HSBC sails confidently through the global typhoon

FAMILY OFFICE | HSBC sails confidently through the global typhoon

Q. What are HSBC's plans for China?

China is very important to the group as we got our incorporation status last year and our business has grown ever since. We are in the process of building up our branch network as we have over 50 outlets there and we are adding a branch per month.

However, given the state of the markets, people's appetite for investment products is lower this year but we will continue to educate our customers and diversify their portfolios into different products. We have a QDII program, where customers can access offshore funds. Last year, we had close to US$1 billion under that category.

But its not just a China story - its India, Taiwan and Korea and these have huge potential for us. In Korea, we own KEB. Now, we sit under personal financial services and having a distribution network is important for us as we must focus on retail customers.

Chinese investors prefer domestic investment where diversification is rare. They focus mainly on local investment.

However, mutual funds have been growing rapidly in China and a lot of investors are going for these.

Demand has been dropping since the beginning of this year. Within the sector, people indicated strong interests in fixed income, commodity and agriculture funds and there are a lot more structured funds coming into the market. The long funds have low subscriptions but there are strong demand on high quality fixed income bonds.

Recently, there were some funds linked with Man Investments that launched a partial guarantee fund with Man HKL futures fund as underlying. These funds provide a different risk profile and they can establish a position.

Fund managers are not seeing the growth in the funds under management in a significant way over time. To overcome that, one of the things we have launched last year is the no subscription fee series in Hong Kong.

We work with some managers with a limited fund choice to target customers who stay in the fund for a long term. By reducing the front end fee to zero we don't earn from the fund house or customer and we move the back end fee to 0 percent after 1 year and to 1 percent in the first 12 months. There is a 1 % distribution fee and 1.5 percent manager fee. This is one of the steps to indicate that as a distributor we are willing to expand the market and reduce the price for mid market customers who lack the bargaining power for this subscription fee. In less than one year, 5 per cent of inflow now go into this asset class.

With the crisis, we also want to see fund managers come out to provide more information for investors who have invested in their funds. Mostly it is the stock brokers who come out and comment, especially when the market is hot. Nowadays, they need to do so through public media more frequently.

Fixed income fund since the beginning of the year is on the top 10 fund subscription list so on absolute terms the subscription amounts are less than last year.

Of our top ten list, none are in Singapore. But there are three commodity related funds at the top, followed by two global bond funds, and three Greater China funds. Closing the list, are two global product funds balanced with bond equities.

Last year, was all china but now, if you look at the performance of some of these commodity sectors their YTD performance is in the range of twenty to thirsty per cent return and that's why we are asking customers to consider that and ask if its too good to be true. As commodity tends to be more volatile, we are asking them to be comfortable with their overall exposure. Given credit cycle there are some opportunities on capital gain but people need to understand more about bonds as an asset class.

The important thing for us as distributor is keeping our product shelf very active and finding a suitable product for the customer at the time . the challenge is finding the right product for the right customer at the right time. We have been keen on educating our front line and our customer that investment manager is an all weather business so we need to build it not dependant on just the market

It is difficult to say the market will recover in a short period of time. So, fund managers without sizeable funds will find it difficult to maintain their presence in the market.