HSBC

Latest work includes: writing personal investment articles for HSBC's "Liquid" client magazine and writing unbylined content for "World Selection News" for investors in HSBC's World Selection suite of investment funds. These publications were designed and prepared for HSBC by Specialist, the contract publisher.

Keeping it Real

Filed in: , gold, art, stamp, asset, tangible, investment, wine, collectibles

The attraction of tangible assets

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Active, passive or both?

Filed in: , hsbc, ftse100, etf, active, passive

Two very different investment approaches. What are the pros and cons and can they work in harmony for investors?

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Building BRICS: India

Filed in: , tax, hsbc, emerging market, infrastructure, fund, investment, india

The numbers, skills and hard work of its people have driven India’s emergence as a major global economic force. This looks set to continue, positioning the country as an investment destination with distinct attractions.

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Building BRICS: India
The numbers, skills and hard work of its people have driven India’s emergence as a major global economic force. This looks set to continue, positioning the country as an investment destination with distinct attractions.

While European and North American economies have struggled to achieve growth, India has been a consistently high performer over recent years. Economists at Moody’s, the rating agency, log India’s record of growth since 2006 as falling in the range of 6.7% to 9.6% annually, with the lowest of these figures covering the period from 2008 to 2009, when the western world was plunged into ␣nancial crisis. Looking ahead, Moody’s projects 8.8% GDP growth this year and 8.1% next year. HSBC Global Asset Management expects growth of at least 7% of GDP over the decade to 2020 in the Indian economy (compound annual growth rate – the year-on-year increase over the period).

Not everything in India’s economic garden is rosy, however. For the last three years, the country has been wrestling with government debt at around 77% of GDP.* Public sector ineciency, particularly in gathering taxes, is rosy however. For the last three years, the country has been wrestling with government debt at around 77% of GDP.* Public sector ineciency, particularly in gathering taxes, is not helping matters. Generally, income levels among India’s vast population are low, and “inadequate physical and social infrastructure,” as Moody’s puts it, could hamper economic development going forward.

But then, this is an emerging market. What attracts investors to India are its prospects for growth and development. One of the key features of India, versus other emerging economies such as China and Russia, is the rapid development of its internal market rather than its exports: thisisgeneratinghugeamountsofincomeforsomeofits growing domestic businesses.

“The rise of the consumer in India – there’s a lot of demand due to higher incomes and aspirations – is a key driver of economic growth,” explains Sanjiv Duggal, manager of the HSBC GIF Indian Equity Fund.

“For example, a particular pocket of opportunity is in passenger car sales… in the financial year ended March 2010, passenger car sales in India grew at their fastest pace in six years, up 25% to 1.53 million units. In addition, the housing market is forging ahead, enjoying strong demand due to a major shortage of quality housing, and we are continuing to find opportunities amongst the under- owned real estate sector. There is also a strong government focus on improving healthcare, education and training, and physical infrastructure.”

Sanjiv Duggal adds: “Growth in per capita income means that India is near the point where we can expect consumption to take o sharply. The nation’s demographics, with its young population, will also continue to bolster economic growth.”

NEW GLOBAL CHALLENGERS
In this regard, the country has a rapidly increasing, affluent middle class that now numbers around 200 million; roughly equal to the entire populations of Germany, France and the UK added together. And these people are buyers of goods and services that are sourced or delivered from overseas, as well as from the domestic market: indeed India is now reckoned to be among the ten largest retail markets in the world and growing fast.

At the same time, the Boston Consulting Group (BCG) has pointed out in its latest New Global Challengers report that India is home to 20 of 100 companies that are based in rapidly developing economies but are contending for global leadership in their fields of operation. They include firms such as United Spirits, the world’s second largest forging business, Tata Consultancy Services (TCS), Asia’s largest services and business process outsourcing company, and Bajaj Auto and Mahindra & Mahindra the automotive equipment makers.

HOW CAN YOU SHARE IN INDIA’S SUCCESS?
So the question facing investors is how to share in the growing prosperity of such Indian companies. HSBC’s Sanjiv Duggal is cautious: “We believe when it comes to investing in India, a strict and disciplined approach is a must. Like any emerging economy, while the potential for growth is robust, investors should be prepared for some volatility, which can be caused by a number of factors.

“For example, the government’s approach is one of many layers, peppered with bureaucracy. The reforms that are needed become a tug-of-war between vested interests, slowing down badly-needed progress, and any potential reforms could be a potential threat to markets in the short term. In addition, rising prices of commodities such as crude oil and fertilisers, on which it is heavily dependent, could have a negative impact on the economy, while the nation’s monsoon season can always have a negative economic impact by slowing progress.”

Sanjiv Duggal describes buying individual shares in Indian companies as “a high-risk strategy.” He says that the Indian market can be highly volatile, but should be a core part of any growth portfolio: “By going for a professionally-managed portfolio of shares, investors are giving themselves the best opportunity of making decent returns over the long term, with far less risk than if they were to buy into individual companies. For example, the HSBC GIF Indian Equity Fund typically holds between 50 and 70 stocks, and has significantly outperformed the market since its launch in March 2006.”

This fund, incidentally, currently holds almost US$6.4bn (£4bn) in assets under management, making it the largest offshore Indian fund in the world.

The emerging market opportunity ffered by India is considerable. Given the still very low level of per capita income of the Indian population in general, and the scale of poverty and lack of infrastructure across the massive sub-continent, this opportunity is likely to remain attractive for some time to come. The risks involved are also significant, so investors face the challenge of balancing the risks versus the potential rewards on offer.

Building BRICS: Russia

Filed in: , hsbc, shares, natural resources, equities, russia, bric, rating, investment

While the natural resources of the world's largest country may play a key role in Russia's status as a member of the exclusive BRIC fraternity, don't be fooled into thinking of it as a one-trick investment pony.

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One of a series of four BRIC investment articles to appear in HSBC’s “Liquid” client magazine.

Risky business

Filed in: , risk, risk management, personal investment, portfolio, investment

Risk assessment for private investors. This article appeared in HSBC's Liquid client magazine in spring 2010

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No investment is entirely free from risk, and the size of the potential reward is usually determined by how much risk an investor wants to take. So have you thought about how much risk you might want to shoulder with your current and future investments?

HSBC World Selection News

Filed in: latin america, hsbc, france, asset management, uk property, equities, asia, global, fund, funds

A newsletter for investors in HSBC's World Selection Fund

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This issue contains a description of this multi-asset, global fund. There are individual articles on Latin America, UK Property, Asia and France. The article entitled “Impossible Dream” was not written by Richard Willsher.

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