HSBC investment experts share market outlook

For the first time in Hong Kong, HSBC Global Asset Management brought together its four investment experts on Brazil, Russia, India and China to share their investment outlook on these dynamic economies.

The HSBC experts hold positive views on the BRIC economies over the long term. Although the MSCI BRIC Index was down 60 per cent in 2008, it was largely because of an increase in risk aversion and massive deleveraging rather than a significant deterioration in fundamentals. The BRIC markets have been generally less affected by structural issues than developed markets and are well supported by huge foreign reserves, improved sovereign ratings and strong domestic consumption.

Driven by the revival of market sentiment, the MSCI BRIC Index has returned 56 per cent in the year to date. HSBC forecasts the average GDP growth of the BRIC economies to be around 1.4 per cent and 5.7 per cent in 2009 and 2010 respectively, significantly outpacing the growth of -3.4 per cent (2009) and 1.2 per cent (2010) of the developed world.

Pedro Bastos, Chief Executive Officer, HSBC Investments Brazil, said: “The Brazilian market is trading at a discount to other emerging markets. The resilience of the Brazilian economy has justified our preference for domestic-oriented plays. The rise in commodity prices and the improvements in its trade balance provide a favourable backdrop to attract new infrastructure investments to further develop the economy. As the global economy continues to recover, the valuations of the exporting sectors will become more attractive.”

Douglas Helfer, fund manager for HSBC Global Investment Funds – Russia Equity, said: “Apart from oil, domestic drivers, including declining inflation, falling interest rates, rising wages and improvement in wage distribution, will support the Russian economy. Despite the recent strong rally, Russia remains one of the cheapest markets in the world, making it attractive from the valuation’s perspective.”

Sanjiv Duggal, fund manager for HSBC Global Investment Funds – Indian Equity, said: “India deserves to be a core part of any growth-oriented portfolio as one of the fastest-growing major economies in the world. India has many years of reasonably strong economic growth ahead driven by consumption and investment spend. The new government has already made some impressive moves that will further facilitate the growth and development of India going forward. However, India does have a volatile stock market so investors should be flexible with their core position. Valuations are now above the five- and 10-year averages.”

Richard Wong, fund manager for HSBC Global Investment Funds – Chinese Equity, said: “We remain positive on China, as strong investment and consumption growth,supported by favorable government policies, will likely continue to stimulate economic growth. With orders picking up in the export sector, the market may have overreacted to the adjustment in monetary policy and the expectation of serious tightening measures. China’s long-term economic growth will be sustainable, with growth supported by both private and public investments.”

With the rally in recent months, HSBC Global Asset Management expects that acorrection may occur in the short run but the medium- to-long-term growth story
remains intact. By investing in the HSBC Global Investment Funds – BRIC Freestyle, investors can capture the long-term growth of these markets through a well-diversified portfolio. The Fund has returned 73 per cent as at the end of August 2009 and has been the top-performing BRIC equity fund in Hong Kong this year.

HSBC Global Asset Management is among the world’s leading asset managers in emerging markets, with approximately US$70 billion of assets under management and around 180 staff covering 16 countries and territories in this area. HSBC Global Asset Management was the first to launch a BRIC fund in 2005 and offers a full range of single-country BRIC markets and emerging markets funds that give investors direct access to the fast-growing economies.

The trip to Hong Kong is part of the BRIC market roadshow in Asia. The four investment experts went to Japan in June this year and will go to Taiwan in early
October.