HSBC GIF RMB Fixed Income - HSBC Global Asset Management

HSBC GIF RMB Fixed Income
31 December 2014
USD Retail Share Class (AC)
Monthly Report
Fund Objective
Fund Details
The sub-fund invests for total return primarily in a diversified portfolio of Investment and Non-Investment
Grade, as well as unrated fixed income securities (including but not limited to bonds and notes), cash,
deposits (including certificate of deposits) and structured products with effective underlying currency
exposure in RMB. The RMB bond market is new and still developing and the opportunities to invest in RMB
bonds are limited. Therefore, until the RMB bond market has fully developed, the fund may at times invest
substantially in cash, deposits and other short term instruments.
Fund domicile
UCITS IV Luxembourg SICAV
Benchmark‡
Offshore Renminbi Overnight Deposit
Rate
Performance (%)
Fund size (USD million)
433.90
114
Inception date
25/10/2011
112
110
Liquidity
Daily
108
106
104
Ongoing charge*
1.00%
102
Dec-14
Aug-14
Apr-14
Dec-13
Jul-13
Mar-13
Nov-12
Jul-12
Mar-12
100
Oct-11
(Rebased to 100 on 25 Oct 2011)
116
HSBC GIF RMB Fixed Income AC
Minimum initial investment
US$ 5,000 or equivalent
ISIN code
AC: LU0692309627
Bloomberg ticker
HSRFAUA LX
Rolling time
HSBC GIF RMB Fixed Income
31/12/2009
to
31/12/2010
31/12/2010
to
31/12/2011
31/12/2011 31/12/2012 31/12/2013
to
to
to
31/12/2012 31/12/2013 31/12/2014
N/A
N/A
4.60%
6.11%
-0.73%
3M
6M
1Y
3Y
inception
0.39%
-0.73%
ann.
3.28%
ann.
3.49%
Since
31 December 2014
HSBC GIF RMB Fixed Income
Calendar years
HSBC GIF RMB Fixed Income
1M
-1.41%
-1.14%
2014 YTD
2013
2012
2011
2010
2009
-0.73%
6.11%
4.60%
N/A
N/A
N/A
Data as at 31 December 2014
Statistics
Average Modified Duration
1.80
Average Yield to Maturity (%)
5.10
Average Quality**
2.06
A3/BAA1
Number of Holdings
** Based upon Moody's ratings & rated issues only
Data as at 31 December 2014
Source: HSBC Global Asset Management.
Benchmark is the Offshore Renminbi Overnight Deposit Rate index, for comparison purposes only as the fund has no
official benchmark
For Professional Clients Only
This is the current internal benchmark. It is
provided for illustrative purposes as the fund
has no official benchmark.
* The ongoing charges figure is based on
last year’s expenses for the year ending
31/03/2014. Charges may vary from year to
year.
The above information refers to the past and should not be seen as an indication of future returns.
The figures are calculated in USD, and changes in the rate of currency exchange may affect the value of your
investment. All return periods longer than 1 year are annualised. Performance returns are based on a NAV per unit basis,
net of fees, with gross income reinvested.
Source: HSBC Global Asset Management.
Average Maturity (Years)
‡
113
The ongoing charges figure (OCF), which is
broadly equivalent to the previous Total
Expense Ratio, provides a measure of what
it costs to invest in a fund on an ongoing
basis. The OCF is made up of the Annual
Management Charge (AMC) and other
operating costs. Other operating costs
include the costs for other services paid for
by the fund, such as the fees paid to the
trustee (or depository), custodian, auditor
and regulator.
HSBC GIF RMB Fixed Income
31 December 2014
USD Retail Share Class (AC)
Monthly Report
Market Overview
The offshore bond market performed poorly in December both in US dollar terms and, unusually, in RMB terms as well. The curre ncy did not perform especially
badly in the context of a strong US dollar against almost all currencies, but the underlying bond market became embroiled in speculation about Chinese credit
and the property market in particular.
The macro environment in China continued to show signs of further slowdown in December, with international trade particularly weak. The pattern was broadly
consistent with the rest of 2014 in that the data did not show a sharp deterioration, but more a chronic malaise across the e conomic spectrum. Nevertheless,
with further stimulus of varying kinds, we believe that a ‘harder landing’ will be avoided.
On a subject more directly relevant to bond holders, the government introduced tighter controls on collateral which segmented the onshore bond market and
had a knock on effect to offshore Chinese bonds. Bonds that are not considered municipal and with local bond ratings lower th an AAA will not be considered as
eligible for repo pledge. This heightened demand for those bonds which remain eligible and diminished that for those which ar e no longer.
Although this move caused some volatility in the market, it was one of a series of measures which are necessary to modernise the bond market. Moreover,
greater discrimination in pricing is necessary in order to correctly reflect risk of default and liquidity. So while it was d isruptive in the short term, it can be seen as
a very positive medium term development.
The offshore RMB market suffered general weakness in December and although the high yield sector performed the worst, investm ent grade bonds were also
weak. This may have reflected negativity on the currency given the likelihood of further interest rate cuts.
Portfolio strategy
The fund underperformed its benchmark in December as it experienced some outflows as a consequence of the unfavourable price action in both the currency
and bond markets. This resulted in the selling of some assets across the maturity and credit spectrum. In terms of new bonds, we participated in the issue of the
junior subordinated contingent capital bonds of ICBC. This is the new class of hybrid capital notes which are compliant with Basel III compliant and set to
become an increasingly important part of the RMB bond markets. This bond has performed satisfactorily since launch, supported by the extremely strong rally in
Chinese equities.
Outlook
After a period of remarkable calm and low volatility, the Chinese RMB bond markets are beginning to wobble. Concerns about co rporate governance and debt
sustainability have translated into weaker price action both in the onshore and offshore markets. So the question now might b e whether this weakness and
volatility might be characteristic of the markets in 2015, or whether the move we saw in December and the early days of Janua ry was a ‘blip’.
Taking the question of volatility first- in line with many financial markets, the RMB bond markets have experienced a period of exceptional stability, in the latter
case for a number of reasons. In the case of the onshore market, the lack of foreign participation in the market, together wi th the highly regulated pricing
mechanisms and stability of underlying investors, have all added up to dampen volatility. Over time, we would expect the libe ralisation and internationalisation of
the bond market to enhance liquidity, but at the same time make price moves more abrupt. Nevertheless, this evolution is stil l in its early stages and therefore
over the course of 2015, bonds should return to a more docile environment. In the offshore market, it is really the combinati on of short duration, high quality and
diversification which has made the market very stable, and in fact even in December, although the markets has shown a slight capital loss, the overall negative
return has been a fraction of that suffered by most markets in times of stress. Again, as the market develops, it is likely t hat there will be more longer dated and
lower quality issuance, but that will not be a material factor in 2015.
The weakness in the markets is also something we do not expect to continue. An occasional reappraisal of risk and idiosyncrat ic credit stress are just facts of
life for a bond investor and RMB markets are no more immune than any others. Although the Chinese economy is slowing down, th e authorities are applying
stimulus in key areas and are likely to cut interest rates further. Moreover and uniquely to China, the internationalisation and liberalisation of financial markets is
bound to cause ripples every now and then. But investors should welcome the ripples - not only does it mean that reform is heading in the right direction, it also
gives opportunity to the active investor.
Source: HSBC Global Asset Management
Data as at 31 December 2014
HSBC GIF RMB Fixed Income
31 December 2014
USD Retail Share Class (AC)
Monthly Report
12.3
20.8
26.9
NR
Cash
AAA
BB
B
AA
BBB
Cash
Technology
Supranational
Bank Sub
Sovereign
Energy
Telecom
Oil & gas
Utility
Cyclical
Quasi-sovereign
Financial
Property
Industrial
0.0
Bank
0.0
0.2
0.7
5.3
6.1
0.2
1.1
10.0
1.3
1.9
1.8
2.1
2.6
2.6
4.6
7.2
10.0
20.0
5.5
20.0
27.7
30.0
A
30.0
11.6
40.0
20.4
40.0
16.4
Quality Weightings (%)*
20.6
Sector Weightings (%)
* Based upon Standard & Poor's ratings & rated issues only
Maturity Breakdown (%)
Currency Weightings (%)
CNY (=offshore RMB) (99.8)
0-2 years (53.1)
EUR (0.1)
2-5 years (46.3)
USD (0.2)
10+ years (0.6)
70.0
60.0
53.4
Country Weightings by Issuers (%)
50.0
4.2
4.0
3.6
2.8
2.6
1.8
1.6
1.5
1.5
1.5
1.3
1.1
0.9
0.6
0.6
0.4
0.4
0.2
Singapore
United Kingdom
Germany
France
United States
India
Brazil
Mexico
Russia
Supranational
New Zealand
Malaysia
Sweden
Netherlands
Canada
Australia
Cash
10.0
S.Korea
20.0
4.3
11.9
30.0
Japan
40.0
Hong Kong
China
0.0
Data as at 31 December 2014
Source: HSBC Global Asset Management.
HSBC GIF RMB Fixed Income
31 December 2014
USD Retail Share Class (AC)
Monthly Report
Portfolio Management
Gregory Suen, CFA – Lead Portfolio Manager
Gregory Suen is the Lead Portfolio Manager in the Asian fixed income team and has been working in the industry since 2000. Prior to
joining HSBC in 2007, Gregory worked as an investment manager at PCI Investment Management Limited. He holds a master’s degree
from the University of Hong Kong, a bachelor’s degree from the University of British Columbia (Canada). He is also a CFA charterholder
and a Certified Public Accountant (CPA).
Alfred Mui, CFA - Alternate Portfolio Manager
Alfred is a Director and the Head of Asian Credit. He has been working in the industry since 1996. Prior to re-joining HSBC in 2010,
Alfred worked as a director of credit trading at Myo Capital and a director at UBS Global Credit Strategies Group. Before first joining
HSBC in 2000, Alfred worked as an investment advisor at Matheson InvestNet Ltd. and Jardine Fleming Holdings Ltd. and market risk
management at Daiwa Securities (HK) Ltd and Chase Manhattan Bank. Alfred holds a BSc with "Distinction" from the University of
Toronto and an MBA from the University of Ottawa. He is also a CFA Charterholder.
Fund Information
Maximum initial charge
Up to 5.54%
Settlement date
Trade day + 4 business days
Management company
HSBC Investment Funds (Luxembourg) S.A.
Redemption fees
None
Investment adviser
HSBC Global Asset Management (Hong Kong) Limited
ISIN codes
AC: LU0692309627
AD: LU0692309460
Depositary bank
HSBC Bank Plc. Luxembourg Branch
Important Information
This document is distributed by HSBC Global Asset Management (France) and is only intended for professional investors as defined by MiFID. The information provided
on this product is simplified and therefore incomplete.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 on the markets, according to the information available to
date. They do not constitute any kind of commitment 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 come 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.
The fund 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.
Please note that according to article 314-13 of the French AMF Regulations, performance for periods of less than 12 months cannot be shown to non-professional
investors, as defined by Mifid.
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. 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.
As interest rates rise debt securities will fall in value. The value of debt securities is inversely proportional to interest rate movements. Investing in assets denominated in a
currency other than that of the investor's own currency perspective exposes the value of the investment to exchnage rate fluctuations. Fund with a narrow or concentrated
investment strategy may experience higher risk and return volatility and lower liquidity than the funds with a more diversified approach. 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, a measure of how easily an
investment can be converted to cash without a loss of capital, and a higher risk of debt securities failing to meet their repayment obligations, known as default.
HSBC GIF RMB Fixed Income is a sub fund of HSBC Global Investment Funds, a Luxemburg domiciled SICAV. The share of sub funds of 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.
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) 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 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.
Office: Immeuble Ile de France - 4 place de la Pyramide - La Défense 9 - 92800 Puteaux – France.
www.assetmanagement.hsbc.com/fr
Copyright © 2015 HSBC Global Asset Management. All rights reserved
AMFR_Ext_69_2014 Exp_10_03_2015
Non contractual document

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