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HSBC Frontier Markets Equity Strategy The investment case for investing in global frontier markets
May 2013
For professional clients only
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RESTRICTED RESTRICTED - For Professional Clients Only
* As at 31 March 2013
Source: HSBC Global Asset Management. The views expressed above were held at the time of preparation and are subject to change without notice
Comprehensive universe: our universe and approach
provides a sensibly diversified exposure to c.30 frontier market
economies
Change: relative improvements by way of reductions in
institutional voids drives productivity growth and hence
performance of the asset class over time
Consumers: frontier markets provide exposure to a large,
young, and growing base of consumers who should fuel further
productivity (and GDP) growth over time
Commodity wealth: many frontier markets are naturally
endowed with commodities which has resulted in a strong
government credit position
Correlations: low correlations across countries results in
surprisingly low volatility (less than emerging and developed
markets)
Cash returns: payout ratios and dividend yields have been
consistently higher in frontier markets than both developed and
emerging markets
Cheap: frontier markets currently look cheap relative to both
developed and emerging markets
7Cs characterising frontier markets:
A pioneer with a 5+ year track record of investing in frontier
markets, having formed a dedicated frontier markets team in
2007 and launched our first mutual fund in February 2008
A truly global investment approach that invests across c.30
countries, as reflected by our customised and exclusive
benchmark that is reflective of our investment strategy
Access to the global resources of HSBC (e.g. offices in
Kenya, Saudi Arabia, etc) and the retail bank network that
provides incremental informational advantages
A robust and enduring process that has withstood the test of
time and extreme market conditions e.g. Global Financial
Crisis, Dubai debt default, Arab Spring
Strong outperformance over most periods and against our
bespoke benchmark that has proven to be a higher hurdle than
publically available alternatives
Our Frontier Markets mutual funds (Luxembourg UCITS III fund
and US ‘40 Act’ fund) provide investors with daily pricing
USD239 million* invested in the frontier markets across two
mutual funds and a managed account for one of the largest and
most forward-thinking US public pension plans
Our competitive advantage:
HSBC Frontier Markets strategy Executive summary
RESTRICTED
What are Frontier Markets?
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Frontier Markets are often defined as fast growing, low income countries Historic and forecasted GDP growth
Source: Citi Research, Haver, IMF, January 2013.
Any forecast, projection or target when provided is indicative only and is not guaranteed in any way.
GDP Growth Forecasts (IMF), 2012-14 average GDP Growth: FM, EM and DM
0% 1% 2% 3% 4% 5% 6% 7% 8%
Argentina
Croatia
Slovenia
Bulgaria
Kuw ait
Serbia
UAE
Romania
Lithuania
Estonia
Jordan
Pakistan
Tunisia
Bahrain
Ukraine
Mauritius
Oman
Lebanon
Kenya
Vietnam
Kazakhstan
Bangladesh
Nigeria
Qatar
Sri Lanka
Asia Sub-Saharan Africa CIS
MENA Central / Eastern Europe Latin America
0%
1%
2%
3%
4%
5%
6%
7%
8%
1985 1990 1995 2000 2005 2010 2015
Frontier
Emerging
Developed
forecasts
EM
FM
DM
0%
1%
2%
3%
4%
5%
6%
7%
8%
1985 1990 1995 2000 2005 2010 2015
Frontier Emerging Developed
forecasts
EM
FM
DM
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0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
Arg
entina
Bahra
in
Bangla
desh
Bulg
aria
Cro
atia
Georg
ia
Jord
an
Kazakhsta
n
Kenya
Kuw
ait
Lebanon
Lithuania
Mauritius
Nig
eria
Om
an
Pakis
tan
Panam
a
Qata
r
Rom
ania
Saudi A
rabia
Serb
ia
Sri L
anka
Tunis
ia
UA
E
Ukra
ine
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
Cum. real GDP growth (LHS) % Cum. stock mkt return (RHS) %
But GDP growth is not sufficient to generate strong equity returns Cumulative GDP growth versus cumulative stock market returns
Cumulative GDP growth of 25 Frontier Markets versus Stock Market returns from 2002 through to 2012
Source: Citi, data as of December 2012. Any performance information shown refers to the past and should not be seen as an indication of future returns..
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What are frontier markets? Frontier markets and the equity market ecosystem
The equity market ecosystem
Source: HSBC Global Asset Management. Data as at end of December 2012.
Graphic shown for illustrative purposes only.
Type of
market
Productivity
d
Institutional
voids
Top 10
countries
‘Industry Standard’
MSCI index
Developed
Markets
High Low
USA
UK
Japan
Canada
France
Australia
Germany
Switzerland
Sweden
Hong Kong
24
29,473,919
1,610
MSCI World
No of
countries:
Free float
market cap (USDm):
No of
stocks:
Emerging
Markets
Medium Medium
China
Korea
Brazil
Taiwan
South Africa
India
Russia
Mexico
Malaysia
Indonesia
21
3,864,877
821
MSCI Emerging
Markets
No of
countries:
Free float
market cap (USDm):
No of
stocks:
Frontier
Markets
Low High Kuwait
Qatar
Nigeria
UAE
Pakistan
Kazakhstan
Oman
Argentina
Kenya
Lebanon
25
107,407
141
MSCI Frontier
Markets
No of
countries:
Free float
market cap (USDm):
No of
stocks:
INSTITUTIONAL VOIDS
Lo
w
Hig
h
Low High
PR
OD
UC
TIV
ITY
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Institutional voids and productivity growth Reduced institutional voids drives productivity growth
Productivity growth: – Political stability and policies fostering trust, transparency, etc. e.g. free and fair elections
– Increased knowledge accumulation and application e.g. R&D
– Improved economic infrastructure e.g. technology and communications
– Improved social infrastructure: e.g. health, education, empowerment of women
– More effective economic institutions e.g. regulations and enforcement
…results in increased profits and dividend distributions to
shareholders, better wages and conditions to the workforce, lower
prices to consumers, increased tax payments to governments
The views expressed above were held at the time of preparation and are subject to change without notice.
Graphic shown for illustrative purposes only.
Small reductions in
institutional voids
can lead to large
productivity gains
=
return opportunity
for equity
investors
Institutional Voids
Lo
wH
igh
Low High
Pro
du
cti
vit
y
Reduced institutional voids:
–Product market improvements through communications and infrastructure
–Improved capital markets through institutional mechanisms and intermediation
–Human development and deepening of labour markets
–Improved regulation, reduced bureaucracy and corporate interference
–Introduction of effective mechanisms to ensure contract enforcement
…results in significant productivity growth
RESTRICTED RESTRICTED - For Professional Clients Only
Investment case for frontier markets: 7Cs
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Investment case for frontier markets The 7Cs of frontier markets that will drive convergence over time
1. Comprehensive universe
Reflective of our globally diversified approach
Sensibly diversified and proprietary customised benchmark
7. Cheap
Frontier markets are cheaper than both Emerging and Developed markets
Less researched, less liquid, and lack of sell-side coverage
6. Cash returns
Established companies new to stock exchanges that generate strong free cash flow
Dividend yields are higher than both Emerging and Developed Markets
4. Commodity wealth
Focus on growth commodity markets
Natural endowments, competitive advantage in factor markets, and export markets can generate significant wealth
Associated state infrastructure spending and industrial diversification
5. Correlations
Favourable cross-country correlations drives surprisingly low volatility
Lower volatility than Emerging Markets and Developed Markets provides diversification benefits
3. Consumers
Large and expanding populations, liberalisation, increasing product penetration, etc fuel productivity gains and GDP growth
Positive change in frontier markets drives convergence and returns over the long-run
2. Change
Positive political, economic, and social change over time results in reduced institutional voids and associated productivity gains
Productivity gains improves equity returns
The views expressed above were held at the time of preparation and are subject to change without notice.
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1
For illustrative purposes only.
* There are 30 countries in our custom benchmark, as illustrated in the chart and detailed on the next page. As an active strategy however there will be deviations in the number of countries held, as well as
additional ‘off-benchmark’ frontier countries not highlighted (such as Saudi Arabia)
Comprehensive universe Globally diversified exposure to c.30 Frontier Markets*
Argentina
Bahrain
Bangladesh
Bulgaria
Colombia
Croatia
Egypt
Estonia
Kazakhstan
Kenya
Kuwait
Lebanon
Lithuania
Mauritius
Morocco
Nigeria
Oman
Pakistan
Peru
Philippines
Qatar
Romania Serbia
Slovenia
Sri Lanka
Tunisia
UAE
Ukraine
Vietnam
Jordan
Europe (9)
Americas (3)
Asia-Pacific (5)
Middle East and Africa (13)
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Comprehensive universe Sensibly diversified portfolio by region and country
HSBC has devised a customised and proprietary ‘capped’ benchmark in tandem with MSCI that
reflects our sensibly diversified approach to investing in frontier markets globally
PUBLICLY AVAILABLE EXCLUSIVE TO HSBC PUBLICLY AVAILABLE/
USED IN ETFs
MSCI Frontier Markets MSCI Frontier Emerging Markets MSCI Frontier
Emerging Markets Capped MSCI Frontier Markets 100
Introduced: 30 November 2007
Back history: from 31 May 2002
Number of Countries: 25
Number of stocks: 141
Introduced: 30 September 2008
Back history: from 29 November 2002
Number of Countries: 30
Number of stocks: 187
Introduced: 31 May 2009
Back history: from 29 November 2002
Number of Countries: 30
Number of stocks: 187
Introduced: 11 April 2012
Back history: from 29 November 2002
Number of Countries: 19
Number of stocks: 100
Index is very concentrated in the GCC
(58% of the total index is represented by
the Middle East, including 26% to Kuwait
alone), while other regions are under-
represented.
Index includes all the countries of the MSCI
Frontier Markets index but is broader.
However ‘crossover’ countries have a
disproportionately large weight (over 50% ot
the total).
Our exclusive capped MSCI Frontier
Emerging Markets index ensures a
broad, well diversified universe that is
predominantly exposed to pure frontier
countries.
Designed for index replication but is
even less representative of the frontier
universe than the MSCI Frontier
Markets index. The Middle East
accounts for 60% of the index, half of
which is in Kuwait).
1
Source: MSCI as of 31 December 2012.
Notes: GCC: Qatar, UAE, Kuwait, Bahrain, Oman [Saudi Arabia is not in the benchmark]; NON-GCC: Argentina, Bangladesh, Bulgaria, Croatia, Estonia, Jordan, Kazakhstan, Kenya, Lebanon, Lithuania,
Mauritius, Nigeria, Pakistan, Romania, Serbia, Slovenia, Sri Lanka, Tunisia, Ukraine, Vietnam; CROSSOVER: Colombia, Philippines, Peru, Egypt, Morocco
There is an initial cap of 25% for the combined weight of the 5 crossover countries. This gets reset back to 25% if it breaches 30%. There is an initial cap of 10% for any other country. This gets reset
back to 10% every time it breaches 12% The capped index is maintained and calculated by MSCI.
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Change Frontier markets benefit from change or relative improvement
Most countries within the frontier markets universe have become more business friendly since 2004
A low number of days means the regulatory environment is more conducive to entrepreneurial activity
World Bank Survey: starting a business (days, low = good)
0
20
40
60
80
100
120
140
160
Saudi A
rabia
Georg
ia
Colo
mbia
Moro
cco
Panam
a
Bulg
aria
Bangla
desh
Slo
venia
Mauritius
Arg
entina
Lithuania
Pakis
tan
Qata
r
Philippin
es
Trinid
ad
Mongolia
Peru
Egypt
Kazakhsta
n
Nig
eria
Om
an
Sri L
anka
Kuw
ait
Cro
atia
Mozam
biq
ue
Lebanon
Cam
bodia
Serb
ia
Kenya
Bahra
in
Ghana
UA
E
Tunis
ia
Ukra
ine
Zam
bia
Jord
an
Rom
ania
Vie
tnam
Esto
nia
Zim
babw
e
2004 2012
Source: Citi, 2012
2
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Change Frontier markets benefit from rapid change and relative improvement
17 of 27 countries that we have exposure to have improved
Economic freedom covers 10 forms of freedoms in four broad categories: (1) rule of law (property
rights, freedom from corruption); (2) limited government (fiscal freedom, government spending); (3)
regulatory efficiency (business freedom, labour freedom, monetary freedom); and (4) open markets
(trade freedom, investment freedom, financial freedom)
Heritage Foundation Index of Economic Freedom (high = good)
Source: Citi and Heritage Foundation, 2012
0
10
20
30
40
50
60
70
80
90
Vie
tnam
Bulg
aria
Ukra
ine
Zim
babw
e
Bangla
desh
Kazakhsta
n
Egypt
Rom
ania
Mozam
biq
ue
Nig
eria
Cro
atia
Georg
ia
Lebanon
Pakis
tan
Ghana
Slo
venia
Mongolia
Cam
bodia
Kenya
UA
E
Tunis
ia
Lithuania
Qata
r
Phili
ppin
es
Zam
bia
Moro
cco
Sri L
anka
Colo
mbia
Om
an
Saudi A
rabia
Mauritius
Jord
an
Peru
Kuw
ait
Esto
nia
Arg
entina
Panam
a
Trinid
ad
Bahra
in
2000 2012
Free
Mostly Free
Moderately Free
Mostly Unfree
Repressed
2
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Consumers Frontier markets provide mass exposure to domestic consumption
Frontier markets benefit from a young, large, and growing population of consumers (the so-called
“demographic dividend”)
RESTRICTED -
For
Professional
Clients Only
Growing populations (Population growth - present to 2050) Young populations (median age)
(50%)
0%
50%
100%
150%
200%
250%
Zam
bia
N
igeria
Kenya
Mozam
biq
ue
Ghana
Kuw
ait
Philippin
es
Zim
babw
e
Saudi A
rabia
Jord
an
Pakis
tan
UA
EE
gypt
Mongolia
P
anam
a
Qata
r B
ahra
in
World
Peru
C
olo
mbia
O
man
Kazakhsta
n
Bangla
desh
N A
merica
Arg
entin
a
Moro
cco
Tunis
ia
Vie
tnam
S
ri L
anka
Lebanon
Mauritiu
s
Slo
venia
E
uro
pe
Trinid
ad
Esto
nia
S
erb
ia
Cro
atia
R
om
ania
Lith
uania
U
kra
ine
Georg
ia
Bulg
aria
grow ing
declining
0
5
10
15
20
25
30
35
40
Zam
bia
M
ozam
biq
uN
igeria
Kenya
Zim
babw
e
Ghana
Jord
an
Pakis
tan
Philippin
es
Bangla
des
Egypt
Mongolia
P
eru
S
audi
Moro
cco
Colo
mbia
O
man
Panam
a
Kuw
ait
Vie
tnam
W
orld
Kazakhsta
Tunis
ia
UA
ELebanon
Arg
entin
a
Bahra
in
Sri L
anka
Trinid
ad
Qata
r M
auritiu
s
Georg
ia
Serb
ia
Rom
ania
U
kra
ine
Lith
uania
E
sto
nia
C
roatia
B
ulg
aria
Slo
venia
3
Source: Citi, 2012
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Consumers Frontier markets benefit from increasing product penetration
Frontier markets are underserved in terms of mobile telephony, internet penetration, transportation,
etc but increasing penetration will drive productivity improvements over time
Internet
Fixed broadband Internet subscribers (per 100 people)*
Mobile phone
Mobile cellular subscriptions (per 100 people)*
Transportation
Passenger cars (per 1,000 people)*
0%
5%
10%
15%
20%
25%
30%
35%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
DM EM FM
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
DM EM FM
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
DM EM FM
* based on the simple average of values for the countries in the respective group. DM, EM and FM classification as per MSCI
Source: World Bank, HSBC Calculations
3
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Professio
nal
Clients
Only
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Commodity wealth Frontier Markets have a comparative advantage in factor markets
Many frontier markets (e.g. GCC countries) are naturally endowed with sought after commodities
which has facilitated a strong government credit position (unlike developed markets)
Commodities in Frontier Markets
43%
30%
21%20%
19% 19%
10%9%
8%
4%3%
0%
30%
20%
4%
15%
29%
24%
3%3%
7%
15%
11%
4%
0%
15%
30%
45%
Oil Natural gas Iron ore Copper Uranium Zinc Coal Aluminium Molybdenum Nickel Gold PGMs
% of global reserves % of global production
4
Source: Citi, 2012
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Commodity wealth But it is not just about oil and gas or a ‘commodity play’
Contrary to popular opinion, frontier markets have low correlations with commodity prices
Wealth generated from commodities funds industrial diversification (eg Qatar) and associated
infrastructure projects
Source: Bloomberg, December 2007 to December 2012, correlation of weekly index levels over 5 year period.
Brent Oil DJ UBS Commodities
EM 0.46 0.54
FM 0.36 0.37
Qatar 0.32 0.25
Colombia 0.37 0.45
UAE 0.31 0.32
Nigeria 0.11 0.14
Kuwait 0.16 0.17
Kazakhstan 0.38 0.41
Oman 0.33 0.26
Brazil 0.52 0.63
Russia 0.47 0.48
India 0.33 0.36
China 0.34 0.36
BRIC 0.49 0.56
World 0.51 0.60
S&P 0.46 0.55
Europe 0.48 0.59
4
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20%
40%
60%
80%
100%
120%
140%
2001 2003 2005 2007 2009 2011
Frontier Emerging Developed
Commodity wealth Commodities have generated strong credit positions
Strong government credit position, unlike developed markets
Private sector debt is also moderate
Public debt/GDP, 2001-2012 Private sector credit/GDP, 2010
Source: Citi, December 2012.
Any forecast, projection or target when provided is indicative only and is not guaranteed in any way.
4
0%
40%
80%
120%
160%
200%
Frontier Emerging Developed
Corporate debt Household debt
0%
40%
80%
120%
160%
200%
Frontier Emerging Developed
Corporate debt Household debt
old graph
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Correlations Low cross-country correlations
Low correlations between frontier and emerging markets and individual country constituents
Source: Bloomberg, December 2007 to December 2012, correlation of weekly index levels (Wednesday to Wednesday) over a 5 year period.
N.B. Blue font denotes correlation of 0.5 or lower, Red denotes a negative correlation.
EM
FM
Qata
r
Co
lom
bia
UA
E
Nig
eria
Ku
wait
Ph
ilipp
ine
s P
eru
Pakis
tan
Kazakh
sta
n
Om
an
Ken
ya
Eg
yp
t
Arg
en
tina
Vie
tnam
EM 1.00
FM 0.64 1.00
Qatar 0.54 0.80 1.00
Colombia 0.69 0.49 0.37 1.00
UAE 0.54 0.78 0.64 0.37 1.00
Nigeria 0.02 0.25 0.07 0.03 0.09 1.00
Kuwait 0.35 0.81 0.58 0.31 0.47 0.00 1.00
Philippines 0.68 0.51 0.42 0.53 0.44 0.08 0.30 1.00
Peru 0.71 0.36 0.32 0.59 0.28 (0.06) 0.17 0.44 1.00
Pakistan 0.17 0.33 0.16 0.14 0.26 0.01 0.33 0.11 0.01 1.00
Kazakhstan 0.69 0.50 0.43 0.48 0.39 0.02 0.23 0.40 0.51 0.13 1.00
Oman 0.55 0.72 0.68 0.31 0.67 (0.04) 0.52 0.42 0.35 0.25 0.42 1.00
Kenya 0.42 0.32 0.37 0.32 0.21 (0.03) 0.14 0.35 0.35 0.10 0.44 0.41 1.00
Egypt 0.57 0.55 0.47 0.38 0.51 0.12 0.33 0.41 0.37 0.10 0.42 0.47 0.32 1.00
Argentina 0.66 0.45 0.36 0.47 0.32 0.01 0.21 0.46 0.60 0.15 0.49 0.37 0.40 0.40 1.00
Vietnam 0.42 0.38 0.31 0.33 0.30 0.04 0.19 0.34 0.28 0.00 0.35 0.29 0.22 0.30 0.27 1.00
5
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Frontier Markets have consistently produced lower volatility of returns compared to emerging and
developed markets
Correlations Low correlations drive surprisingly low volatility1
Rolling 12 month annualised volatility of returns
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Dec-05 May-07 Oct-08 Apr-10 Sep-11 Feb-13
MSCI Emerging Markets MSCI World MSCI FEM Capped
12.40%
13.65%
6.05%
Source: Bloomberg, daily data from December 2005 to March 2013. The views expressed above were held at the time of preparation and are subject to change without notice.'
1.So long as investors embrace a truly diversified frontier markets portfolio globally. Otherwise, investors who selectively target a small number of frontier market countries
(perhaps through a GEM only allocation) will inevitably experience higher idiosyncratic risk and hence much higher levels of volatility. Past performance is not an indication of
future returns.
5
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Cash returns Frontier Markets have the highest dividend yields
Frontier markets have consistently offered higher dividends yields than both developed and emerging
markets
Certain countries offer dividend yields nearing 8% e.g. Pakistan has a 7.7% dividend yield 12 month trailing dividend yield 12 month trailing dividend yield at year end
Source: MSCI, Thomson Reuters DataStream, HSBC Calculations, March 2013.
* Based on the MSCI indices. World represents EM + DM + FM. DM = Developed Markets, EM = Emerging Markets, FM = Frontier Markets.
The views expressed above were held at the time of preparation and are subject to change without notice. The level of yield is not guaranteed and may rise or fall in the future.
3.9%
2.7%
2.7%
1.5%
2.5%
3.5%
4.5%
5.5%
6.5%
7.5%
8.5%
2008 2009 2010 2011 2012 2013
DM EM FM
3.8
%
2.4
%
2.5
% 2.9
%
2.8
%
4.1
%
2% 2
.2%
2.9
%
2.7
%
6.3
%
4.4
%
4.2
%
5.5
%
4.2
%
1.5%
2.5%
3.5%
4.5%
5.5%
6.5%
7.5%
8.5%
2008 2009 2010 2011 2012
DM EM FM
1.5%
2.5%
3.5%
4.5%
5.5%
6.5%
7.5%
8.5%
Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13
DM EM FM
2.8% 2.6%
4.0%
6
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Cheap Frontier markets look undervalued on a trailing basis
Frontier Markets are cheaper than Emerging and Developed Markets on a trailing Price to Book basis
for a higher level of return
By comparison, on a trailing Price to Earnings basis, frontier markets are trading at 11.8x versus
Emerging Markets at 12.5x and Developed Markets at 16.1x
12-month trailing Price to Book Return on Equity
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
Jan-1
2
Jan-1
3
DM EM FM
5.5%
7.5%
9.5%
11.5%
13.5%
15.5%
17.5%
19.5%
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
Jan-1
2
Jan-1
3
DM EM FM
1.5x
1.9x
1.6x
13.1%
11.9%
13.0%
Source: MSCI, Thomson Reuters DataStream, HSBC Calculations, March 2013.
* Based on the MSCI indices. World represents EM + DM + FM. DM = Developed Markets, EM = Emerging Markets, FM = Frontier Markets.
The views expressed above were held at the time of preparation and are subject to change without notice.
7
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Forward 12-month P/E estimates
Source: Bloomberg consensus estimates of forward P/E valuations as at March 2013 based on MSCI indices.
The views expressed above were held at the time of preparation and are subject to change without notice. Any forecast, projection or target when provided is indicative only and is not guaranteed in any way
14.2113.70
10.8810.38
4.375.54
7.6 7.92 8.259.45 9.63
10.7 10.7111.23 11.43
12.41 12.81 13.26 13.3 13.4 13.71
15.35
17.61.17.00
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Worl
d
AC
Worl
d
Em
erg
ing M
ark
ets
Fro
ntier
Mark
ets
Arg
entina
Kazakhsta
n
Pakis
tan
Bahra
in
Rom
ania
Om
an
Egypt
Kenya
Sri
Lanka
Vie
tnam
Cro
atia
UA
E
Lebanon
Nig
eri
a
Peru
Qata
r
Slo
venia
Kuw
ait
Colo
mbia
Phili
ppin
es
7 Cheap Frontier markets are undervalued on a forward basis
Frontier Markets are currently trading at attractive valuations, both in absolute terms and relative to
Emerging Markets
Frontier Markets are still trading significantly lower than the pre-crisis levels of August 2008, whereas
Emerging Markets and Developed Markets have almost entirely recovered the losses
RESTRICTED
Management team
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Management team Emerging markets platform
Key:
= investment management team and associated product specialists
= closely affiliated
FM = Frontier Markets, EM = Emerging Markets, DM = Developed Markets
* Joint venture with SABB (Saudi British Bank, an affiliate of the HSBC Group) ** Jintrust Fund Management is a joint venture between HSBC Global Asset Management and Shanxi Trust & Investment Corp
Chris Cheetham
Global Chief Investment Officer (CIO)
Philip Glaze
CIO UK & Global CIO, Multimanager
Bill Maldonado
CIO Asia Pacific & Global CIO, Equity
Research Analysts
Global FM
Seki Mutukwa
Global DM
Linda Saitowitz
Latin America
Carlos Uema
Carlos Lima
Raquel Diniz
Ana Browne
Tatyana Katalan
João Roncaglia
Giuliano Ajeje
Global EM
Tony MacNeary
Helen King
Global Thematic
Sally Godley Maynard
Asia Pacific
Hugh Lee
Kwok Wing Cheong
Ferdinand Cheuk
Sami Abouzahr
Joy Yuan
Debbie Chan
Divya Balakrishnan
Elina Fung
Alex Kwan
Stanley Chen
Mabel Wong (HK)
Arwen Liu
Portfolio Managers – Global
Nick Timberlake
Head of Equities
Global DM Angus Parker Ann Hall Graeme Blyth Nick Dowell Se-Ting Frenzel Ben Hubbard Oliver Gottlieb Tobyn Dickinson
Global FM
Andrew Brudenell
Chris Turner
Global EM
Douglas Helfer
Stephanie Wu
Lee Ray
Ed Conroy
Portfolio Managers – Regional/Local
Latin America
Natalia Kerkis
Aline Cardoso
Fernando Fontoura
Gabriela Cervantes (Mexico)
India (Offshore)
Sanjiv Duggal
Viresh Mehta
Nilang Mehta
India (Onshore)
Tushar Pradhan + team of 6
Asia Pacific
Husan Pai
Mick Dillon
Karma Wilson
Philip Mok (HK)
Mandy Chan (China)
Michael Chiu (China)
Equity Dealers
Latin America
Nelson Sussumu
+ team of 2
Asia
James Levy
+ team of 4
EMEA
Steve Chappell
+ team of 5
Equity Product Specialists
Global EM & FM /
Smart Beta
David Wickham
Jake Williams
Indexation & ETFs Carmen Gonzalez Calatayud Brummer
Olena Datsenko
Alfred Le Leon
Latin America
Victor Arakaki
EM (BRIC, Russia,
CIVETS)
Soren Beck-Petersen
Tanya Chadha
Global DM
James Hogan
Asia Pacific
Chris Adams
Grace Chuang
India (Offshore)
Roshan Padamadan
Saudi British Bank (Riyadh)*
Research Analysts
Jafar Khan
Abdulmajeed
Al Hagbani
+ team of 4
Portfolio Managers
Abdullah Al Hamed
Khaled Al Braikan
+ team of 6
EM Debt (New York)
Sovereign Analyst
Binqi Liu
Portfolio Engineers
Vinayak Potti
Phil Yuhn
Portfolio Managers
Guillermo Osses
Srinivas Paruchuri
Lisa Chua
Marge Karner
HSBC Retail Banking & Wealth Management Global Asset Management - HSBC Insurance - HSBC Premier
HSBC Global Banking & Markets Global Banking - Global Markets - Global Research
Jintrust Fund Management (Shanghai)**
Research Analysts
Quentin Cao
+ team of 8
Portfolio Managers
Tom Lin
+ team of 12
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Seki Mutukwa – Senior Analyst
Seki Mutukwa is a Senior Analyst in the Frontier Markets equity team and has been working in the industry since 2004. Prior to joining HSBC in 2012, he spent
six years as a Portfolio Manager/ Analyst with Blackfriars Asset Management, a London based fund management boutique formerly majority owned by BNY
Mellon Asset Managementt, where he focused on emerging and frontier markets across Europe, Middle East and Africa. Prior to this he was an Analyst with
State Street Global Advisors. Seki holds an MSc in investment management from Cass Business School and is a CFA charterholder.
Andrew Brudenell – Co-Portfolio Manager
Andrew Brudenell is the lead Senior Portfolio Manager of the Frontier Markets strategy and has been working in the industry since 1997. Andrew joined HSBC in
2007 as a member of the Global Emerging Markets equity team and subsequently joined the dedicated Frontier Markets equity team at launch in early 2008.
Prior to HSBC, Andrew worked as a US Portfolio Manager at Scudder Investments in New York and at Deutsche Asset Management in London. He holds an
MSc from the London School of Economics and is a CFA charterholder.
Chris Turner – Co-Portfolio Manager
Chris Turner is a Senior Portfolio Manager and co-portfolio manager of the Frontier Markets strategy and has been working in the industry since 1986. Prior to
joining HSBC in 2012, Chris was a Portfolio Manager with EMSO Partners (Citi Capital Partners) where he covered a number of emerging and frontier markets.
Prior to this, he worked in emerging markets equity with Morley Fund Management (now Aviva Investors) and Morgan Grenfell Asset Management (now
Deutsche Asset Management) in a similar role. Chris is a graduate of University College London.
Management team A dedicated and experienced frontier markets team
David Wickham – Senior Product Specialist
David Wickham is a Director and Senior Product Specialist responsible for leading the promotion of the Global Emerging Markets, Global Frontier Markets, and
Alternative Indexation equity capabilities. Prior to joining HSBC in 2011, he was a Senior Portfolio Manager with Invesco Asset Management in London where he
managed the firm’s non-US private equity investment program. David holds a Master’s degree in International Relations from the University of Cambridge and
an MBA with Distinction from the University of Oxford. David is a Nonresident Fellow of the Brookings Institution and an Associate Fellow of the University of
Oxford’s Saïd Business School.
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Management team and associated global analytical resources Global Asset Management office locations in emerging and frontier markets
Colombia*
Morocco
Peru*
Philippines*
Brazil
Chile
China
Czech
Hungary
India
Indonesia
South Korea
Malaysia
Mexico
Poland
Russia
South Africa
Taiwan
Thailand
Turkey
Hong Kong
Argentina
Bahrain
Bangladesh
Bulgaria Croatia
Estonia
Jordan
Kazakhstan
Kenya
Kuwait
Lebanon
Lithuania
Mauritius
Nigeria
Oman
Pakistan
Qatar
Romania
Serbia
Slovenia
Sri Lanka
Tunisia
UAE
Ukraine
Vietnam
Emerging Countries
Frontier Countries
Egypt*
Source: HSBC Global Asset Management, September 2012
RESTRICTED
Important information
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Important information
This presentation is intended for Professional clients only and should not be distributed to or relied upon by Retail Clients.
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 herein is for information only and does not constitute investment advice or a recommendation to any reader of this material to buy or sell
investments.
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.
The views expressed above were held at the time of preparation and are subject to change without notice.
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.
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested.
HSBC GIF Frontier Markets Fund is a sub-fund of the HSBC Global Investment Funds, a Luxembourg domiciled SICAV. UK based investors in HSBC Global
Investment Funds are advised that they may not be afforded some of the protections conveyed by the provisions of the Financial Services and Markets Act 2000. HSBC
Global Investment Funds is recognised in the United Kingdom by the Financial Conduct Authority under section 264 of the Act. The shares in HSBC Global Investment
Funds have not been and will not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to its jurisdiction, or to
United States Persons. All applications are made on the basis of the current HSBC Global Investment Funds Prospectus, Key Investor Information Document (KIID),
Supplementary Information Document (SID) and most recent annual and semi-annual reports, which can be obtained upon request free of charge from HSBC Global
Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London, E14 5HQ. UK, or the local distributors. Investors and potential investors should read and
note the risk warnings in the prospectus and relevant KIID and additionally, in the case of retail clients, the information contained in the supporting SID.
'The HSBC Frontier Markets Fund is an unregulated collective investment schemes for UK Regulatory purposes. The promotion of the Fund is therefore restricted in
the UK by the Financial Services and Markets Act 2000 and this document can only be issued to persons permitted under COBS 4.12 of the FCA Handbook. UK based
investors are advised that they may not be afforded some of the protections conveyed by the provisions of the Act. In particular, compensation will not be available
under the Financial Services Compensation Scheme in the UK.
Where overseas investments are held the rate of currency exchange may cause the value of such investments to go down as well as up.
Investments in Frontier Markets are by their nature higher risk and potentially more volatile than those inherent in some established markets.
Economies in Frontier Markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which
they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade.
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Important information (cont’d)
Brokerage commissions, custodial services and other costs relating to investment in Frontier Markets generally are more expensive than those relating to investment in
more developed markets. Lack of adequate custodial systems in some markets may prevent investment in a given country or may require a sub-fund to accept greater
custodial risks in order to invest, although the Custodian will endeavour to minimise such risks through the appointment of correspondents that are international,
reputable and creditworthy financial institutions. In addition, such markets have different settlement and clearance procedures. In certain markets there have been times
when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. The inability of a sub-fund
to make intended securities purchases due to settlement problems could cause the sub-fund to miss attractive investment opportunities. Inability to dispose of a
portfolio security caused by settlement problems could result either in losses to a sub-fund due to subsequent declines in value of the portfolio security or, if a sub-fund
has entered into a contract to sell the security, could result in potential liability to the purchaser.
The risk also exists that an emergency situation may arise in one or more developing markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for a sub-fund’s securities in such markets may not be readily available.
Investors should note that changes in the political climate in Frontier Markets may result in significant shifts in the attitude to the taxation of foreign investors. Such
changes may result in changes to legislation, the interpretation of legislation, or the granting of foreign investors the benefit of tax exemptions or international tax
treaties. The effect of such changes can be retrospective and can (if they occur) have an adverse impact on the investment return of shareholders in any sub-fund so
affected.
Stock market investments should be viewed as a medium to long term investment and should be held for at least five years.
Any performance information shown refers to the past and should not be seen as an indication of future returns.
MSCI Index – 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 other person 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 the results 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
To help improve our service and in the interests of security we may record and/or monitor your communication with us.
This presentation is approved for issue in the UK by HSBC Global Asset Management (UK) Limited, who are authorised and regulated by the Financial Conduct
Authority.
www.assetmanagement.hsbc.com/uk
Copyright © HSBC Global Asset Management (UK) Limited 2013. All rights reserved.
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