Low macro risk with low inflation and modest increases in short term interest rates
UK Mining sector strength and takeover activity continue to drive market performance
Hong Kong Could be due for short-term consolidation
US Investor sentiment is becoming stretched, consolidation could happen in the near term
Data as of February 2006
Regional Outlook
Overweight Neutral Underweight
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Factors for consideration before switching
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Dangers of market timing
11.9
8.2
5.9
4.2
0
5
10
15%
HSI full period return
HSI full period less 10 best performing days
HSI full period less 20 best performing days
HSI full period less 30 best performing days
Data as at 31 December 2005Source : Thomson Financial DatastreamInvestment involves risk. Investment value can rise as well as fall. For internal use only 。 The opinions expressed herein should not be considered to be a recommendation to any reader of this material to buy or sell securities, commodities, currencies or other investments referred to herein.
Average annualized return (1980 - 2005)
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HKBU - High Growth Fund
HKBU - Growth Fund
HKBU - Balanced Fund
HKBU - Stable Fund
HKBU - Money Market Funds
Note: Please note that the above table is designed for an average member. The final choice for any member may be based on a variety of factors.
– Most appropriate– Appropriate – Acceptable – Not appropriate
Investment horizon (e.g. years to retirement)
Fund type 30+ >20-30 >10-20 5-10 Very short years years years years (< 5 years)
Reference table for suggested investment choices
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Contact details
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Members Choice Investment Hotline : 2284 1281
Investment Service e-mail : [email protected]
Web site : http://www.hsbcinvestments.com.hk
How to contact us ?
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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 Investments (Hong Kong) Limited to any reader of this material to buy or sell securities, commodities, currencies or other investments referred to herein. HSBC Investments (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 Investments (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 Investments (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 Investments (Hong Kong) Limited