Willem Sels
Global Chief Investment Officer, HSBC Global Private Banking and Wealth
Lucia Ku
Global Head of Wealth Insights, HSBC Wealth and Personal Banking
Key takeaways
- While solid economic and earnings growth data, Fed rate cuts and structural trends are positive for US equities, we believe a Trump presidency is likely to offer additional support due to the proposed tax cuts and deregulation. As fiscal stimulus and potential tariff-related upward pressure on inflation may lead to further volatility in bonds, we downgrade Global, US and Asian investment grade bonds to neutral.
- The Eurozone faces challenges of slow growth and potential US tariffs, hence warranting our downgrade of Europe ex-UK equities to underweight. The UK is better positioned due to its better macro outlook and lack of a US-UK trade deficit. UK equities are also more defensive in nature and cheap. We continue to see opportunities in European IT, energy and healthcare.
- While we are waiting for more clarity around the size and the specific details of China’s fiscal stimulus measures, the potential for increased US tariffs adds to the complexity, so we remain neutral on mainland Chinese and Hong Kong stocks. Yet, valuations remain cheap. Within the region, we favour Japan, India and Singapore due to their favourable market conditions and positive growth drivers. South Korean stocks are moved down to neutral due to tariff concerns.
Talking Points
Each month, we discuss 3 key issues facing investors
1. How should investors position for the US election outcome?
- As Donald J Trump is set to become the next US president, with the control of the Senate and potentially the House according to news resources, markets are pricing in “a clean Republican sweep”. The likelihood of tax cuts and deregulation are supportive of US equities, but there are also concerns about higher trade tariffs leading to higher inflationary pressure and slower rate cuts. Given relatively tight credit spreads with limited scope for price gains, we downgrade developed market investment grade bonds (Global, US and Asian) to neutral.
- Historically, market volatility tends to accelerate in the lead-up to the elections but ease when the result is known. Equity markets also tend to rise in the 6 months after the elections, regardless of the outcome.
- We continue to base our investment decisions on fundamentals. US economic and earnings growth data have surprised to the upside, leading to reduced Fed rate cut expectations and a rise in Treasury yields. Solid earnings momentum, Fed rate cuts and long-term structural trends support our overweight on US and global equities, favouring US technology, communications, industrials, financials and healthcare.
2. What is the outlook for the Eurozone and UK?
- The ECB delivered a widely-expected 0.25% policy rate cut in October amid moderating inflation. Although it doesn’t forecast a recession in the Eurozone, weak macro conditions and earnings momentum remain headwinds. The significant trade deficit of the US with the Eurozone risks resulting in higher trade barriers under Trump administration. We downgrade Europe ex-UK stocks to underweight.
- The consumer discretionary sector may be adversely hit by tariff escalations, while luxury companies are already affected by weak Chinese consumer sentiment and auto companies by strong competition. We see better opportunities in European technology, energy and healthcare.
- Meanwhile, the UK market is in a better position due to its more neutral trade balance with the US, which provides some insulation from potential tariff impacts. The market is also showing signs of improvement with rising consumer confidence. UK equities are also more defensive in nature and remain relatively cheap, which supports our overweight position.
3. Is it time to turn more positive on Chinese equities?
- Following the liquidity-driven rally of the Chinese equity markets in late September and early October as a result of a series of stimulus packages announced by the Chinese authorities, sentiment has shifted to a wait-and-see mode.
- The fiscal measures include repairing the balance sheets of the local governments, which should alleviate their financial constraints while more forceful destocking of the housing sector using special local government bonds should help support housing market activities.
- While these measures should be sufficient to address a cyclical downturn, we think further policy support is necessary, which should be announced soon upon approval. The potential for increased US tariffs adds to the complexity, so we remain neutral on mainland Chinese and Hong Kong stocks. Valuations remain low compared to many global and emerging market counterparts, suggesting potential upside if earnings expectations turn around. Within the region, we are more bullish in Japan, India and Singapore due to their favourable market conditions and robust growth drivers. As South Korea has a high trade surplus with the US, we downgrade South Korean equities due to tariff concerns.
Asset Class Views
Our latest house view on various asset classes
Global equities (6-month view)
Global
▲Overweight
Solid earnings growth, rate cuts and investors’ high cash balances that can be put to work remain key drivers for global equities. We continue to broaden our geographical and sector exposure to tap into the wide opportunity set.
United States
▲Overweight
Fed rate cuts, continued disinflation and the power of innovation fuel the earnings momentum across sectors. The proposed tax cuts and deregulation by the new US president should further support our preference for the IT, communications, financials, industrials and healthcare sectors.
United Kingdom
▲Overweight
We remain bullish on UK equities due to their improved earnings momentum, attractive valuations and defensive characteristics. Their lower reliance on trade also means that they are more insulated from the tariff risks.
Europe ex-UK
▼↓ Underweight
Sluggish economic growth and the US tariff vulnerability bring Europe ex-UK equities to an underweight position.
Japan
▲Overweight
Despite near-term volatility driven by the ruling Liberal Democratic Party’s loss of majority in the parliamentary election, the sustainable reflationary momentum, corporate governance reforms and the AI boom remain positive for Japanese equities.
Emerging Markets (EM)
▶Neutral
The Fed’s easing cycle has historically been positive for EM as it provides more scope for EM central banks to follow.
EM EMEA
▼Underweight
Monetary and geopolitical uncertainties remain headwinds for the region, along with weak EU growth.
EM Latam
▼Underweight
US tariffs are a potential headwind for Mexico and renewed rate hikes in Brazil may trigger selling.
Asia ex Japan equities (6-month view)
Asia ex-Japan
▲Overweight
Asia’s solid fundamentals and structural trends offer diversification and growth opportunities, particularly in India and Singapore. Historically, Asian equities tend to deliver decent performance after the Fed’s first rate cut.
Mainland China
▶Neutral
Despite the recent policy stimulus, we expect market volatility and mixed investor sentiment to persist until more policy clarity is provided. We prefer Chinese internet leaders, quality SOEs and resilient consumer stocks.
India
▲Overweight
Double-digit earnings growth expectations, high ROEs and strong domestic investor flows continue to support Indian equities. We prefer large-cap stocks in the financials, consumer discretionary and industrials sectors.
Hong Kong SAR
▶Neutral
While we look for more evidence of a meaningful improvement in the fundamental outlook and corporate earnings, we see opportunities in the insurance and telecom sectors, which are expected to perform well in the global rate-cutting cycle.
Singapore
▲Overweight
Singapore’s large REITs sector should benefit from the global rate-cutting cycle. The country’s 4.9% dividend yield (the highest in the region) is also an attraction as the search for yield may intensify.
South Korea
▶↓ Neutral
Although the global AI-driven investment boom, the “Corporate Value-Up Programme” and attractive valuations remain key drivers for growth, South Korean stocks are vulnerable to tariff risks, so we downgrade them to neutral.
Taiwan Region
▶Neutral
While the AI boom and strong demand for semiconductors are positive for the equity market, valuations remain expensive.
Government bonds (6-month view)
Developed markets (DM)
▼Underweight
Although market expectations for a soft landing have recently pushed up government bond yields, they remain on a downward trend as interest rates fall. We are neutral on most DM government bonds but underweight Japanese government bonds.
United States
▶Neutral
US 10-year Treasury yield has surged amid stronger-than-expected economic data, which led to markets repricing for slower Fed rate cuts. We remain neutral on Treasuries and stick with our 5-7 year duration target.
United Kingdom
▶Neutral
We remain neutral on gilts and focus on locking in attractive yields now. We believe the Bank of England may cut rates more than markets currently price in but note that uncertainty around the budget can lead to some volatility for gilts.
Eurozone
▶Neutral
We expect a steady easing cycle with a 0.25% rate cut at each ECB meeting from now through April 2025. Absolute yields remain less attractive relative to other government bond markets, but we still lock in yields at the current levels.
Japan
▼Underweight
We expect the Bank of Japan to continue with its policy normalisation from a highly accommodative stance and deliver the next hike in Q1 2025, followed by another 0.25% hike in Q3. Japanese government bond yields remain unattractive.
Emerging Markets (Local currency)
▶Neutral
More EM rate cuts and the search for carry should support better total returns. We favour Indian and Indonesian local currency debt.
Emerging Markets (Hard currency)
▶Neutral
We still find yields generally appealing but remain selective and focus on quality issuers.
Corporate bonds (6-month view)
Global investment grade (IG)
▶↓ Neutral
As credit spreads are relatively tight, we foresee reduced scope for price gains and downgrade investment grade to neutral.
USD investment grade (IG)
▶↓ Neutral
We downgrade US investment grade to neutral due to tight credit spreads and limited upside price gains .
EUR and GBP investment grade (IG)
▲Overweight
We prefer high-quality credit over sovereign debt, which still offers attractive absolute yields compared to historical levels. There is also more scope for central banks to provide support through rate cuts, so we remain overweight.
Asia investment grade (IG)
▶↓ Neutral
Following the downgrade of global investment grade, we also move Asian investment grade to a neutral position and remain our preference for Asian financials, quality Chinese SOEs and TMT (technology, media and telecom) issuers.
Global high-yield (HY)
▶Neutral
Credit spreads are broadly tight, so we prefer quality credit over high yield, as they offer a better risk-adjusted reward. High yield bonds are also more sensitive to market uncertainties.
US high-yield (HY)
▶Neutral
Despite low defaults and manageable refinancing risk, the risk premia of US high yield is too low versus investment grade.
EUR and GBP high-yield (HY)
▶Neutral
We maintain our focus on high quality and spreads in high yield remain tight compared to historical averages, so are less attractive.
Asia high-yield (HY)
▶Neutral
We continue to prefer quality bonds over high yield in Asia given the volatility of interest rates and relative valuations of high yield.
Commodities (6-month view)
Gold
▲↑ Overweight
Higher bond yields and a stronger USD are obstacles for gold but we expect to see structural demand amid global uncertainties over the short term, so move gold up to an overweight position.
Oil
▶Neutral
While geopolitics provide support for oil, spare capacity and relatively weak demand limit the upside.
Sector Views
Global and regional sector views based on a 6-month horizon
Consumer Discretionary
Ongoing weak discretionary spending trends are impacting Q3 results across many categories, from luxury to autos as consumers become more selective. After a strong summer, hospitality and tourism are seeing signs of cooling demand. Home appliance demand remains subdued pending a recovery in home sales. European auto companies are struggling from falling EV demand and intense Asian competition.
Global
▶ Neutral
US
▶ Neutral
Europe
▶ Neutral
Asia
▶ Neutral
Financials
Globally and in the US, the sector continues to benefit from an improving economic backdrop while interest rates look set to decline slowly with a modest impact on earnings. Capital market activity has picked up. Regional banks with significant exposure to the real estate sector and loans remain an area of concern. Adverse weather events are weighing on the insurance and re-insurance segments.
Global
▲ Overweight
US
▲ Overweight
Europe
▶ Neutral
Asia
▶ Neutral
Industrials
We expect a pick-up in new orders in Q4 and a re-rating of earnings to ease valuations. Asian industrials are showing tentative signs of slowly improving fundamentals. Medium term, we remain positive on the sector as government policy remains supportive in China, Europe and, especially, the US where the Inflation Reduction Act (IRA) and CHIPS Act are driving significant investments in new production capacity and infrastructure.
Global
▲ Overweight
US
▲ Overweight
Europe
▶ Neutral
Asia
▲ Overweight
Information Technology
Tech stocks have mainly rebounded as sector momentum broadens out. AI-enabled products and services are helping companies seek productivity gains and competitive differentiation. The next wave of AI development should benefit digital infrastructure companies focused on cloud, data centres, software and cooling technologies.
Global
▲ Overweight
US
▲ Overweight
Europe
▲ Overweight
Asia
▲ Overweight
Communications Services
The US Communications sector continues to deliver above-average earnings growth for this year as fundamentals and attractive prices continue to attract investors. In Asia, the stabilising regulatory environment and appealing valuations offer an attractive risk-return profile. In Europe, the telecom services sector struggles with intense competition and high investment costs, but further consolidation is expected to reshape the industry dynamics.
Global
▲ Overweight
US
▲ Overweight
Europe
▶ Neutral
Asia
▲ Overweight
Materials
Copper prices remain the bright spot in the commodity markets on rising renewables, electrical and digital infrastructure demand plus some strategic inventory building in China. Iron ore, steel and EV battery materials remain lacklustre. M&A activity has sparked interest in the miners. Chemical stocks remain range-bound while chemical business remains subdued.
Global
▶ Neutral
US
▶ Neutral
Europe
▶ Neutral
Asia
▶ Neutral
Real Estate
In Asia, valuations appear to have stabilised in mainland China and Hong Kong while other markets in the region are either stable or improving. Globally, there are tentative signs of improving sentiment as markets anticipate lower interest rates and signs of a better pricing environment.
Global
▼ Underweight
US
▼ Underweight
Europe
▶ Neutral
Asia
▶ Neutral
Consumer Staples
Strong competition and consumers trading down have created a weak pricing environment for companies in many markets. As a result, Q2 sales results were generally disappointing with margins also squeezed by continuing wage inflation. The sector is trading in line with historical valuations limiting potential upside.
Global
▶ Neutral
US
▶ Neutral
Europe
▶ Neutral
Asia
▲ Overweight
Energy
Low valuations, strong cashflow and high dividends appear to be insufficient to change sentiment towards the sector as energy prices remain range-bound. On a seasonally-adjusted basis, supplies appear plentiful and inventories are adequate, supported by the relatively mild winter in Europe. In Q4, energy prices may not benefit from geopolitical uncertainties as they have over the last two years.
Global
▶ Neutral
US
▶ Neutral
Europe
▲ Overweight
Asia
▶ Neutral
Healthcare
New product launches, a less hostile pricing environment and the ebbing wave of major product patent expirations should help lift the sector after a period of under-performance. Healthcare sales growth should start to benefit from easier YoY comparables while new pharma products should lift sentiment and expectations. In Asia, valuations remain high, trading well above historical levels.
Global
▲ Overweight
US
▲ Overweight
Europe
▲ Overweight
Asia
▼ Underweight
Utilities
Reported earnings and sales continue to surprise positively with some companies raising guidance on robust demand from data centres and other related AI activities. The momentum of renewable projects continues to accelerate. Interest rate cuts should provide a tailwind and improve sentiment further. Utilities typically benefit as interest rates fall and investors look to high dividend-paying stocks.
Global
▲ Overweight
US
▶ Neutral
Europe
▲ Overweight
Asia
▲ Overweight
Disclaimer
This document or video is prepared by The Hongkong and Shanghai Banking Corporation Limited (‘HBAP’), 1 Queen’s Road Central, Hong Kong. HBAP is incorporated in Hong Kong and is part of the HSBC Group. This document or video is distributed and/or made available by HSBC Bank Canada (including one or more of its subsidiaries HSBC Investment Funds (Canada) Inc. (“HIFC”), HSBC Private Investment Counsel (Canada) Inc. (“HPIC”) and HSBC InvestDirect division of HSBC Securities (Canada) Inc. (“HIDC”)), HSBC Bank (China) Company Limited, HBAP, HSBC Bank (Singapore) Limited, HSBC Bank Middle East Limited (UAE), HSBC UK Bank Plc, HSBC Bank Malaysia Berhad (198401015221 (127776-V))/HSBC Amanah Malaysia Berhad (20080100642 1 (807705-X)), HSBC Bank (Taiwan) Limited, HSBC Bank plc, Jersey Branch, HSBC Bank plc, Guernsey Branch, HSBC Bank plc in the Isle of Man, HSBC Continental Europe, Greece, The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India), HSBC Bank (Vietnam) Limited, PT Bank HSBC Indonesia (HBID), HSBC Bank (Uruguay) S.A. (HSBC Uruguay is authorised and oversought by Banco Central del Uruguay), HBAP Sri Lanka Branch, The Hongkong and Shanghai Banking Corporation Limited – Philippine Branch, HSBC Investment and Insurance Brokerage, Philippines Inc, and HSBC FinTech Services (Shanghai) Company Limited and HSBC Mexico, S.A. Multiple Banking Institution HSBC Financial Group (collectively, the “Distributors”) to their respective clients. This document or video is for general circulation and information purposes only.
The contents of this document or video may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. This document or video must not be distributed in any jurisdiction where its distribution is unlawful. All non-authorised reproduction or use of this document or video will be the responsibility of the user and may lead to legal proceedings. The material contained in this document or video is for general information purposes only and does not constitute investment research or advice or a recommendation to buy or sell investments. Some of the statements contained in this document or video may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. HBAP and the Distributors do not undertake any obligation to update the forward-looking statements contained herein, or to update the reasons why actual results could differ from those projected in the forward-looking statements. This document or video has no contractual value and is not by any means intended as a solicitation, nor a recommendation for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The views and opinions expressed are based on the HSBC Global Investment Committee at the time of preparation and are subject to change at any time. These views may not necessarily indicate HSBC Asset Management‘s current portfolios’ composition. Individual portfolios managed by HSBC Asset Management primarily reflect individual clients’ objectives, risk preferences, time horizon, and market liquidity.
The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Past performance contained in this document or video is not a reliable indicator of future performance whilst any forecasts, projections and simulations contained herein should not be relied upon as an indication of future results. Where overseas investments are held the rate of currency exchange may cause the value of such investments 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 some established markets. Economies in emerging markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade. Investments are subject to market risks, read all investment related documents carefully.
This document or video provides a high level overview of the recent economic environment and has been prepared for information purposes only. The views presented are those of HBAP and are based on HBAP’s global views and may not necessarily align with the Distributors’ local views. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. It is not intended to provide and should not be relied on for accounting, legal or tax advice. Before you make any investment decision, you may wish to consult an independent financial adviser. In the event that you choose not to seek advice from a financial adviser, you should carefully consider whether the investment product is suitable for you. You are advised to obtain appropriate professional advice where necessary.
The accuracy and/or completeness of any third-party information obtained from sources which we believe to be reliable might have not been independently verified, hence Customer must seek from several sources prior to making investment decision.
Important Information about HSBC Global Asset Management (Canada) Limited (“AMCA”)
HSBC Asset Management is a group of companies, including AMCA, that are engaged in investment advisory and fund management activities, which are ultimately owned by HSBC Holdings plc. AMCA is a wholly owned subsidiary of, but separate entity from, HSBC Bank Canada.
Important Information about HSBC Investment Funds (Canada) Inc. (“HIFC”)
HIFC is the principal distributor of the HSBC Mutual Funds and offers the HSBC Mutual Funds and/or the HSBC Pooled Funds through the HSBC World Selection® Portfolio service. HIFC is a subsidiary of AMCA, and indirect subsidiary of HSBC Bank Canada, and provides its products and services in all provinces of Canada except Prince Edward Island. Mutual fund investments are subject to risks. Please read the Fund Facts before investing.
®World Selection is a registered trademark of HSBC Group Management Services Limited.
Important Information about HSBC Private Investment Counsel (Canada) Inc. (“HPIC”)
HPIC is a direct subsidiary of HSBC Bank Canada and provides services in all provinces of Canada except Prince Edward Island. The Private Investment Counsel service is a discretionary portfolio management service offered by HPIC. Under this discretionary service, assets of participating clients will be invested by HPIC or its delegated portfolio manager, AMCA, in securities, including but not limited to, stocks, bonds, mutual funds, pooled funds and derivatives. The value of an investment in or purchased as part of the Private Investment Counsel service may change frequently and past performance may not be repeated.
Important Information about HSBC InvestDirect (“HIDC”)
HIDC is a division of HSBC Securities (Canada) Inc., a direct subsidiary of, but separate entity from, HSBC Bank Canada. HIDC is an order execution only service. HIDC will not conduct suitability assessments of client account holdings or of the orders submitted by clients or from anyone authorized to trade on the client’s behalf. Clients have the sole responsibility for their investment decisions and securities transactions.
The following statement is only applicable to HSBC Mexico, S.A. Multiple Banking Institution HSBC Financial Group with regard to how the publication is distributed to its customers: This publication is distributed by Wealth Insights of HSBC México, and its objective is for informational purposes only and should not be interpreted as an offer or invitation to buy or sell any security related to financial instruments, investments or other financial product. This communication is not intended to contain an exhaustive description of the considerations that may be important in making a decision to make any change and/or modification to any product, and what is contained or reflected in this report does not constitute, and is not intended to constitute, nor should it be construed as advice, investment advice or a recommendation, offer or solicitation to buy or sell any service, product, security, merchandise, currency or any other asset.
Receiving parties should not consider this document as a substitute for their own judgment. The past performance of the securities or financial instruments mentioned herein is not necessarily indicative of future results. All information, as well as prices indicated, are subject to change without prior notice; Wealth Insights of HSBC Mexico is not obliged to update or keep it current or to give any notification in the event that the information presented here undergoes any update or change. The securities and investment products described herein may not be suitable for sale in all jurisdictions or may not be suitable for some categories of investors.
The information contained in this communication is derived from a variety of sources deemed reliable; however, its accuracy or completeness cannot be guaranteed. HSBC México will not be responsible for any loss or damage of any kind that may arise from transmission errors, inaccuracies, omissions, changes in market factors or conditions, or any other circumstance beyond the control of HSBC. Different HSBC legal entities may carry out Wealth Insights internationally in accordance with local regulatory requirements. HSBC specifically prohibits the redistribution of this material and is not responsible for any actions that third parties may take to and/or with it.
Important Information about the Hongkong and Shanghai Banking Corporation Limited, India (“HSBC India”)
HSBC India is a branch of The Hongkong and Shanghai Banking Corporation Limited. HSBC India is a distributor of mutual funds and referrer of investment products from third party entities registered and regulated in India. HSBC India does not distribute investment products to those persons who are either the citizens or residents of United States of America (USA), Canada, Australia or New Zealand or any other jurisdiction where such distribution would be contrary to law or regulation.
The following statement is only applicable to HSBC Bank (Taiwan) Limited with regard to how the publication is distributed to its customers: HSBC Bank (Taiwan) Limited (“the Bank”) shall fulfill the fiduciary duty act as a reasonable person once in exercising offering/conducting ordinary care in offering trust services/ business. However, the Bank disclaims any guarantee on the management or operation performance of the trust business.
The following statement is only applicable to PT Bank HSBC Indonesia (“HBID”): PT Bank HSBC Indonesia (“HBID”) is licensed and supervised by Indonesia Financial Services Authority (“OJK”). Customer must understand that historical performance does not guarantee future performance. Investment product that are offered in HBID is third party products, HBID is a selling agent for third party product such as Mutual Fund and Bonds. HBID and HSBC Group (HSBC Holdings Plc and its subsidiaries and associates company or any of its branches) does not guarantee the underlying investment, principal or return on customer investment. Investment in Mutual Funds and Bonds is not covered by the deposit insurance program of the Indonesian Deposit Insurance Corporation (LPS).
THE CONTENTS OF THIS DOCUMENT OR VIDEO HAVE NOT BEEN REVIEWED BY ANY REGULATORY AUTHORITY IN HONG KONG OR ANY OTHER JURISDICTION.
YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE INVESTMENT AND THIS DOCUMENT OR VIDEO. IF YOU ARE IN DOUBT ABOUT ANY OF THE CONTENTS OF THIS DOCUMENT OR VIDEO, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.
© Copyright 2024. The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED.
No part of this document or video may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited.
Important information on sustainable investing
In broad terms “ESG and sustainable investing” products include investment approaches or instruments which consider environmental, social, governance and/or other sustainability factors to varying degrees. Certain instruments we classify as sustainable may be in the process of changing to deliver sustainability outcomes. There is no guarantee that ESG and Sustainable investing products will produce returns similar to those which don’t consider these factors. ESG and Sustainable investing products may diverge from traditional market benchmarks. In addition, there is no standard definition of, or measurement criteria for, ESG and Sustainable investing or the impact of ESG and Sustainable investing products. ESG and Sustainable investing and related impact measurement criteria are (a) highly subjective and (b) may vary significantly across and within sectors.
HSBC may rely on measurement criteria devised and reported by third party providers or issuers. HSBC does not always conduct its own specific due diligence in relation to measurement criteria. There is no guarantee: (a) that the nature of the ESG / sustainability impact or measurement criteria of an investment will be aligned with any particular investor’s sustainability goals; or (b) that the stated level or target level of ESG / sustainability impact will be achieved. ESG and Sustainable investing is an evolving area and new regulations are being developed which will affect how investments can be categorised or labelled. An investment which is considered to fulfil sustainable criteria today may not meet those criteria at some point in the future.