new frontiers: the next generation of em equities contractual document only intended for...

Non contractual document only intended for professional investors as defined by MiFID

New Frontiers: The Next Generation of EM equities

Senior Portfolio Manager

Andrew Brudenell

AM

FR

_E

xt_

94

_2

01

4

2 2

* As at 31 December 2013. Source: HSBC Global Asset Management. The views expressed above were held at the time of preparation and are subject to change without notice.

The performance figures displayed in the document relate to the past and past performance should not be seen as an indication of future returns.

Comprehensive universe: our universe of over 3,000 companies and

investment 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 and

the ability to invest in hard and soft infrastructure

Correlations: low correlations across many unconnected countries results

in surprisingly low volatility (less than both 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 developed markets

but slightly expensive to emerging markets, albeit with a higher return on

equity

7Cs characterising global frontier markets:

A pioneer with close to a 6 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 (Mon – Thurs)

USD505 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

HSBC’s 7 competitive advantages:

HSBC Frontier Markets strategy Executive summary

Non contractual document

AM

FR

_E

xt_

94

_2

01

4

3 3

Investment case for global 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 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.


AM

FR

_E

xt_

94

_2

01

4

4 4

Argentina

Bahrain

Bulgaria

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

Barbados

Cape Verde

Seychelles

Timor-Leste

Afghanistan

Albania

Algeria

Armenia

Azerbaijan

Bahamas

Belarus

Belize

Bhutan

Bolivia

Brunei-Darussalam

Laos

Cambodia

Cameroon

Costa Rica

Cyprus Dominican Republic

El Salvador

Gabon

Georgia

Guatemala

Guyana

Haiti

Iran

Iraq

Kyrgyzstan

Latvia

Libya

Macedonia

Malawi

Moldova Mongolia Montenegro

Mozambique

Namibia

Nepal

Nicaragua

Panama

Papua

New Guinea Paraguay

Rwanda

Saudi Arabia

Slovakia

Sudan

Swaziland

Syria

Tanzania

Uganda

Uruguay

Uzbekistan

Venezuela

Zambia

Fiji

Myanmar

Tajikistan

Ecuador

Bosnia and Herzegovina

\

Angola

Benin

Botswana

Burkina Faso

Comoros

Côte d'Ivoire

Republic

of Congo

Equatorial Guinea

Ethiopia

Ghana

Jamaica

Trinidad and Tobago

Zimbabwe

Grenada

Lesotho

Mauritania

São Tomé and Príncipe

Senegal Gambia

Togo

Yemen

Maldives

Colombia*

Suriname

Bangladesh

Comprehensive universe Over 3,000 stocks across an eclectic group of countries

Frontier Market (off-benchmark)

Frontier Market (MSCI FEM benchmark)

Source: HSBC Global Asset Management, as at December 2013

Counties shown above have a local stock exchange. Countries in bold are indicative of countries with meaningful stock exchanges.

* These are crossover countries with Emerging Markets

1


AM

FR

_E

xt_

94

_2

01

4

5 5

Change Frontier markets benefit from rapid change and relative improvement

17 of c.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)

Source: Citi and Heritage Foundation, 2012

Heritage Foundation Index of Economic Freedom (high = good)

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


AM

FR

_E

xt_

94

_2

01

4

6 6

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”)

Growing populations (Population growth - present to 2050) Young populations (median age)

Source: Citi, 2012

0

5

10

15

20

25

30

35

40

Zam

bia

Moza

mbiq

ue

Nig

eria

Kenya

Zim

babw

eG

hana

Jord

an

Paki

stan

Phili

ppin

es

Bangla

desh

Egyp

tM

ongolia

Peru

Saudi A

rabia

Moro

cco

Colo

mbia

Om

an

Panam

aK

uw

ait

Vie

tnam

Tun

isia

UA

EA

rgent

ina

Bahra

inS

ri L

anka

Trin

idad

Qata

rM

auritiu

sG

eorg

iaS

erb

iaR

om

ania

Ukr

ain

eLith

uania

Est

onia

Cro

atia

Bulg

aria

Slo

venia (50%)

0%

50%

100%

150%

200%

250%

Zam

bia

Nig

eria

Kenya

Moza

mbiq

ue

Ghana

Kuw

ait

Phili

ppin

es

Zim

babw

eS

audi A

rabia

Jord

an

Paki

stan

UA

EE

gyp

tM

ongolia

Panam

aQ

ata

rB

ahra

inP

eru

Colo

mbia

Om

an

Kaza

khst

an

Bangla

desh

N A

merica

Arg

ent

ina

Moro

cco

Tun

isia

Vie

tnam

Sri L

anka

Lebanon

Mauritiu

sS

lovenia

Euro

peT

rinid

ad

Est

onia

Serb

iaC

roatia

Rom

ania

Lith

uania

Ukr

ain

eG

eorg

iaB

ulg

aria

grow ing

declining

3


AM

FR

_E

xt_

94

_2

01

4

7 7

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


AM

FR

_E

xt_

94

_2

01

4

8 8

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

Source: Citi, 2012

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


AM

FR

_E

xt_

94

_2

01

4

9 9

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 both oil and non-

commodity prices

Wealth generated from commodities funds industrial diversification (eg Qatar) and associated

infrastructure projects

Source: Bloomberg, December 2008 to December 2013, correlation of weekly index levels (Wednesday to Wednesday) over 5 year period.

N.B. Blue font denotes correlation of 0.5 or lower.

Brent Oil DJ UBS Commodities

DM 0.57 0.63

EM 0.54 0.61

FM 0.41 0.41

Qatar 0.32 0.23

Colombia 0.43 0.51

UAE 0.30 0.33

Nigeria 0.15 0.15

Kuwait 0.22 0.22

Kazakhstan 0.38 0.40

Oman 0.28 0.27

Brazil 0.52 0.60

Russia 0.54 0.56

India 0.41 0.45

China 0.45 0.51

BRIC 0.58 0.64

S&P 0.52 0.59

Europe 0.55 0.62

4


AM

FR

_E

xt_

94

_2

01

4

10 10

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 where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management (France) accepts no liability for any failure to meet such forecast, projection or target.

20%

40%

60%

80%

100%

120%

140%

2001 2003 2005 2007 2009 2011

Frontier Emerging Developed

0%

40%

80%

120%

160%

200%

Frontier Emerging Developed

Corporate debt Household debt

4


AM

FR

_E

xt_

94

_2

01

4

11 11

DM 1.00

EM 0.86 1.00

FM 0.56 0.60 1.00

Qatar 0.42 0.44 0.77 1.00

Colombia 0.58 0.67 0.47 0.29 1.00

UAE 0.41 0.45 0.76 0.59 0.33 1.00

Nigeria 0.21 0.25 0.43 0.22 0.18 0.24 1.00

Kuwait 0.26 0.30 0.77 0.53 0.31 0.40 0.07 1.00

Philippines 0.45 0.61 0.48 0.38 0.43 0.38 0.22 0.28 1.00

Peru 0.64 0.66 0.33 0.22 0.53 0.25 0.09 0.14 0.41 1.00

Pakistan 0.18 0.23 0.42 0.30 0.13 0.34 0.12 0.32 0.15 0.04 1.00

Kazakhstan 0.53 0.59 0.43 0.31 0.42 0.33 0.23 0.12 0.30 0.35 0.11 1.00

Oman 0.38 0.37 0.65 0.61 0.21 0.62 0.11 0.47 0.32 0.22 0.31 0.26 1.00

Kenya 0.23 0.19 0.29 0.18 0.17 0.15 0.24 0.13 0.17 0.12 0.15 0.11 0.21 1.00

Egypt 0.36 0.44 0.49 0.37 0.33 0.43 0.23 0.28 0.35 0.21 0.25 0.30 0.32 0.22 1.00

Argentina 0.56 0.57 0.46 0.31 0.38 0.26 0.19 0.22 0.35 0.45 0.18 0.30 0.24 0.12 0.27 1.00

Vietnam 0.35 0.39 0.41 0.29 0.29 0.27 0.20 0.18 0.30 0.24 0.16 0.32 0.25 0.19 0.24 0.24 1.00

Lebanon 0.13 0.17 0.22 0.16 0.11 0.14 0.20 0.07 0.16 0.08 0.03 0.14 0.07 0.17 0.18 0.15 0.21 1.00

Croatia 0.54 0.56 0.45 0.33 0.42 0.31 0.23 0.18 0.29 0.38 0.09 0.37 0.29 0.13 0.22 0.36 0.37 0.05 1.00

Correlations Low cross-country correlations

Low correlations between frontier and emerging markets and individual country constituents

Source: Bloomberg, December 2008 to December 2013, correlation of weekly index levels (Wednesday to Wednesday) over a 5 year period.

N.B. Blue font denotes correlation of 0.5 or lower.

EM

FM

Qata

r

Co

lom

bia

UA

E

Nig

eria

Ku

wait

Ph

ilipp

ines

Peru

Pakis

tan

Kazakh

sta

n

Om

an

Ken

ya

Eg

yp

t

Arg

en

tina

Vie

tnam

Leb

an

on

Cro

atia

DM

5


AM

FR

_E

xt_

94

_2

01

4

12 12

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Dec 2007 Jun 2008 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Jun 2011 Dec 2011 Jun 2012 Dec 2012 Jun 2013 Dec 2013

MSCI FEM Capped MSCI World MSCI EM

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

Source: Bloomberg, weekly data (Wednesday to Wednesday) from December 2007 to December 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

9.6%

15.7%

10.1%


AM

FR

_E

xt_

94

_2

01

4

13 13

Cash returns Frontier Markets tend to have the highest dividend yields

Frontier markets have consistently offered higher dividends yields than both developed and

emerging markets

Certain countries offer dividend yields over 10% e.g. Kazakhstan

12 month trailing dividend yield 12 month trailing dividend yield at year end

Source: MSCI, Thomson Reuters DataStream, HSBC Calculations, December 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.

2.6% 2.4%

3.6%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

8.5%

Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13

DM EM FM

3.8

%

2.4

%

2.5

% 2.9

%

2.8

%

2.4

%

4.1

%

2% 2

.2%

2.9

%

2.7

%

2.6

%

6.3

%

4.4

%

4.2

%

5.5

%

4.2

%

3.6

%

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

6


AM

FR

_E

xt_

94

_2

01

4

14 14

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13

DM EM FM

Cheap Frontier markets look undervalued on a trailing basis

Frontier Markets are cheaper than Developed Markets although slightly more expensive than

Emerging Markets on a trailing Price to Book basis but with a higher level of return on equity

12-month trailing Price to Book Return on Equity

1.7x

2.2x

1.5x

13.2%

12.0%

12.7%

Source: MSCI, Thomson Reuters DataStream, HSBC Calculations, December 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.

5.5%

7.5%

9.5%

11.5%

13.5%

15.5%

17.5%

19.5%

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13

DM EM FM

7


AM

FR

_E

xt_

94

_2

01

4

15 15

Trailing 12-month P/E estimates

Source: MSCI, Thomson Reuters DataStream, HSBC Calculations, December 2013.

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

Cheap Frontier countries: Trailing P/E estimates

There is significant variation in valuation levels across the frontier universe

3.3 3.8

6.2 6.77.6

10.4 10.7 10.7

13.0 13.2 13.3 13.8 13.8 14.0 14.3 14.4 14.5 14.5 14.9 15.4 15.5 16.0 16.1 16.2

17.7 17.7 18.0 18.118.8

22.7

12.1

0.0

5.0

10.0

15.0

20.0

25.0

Ukra

ine

Serb

ia

Arg

entina

Bulg

aria

Kazakhsta

n

Pakis

tan

Mauritius

Om

an

Rom

ania

Cro

atia

Nig

eria

Lithuania

Slo

venia

Moro

cco

Esto

nia

Kenya

Qata

r

Peru

Jord

an

Sri L

anka

Lebanon

Tunis

ia

Bangla

desh

Vie

tnam

UA

E

Saudi A

rabia

Bahra

in

Colo

mbia

Kuw

ait

Phili

ppin

es

Egypt

7


AM

FR

_E

xt_

94

_2

01

4

16 16

Fund performance Supplemental information as at 31 December 2013

Calendar year returns Gross performance comparison: strong relative performance on a calendar year basis versus both the fund’s

customised comparative index* (MSCI Frontier EM Capped) and the MSCI Frontier Markets index

Performance (%) of HSBC GIF

Frontier Markets versus : 2013 2012 2011 2010 2009 2008**

MSCI Frontier EM Capped +11.13 +8.96 +1.25 +3.94 +18.37 -3.54

MSCI Frontier Markets +2.72 +17.01 +1.22 +3.60 +31.13 -2.99

25.87%

42.74%

16.91%

24.37%25.89%

8.85%11.61%

(57.82%)

27.35%28.61%

(17.51%)

(54.28%)

17.48%

23.41%

(18.76%)

(54.83%)

23.75%

(18.73%)

(60%)

(50%)

(40%)

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

YTD 2012 2011 2010 2009 2008**

HSBC GIF Frontier Markets MSCI Frontier Emerging Markets Capped MSCI Frontier Markets

Source: HSBC Global Asset Management as at end of December 2013. Data is supplemental to the GIPS® compliant performance. Please see important disclosure in the Appendix. Performance is shown gross of fees. The

performance figures displayed in the document relate to the past and past performance should not be seen as an indication of future returns. *The comparative index is a customised MSCI Frontier Emerging Markets Capped Net

index. Prior to 1 June 2009, the comparative index was the MSCI Frontier Emerging Markets index uncapped. This is the current internal index, which may change and is not detailed in the fund's prospectus. For illustrative

purposes only as the fund has no official benchmark. ** 2008 performance is from 4 February 2008. Non contractual document

AM

FR

_E

xt_

94

_2

01

4

17 17

Fund performance Supplemental information as at 31 December 2013

Rolling returns Gross performance comparison: strong relative rolling performance generated versus both the fund’s customised

comparative index* (MSCI Frontier EM Capped) and the MSCI Frontier Markets index

Performance (%) of HSBC GIF

Frontier Markets versus : 3 months YTD 1 year 3 years (pa) 5 years (pa) Inception (pa)**

MSCI Frontier EM Capped +3.43 +11.13 +11.13 +6.41 +8.05 +4.46

MSCI Frontier Markets +1.86 +2.72 +2.72 +6.47 +10.42 +6.38

8.41%

28.61% 28.61%

10.13%

19.42%

0.40%

4.98%

17.48% 17.48%

3.72%

11.37%

(4.06%)

6.55%

25.89% 25.89%

3.66%

9.00%

(5.98%)(10%)

(5%)

0%

5%

10%

15%

20%

25%

30%

35%

40%

3 months YTD 1 year 3 years (pa) 5 years (pa) Inception (pa)**

HSBC GIF Frontier Markets MSCI Frontier Emerging Markets Capped MSCI Frontier Markets

Source: HSBC Global Asset Management as at end of December 2013. Data is supplemental to the GIPS® compliant performance. Please see important disclosure in the Appendix. Performance is shown gross of fees. The

performance figures displayed in the document relate to the past and past performance should not be seen as an indication of future returns. *The comparative index is a customised MSCI Frontier Emerging Markets capped Net

index. Prior to 1 June 2009, the comparative index was the MSCI Frontier Emerging Markets index uncapped. This is the current internal index, which may change and is not detailed in the fund's prospectus. For illustrative

purposes only as the fund has no official benchmark. ** Inception from 4 February 2008..


AM

FR

_E

xt_

94

_2

01

4

18 18

Source: HSBC Global Asset Management, MSCI as of December 2013. Information is given for illustrative purposes. Data represents the HSBC GIF Frontier Markets Fund. Comparative index is the MSCI Frontier Emerging

Markets Capped Net Index. This is the current internal comparative index, which may change and is not detailed in the fund's prospectus. For illustrative purposes only as the fund has no official benchmark.

Data is supplemental to the GIPS® compliant performance details.

MENA (48.2%)

Asia (21.0%)

Sub-Saharan Africa (12.5%)

Eastern Europe (10.4%)

Latin America (6.1%)

Cash (1.8%)

Fund metrics Regional positioning

Regional Weightings (%) Regional Weightings vs. MSCI FEM Capped* (%)

(10.5)

(3.4)

(0.7)

3.3

9.4

(14.0)

(9.0)

(4.0)

1.0

6.0

11.0

Latin

Am

erica

Su

b-S

ah

ara

n A

fric

a

Ea

ste

rn E

uro

pe

Asia

ME

NA


AM

FR

_E

xt_

94

_2

01

4

19 19

Top 10 Country Holdings Top & Bottom 5 Country Weightings vs. MSCI FEM Capped* (%)

Country Portfolio Weight (%)

United Arab Emirates 14.85

Qatar 14.28

Nigeria 11.41

Pakistan 10.65

Saudi Arabia 7.89

Kuwait 6.13

Vietnam 3.93

Oman 3.81

Philippines 3.72

Georgia 2.86

Source: HSBC Global Asset Management, MSCI as of December 2013. Information is given for illustrative purposes. Data represents the HSBC GIF Frontier Markets Fund. Comparative index is the MSCI Frontier Emerging Markets

Capped Net Index. This is the current internal comparative index, which may change and is not detailed in the fund's prospectus. For illustrative purposes only as the fund has no official benchmark.


Fund metrics Country positioning

(5.8) (5.8)

(3.5) (2.7) (2.3)

2.93.8 4.3

5.4

7.9

(10.0)(8.0)(6.0)(4.0)(2.0)

0.02.04.06.08.0

10.0

Co

lom

bia

Arg

entin

a

Ke

nya

Ph

ilip

pin

es

Slo

ve

nia

Ge

org

ia

Un

ite

d A

rab

Em

ira

tes

Qa

tar

Pa

kis

tan

Sa

ud

i A

rabia


AM

FR

_E

xt_

94

_2

01

4

20 20

Banks (35.8%)

Consumers (26.9%)

Infrastructure (12.6%)

Energy (10.8%)

Materials (5.8%)

Conglomerates (4.4%)

Healthcare (1.9%)

Cash (1.8%)

Financials (44.9%)

Industrials (13.0%)

Energy (10.8%)

Materials (9.3%)

Telecom Services (6.9%)

Consumer Staples (6.1%)

Utilities (3.1%)

Consumer Discretionary (2.3%)

Healthcare (1.9%)

Cash (1.8%)

Sector Weightings (%) – GICS Classification

* The HSBC Global Asset Management classification above is a subjective classification based upon our assessment of the true nature of the economic exposures based on the investment team’s investment thesis:

1) ‘Consumers’ includes consumer discretionary, consumer staples, malls, casinos, cruise ships, low cost airlines, and mobile phones.

2) ‘Infrastructure’ includes cement, ports, power, and transportation.

3) ‘Conglomerates’ is defined as companies having no dominant sector theme.

Source: HSBC Global Asset Management, MSCI as of December 2013. Information is given for illustrative purposes. Data represents the HSBC GIF Frontier Markets Fund.


Thematic Weightings (%) – HSBC Classification*

1

2

3

Fund metrics Sector positioning


AM

FR

_E

xt_

94

_2

01

4

21 21

Frontier Markets outlook Regional market outlook

Middle East and North Africa

We are focused on the Arabian Gulf countries, with a preference for the UAE and Qatar where we have increased our exposure as we expect growth to

accelerate driven by government spending; the next largest exposure is Saudi Arabia.

In North Africa, we have no exposure to Morocco or Tunisia and small exposure to special situations in Egypt given low prices but an uncertain outlook.

Eastern Europe

Our exposure is small in absolute terms and very stock specific with a focus on domestic growth opportunities having avoided much of the region in the

last few years due to concerns about the troubled Eurozone countries, but this could change in 2014.

The largest country exposure is Georgia through one very well run holding which should continue to benefit from the positive outlook of the economy.

Sub-Saharan Africa

The exposure to Sub-Sahara Africa is the lowest in the strategy’s history; Nigeria remains our favourite market but profits have been taken after strong

returns in 2012 and 2013.

There is only one other SSA holding, in Kenya where profits were taken after a very strong 2013 has left valuations unattractive.

Asia

Pakistan is our favoured country with cheap valuations, a high dividend yield, an IMF deal in place and a relatively new government making progress on

necessary reforms.

Valuations in the Philippines, Sri Lanka, and Bangladesh are still unattractive although the Philippine economy continues to perform well.

Latin America

Our largest holding is a high quality industrial company in Panama that gives exposure to increased business activity in Central and South America.

We remain underweight Colombia and Peru due to valuation and poor growth prospects, but with the local markets off their highs by over 20% and 30%

respectively some value may start to re-appear in 2014.

We continue to monitor the ongoing changes in the political landscape in Argentina and potential impact on economic policy but currently have no

exposure.

Note: The views expressed above were held at the time of preparation and are subject to change without notice.


AM

FR

_E

xt_

94

_2

01

4

22 22

HSBC Frontier Markets strategy Supplemental information - Risk and return over 3 years

Data is supplemental to the GIPS© compliance performance details at the end of this presentation. The performance figures displayed in the document relate to the past and past performance should not be seen as an indication of

future returns.


AM

FR

_E

xt_

94

_2

01

4

23 23

Frontier Markets Equity GIPS report to 30 September 2013


Returns for the composite are shown gross of fees. Returns greater than one year are annualised returns. The performance figures displayed in the document relate to the past and past performance should not be seen

as an indication of future returns.

AM

FR

_E

xt_

94

_2

01

4

24 24

Frontier Markets Equity Disclosures


Important information

AM

FR

_E

xt_

94

_2

01

4

26 26

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. All non-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 means intended as a solicitation, nor an investment advice 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 reflect the opinion of HSBC Global Asset Management (France) on the markets, according to the information available to date. They do not constitute any kind of commitment neither from HSBC Global Asset Management (France). 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 unless otherwise specified. Any third party information has been obtained from sources we believe to be reliable, but which we have not independently verified. It is complete without the oral briefing provided by the representatives of HSBC Global Asset Management (France).

The products presented in this document may not be registered and/or authorised for sale in your country. The performance figures displayed in the document relate to the past and 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. Capital is not guaranteed.

Please note that according to article 314-13 of AMF General Regulations, performance for periods of less than 12 months cannot be shown to non-professional investors, as defined by the MIF directive.

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 strategy’s securities in such markets may not be readily available.

Investors should note that changes in the political climate in Emerging 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 the strategy. Where overseas investments are held the rate of exchange may cause the value 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. Fluctuations in the rate of exchange of currencies may have a significant impact on fund performance. Emerging economies typically exhibit higher levels of investment risk. Markets are not always well regulated or efficient and investments can be affected by reduced liquidity. The value of derivative contracts is dependent upon the performance of an underlying asset. A small movement in the value of the underlying can cause a large movement in the value derivative. Unlike exchange traded derivatives, over-the-counter (OTC) derivatives have credit risk associated with the counterparty or institution facilitating the trade. Operational risks are borne by the Investment Adviser. The main risks are related to systems and process failures. The Investment Advisers are overseen by independent risk functions, are subject to independent internal and external audit and are supervised by regulators. It is important to remember that the value of investments and any income from them can go down as well as up and capital is not guaranteed. All subscriptions in any fund presented in this document are accepted only on the basis of the current prospectus accompanied by the latest annual or half-yearly report, available on request from HSBC Global Asset Management (France), the centralisation agent, the financial department or the usual representative. Before subscription, investors should refer to the Key Investor Information Document (KIID) and/or the simplified prospectus of the fund as well as its complete prospectus. For more detailed information on the risks associated with this fund, investors should refer to the complete prospectus of the fund.

HSBC GIF Frontier Markets is a sub-fund of HSBC Global Investment Funds, a Luxemburg domiciled SICAV. The shares of HGIF 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.

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.

Important information for Swiss investors: The presented fund is authorised for public distribution according to Art. 120 of the Federal Collective Investment Schemes Act in Switzerland. This presentation is intended exclusively towards qualified investors in the meaning of Art. 10 para 3 lit. a and b of the Federal Collective Investment Schemes Act (CISA). The prospectus, Key Investor Information Document (KIID) of the afore mentioned sub-fund and (semi-) annual reports of the Company can be obtained free of charge at the Swiss office of the Swiss representative of the fund: ACOLIN Fund Services AG, Stadelhoferstrasse 18, CH-8001 Zurich. Paying agent in Switzerland: HSBC Private Bank (Suisse) S.A., Quai Général Guisan 2, P.O. Box 3580, 1211 Geneva 3.

HSBC Global Asset Management is the brand name for the asset management business of HSBC Group. The above document has been produced by HSBC Global Asset Management (France) and 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 euros.

Postal address: 75419 Paris cedex 08, France.

Offices: Immeuble Ile de France - 4 place de la Pyramide - La Défense 9 - 92800 Puteaux – France. (Website: www.assetmanagement.hsbc.com.fr).

HSBC Global Asset Management (Switzerland) Limited

Bederstrasse 49, P.O. Box, CH-8027 Zurich, Switzerland (Website: www.assetmanagement.hsbc.com/ch)

Copyright © 2014. HSBC Global Asset Management (France). All rights reserved.

Non contractual document, updated in January 2014


http://www.assetmanagement.hsbc.com.fr/

http://www.assetmanagement.hsbc.com/ch

new frontiers: the next generation of em equities contractual document only intended for...

Documents