HONG KONG MARK MCCOMBE, CHIEF EXECUTIVE - HONG KONG - HSBC GROUP
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HSBC Holdings plc
Hong Kong
Hong Kong
Mark McCombe, Chief Executive
www.hsbc.com
Forward-looking statements
This presentation and subsequent discussion may contain certain forward-looking
statements with respect to the financial condition, results of operations and business of the
Group. These forward-looking statements represent the Group’s expectations or beliefs
concerning future events and involve known and unknown risks and uncertainty that could
cause actual results, performance or events to differ materially from those expressed or
implied in such statements. Additional detailed information concerning important factors that
could cause actual results to differ materially is available in our Interim Report. Past
performance cannot be relied on as a guide to future performance.
This presentation contains non-GAAP financial information. Reconciliation of non-GAAP financial information to the most
directly comparable measures under GAAP can be found in HSBC’s 2010 Interim Report in the Operating and Financial
Review.
2Hong Kong’s outlook is better than ever…
Nominal GDP (USDbn) and GDP growth (%)1
• Sharp V-shaped recovery from crisis
7
300 7
– Allowing normalization at elevated levels
6.4
– Transitioning into sustainable growth - 6.5% real GDP growth in 6
5.4
Q210 2 250
229 5
– Mounting business confidence and buoyant domestic demand
215
207 209
• Sustained Mainland China recovery to counter-balance 200 190
4
any deterioration in the West
3
2.4
• Rise of Greater China bringing significant people, trade
150 2
and capital flow into HK
• RMB internationalization – HK as offshore RMB centre 1
100
0
(1)
50 (2.7)
(2)
0 (3)
2006 2007 2008 2009 2010e
Source:
[1] HSBC Global Research (nominal GDP)
[2] HSBC Global Research, Hong Kong Chartbook, 16 September 2010
3HSBC is the Largest and Leading Bank in Hong Kong
Well-Positioned to Capture Market Opportunities
No 1. in cards
No. 1 in No. 1 in life
No. 1 in MPF; 32 with 4.26m in
mortgages; 22 insurance; 26.7
Leading market share per cent market force; 47 per cent
per cent market per cent market
share3 share in
share1 share2
balances4
Leading mass affluent No. 1 in penetration into premium No. 1 in penetration into mid-market
and mid-market share banking segment (46 per cent)5 integrated accounts (49 per cent)5
Over half of CMB 50 per cent of new CMB
Leading SME and Over 350,000 SME
customers are accounts are mainland
cross-border bank customers
international Chinese companies
Best Domestic
Top-ranked in trade,
No. 1 in Asia-ex No. 1 in HKD Cash Led 9 of 13 RMB
cash management,
Japan bonds bonds since Management bond issuances
FX, investment
since 20067 20027 House in since 2007
banking6
Hong Kong6
Note:
(1) mReferral
(2) Office of the Commissioner of Insurance, H1 2010 (combined HSBC and Hang Seng share)
(3) Hong Kong Mandatory Provident Fund
(4) Hong Kong Monetary Authority Q1 2010
(5) HSBC Wealth Management Tracker, OracleAddedValue
(6) FinanceAsia 2010 4
(7) BloombergRise of Greater China
Significant Economic Benefits for Hong Kong
People Trade
China has over 9m mass affluent, growing at China is the largest exporting country
13% CAGR. 825k individuals of wealth over - USD1.2trn total exports in 2009
RMB10m - Will surge to around USD2.4trn in 2020
Spending power spilled over to HK Robust HK/China trade is robust
- 10.5m Mainland tourists to HK in 1H10 - 53% exports/44% imports of HK to/from China
- accounted for 30% of luxury retail sales# and - 51%/62% of HK re-exports to/from China
- 1 in 4 HK flats sold to Mainland buyers in
Jan – May 2010
China GDP
USD8.8trn GDP
in 2009, at 8.7%
growth
Capital Currency
China engages in active foreign asset Targeting full convertibility
acquisition and continued domestic
infrastructure spending Reserve currency?
Strong capital flow between China and HK RMB internationalization
- > 1/3 HK FDI originated from China in 2009
- 45% of overseas projects in China is HK related*
- 524 Mainland companies listed in HK (58% of
total market cap)
5
# in H1 2010 * World Trade OrganizationRise of Greater China
… and Significant Opportunities for Business
Opportunities for Hong Kong HSBC Strategic Positioning
•Estimated 12m mass affluent in
• HSBC is the leading bank in HK for
Mainland China by 2011
Greater China banking services
Rise of Wealth •560k+ potential new mass
•1st to open dedicated Non-Resident
affluent customers in Hong
Chinese (NRC) zones in HK
Kong2
•Close to 50% HK SMEs to hold
Increasing SME RMB accs in next 12 months1 •Dedicated propositions for China and
activity into/from HK based SMEs with China interest
•50% of new HK SME accounts (e.g. investment, trade)
China are PRC companies
•Dedicated staff and China Desk set up
Active FDI •> 50% HK MMEs plan to expand in HK/China targeting SOE/POEs 3
into China into China in the next two years1 •Played key role in capital raising
activities of PRC companies in HK
Notes:
(1) HSBC Small Business Confidence Monitor, July 2010
(2) Datamonitor 6
(3) POE – Privately-Owned Enterprise / SOE – State-Owned EnterpriseThe RMB Opportunity
Chronology of RMB Developments
RMB full current account convertibility
Dec 1996
Existing restrictions on capital account
Feb 2004 RMB Personal Business
Dec 2005 Designated Business Customers
July 2009 RMB Trade Settlement
RMB Investment and Insurance Products
July 2010
Access to RMB inter bank bond market
RMB Mini-QFII
??
RMB Securities, RMB Funds,RMB Delivered Forwards, RMB IPOs etc.
?? Hong Kong becomes an Offshore RMB Center
RMB fully convertible
< 2020 ??
RMB as Reserve Currency for overseas countries
7The RMB Opportunity
Hong Kong as the Dedicated RMB Offshore Centre
• Close ties with mainland China, both geographically and politically
• Strong international network
• Centre of Excellence for RMB product development
• Experience and knowledge has been built up
• Attracting international fund and trade flows – Over RMB30Bn RMB bonds issued in HK
RMB deposits, 2010
(RMBbn) RMB 103bn
100
RMB deposits in
Hong Kong surpassed
50
RMB100bn in Jul 2010
0
2004 2005 2006 2007 2008 2009 2010 Jun 2010 Jul
RMB trade settlement, 2010
(RMBbn)
1,000 14
Hong Kong as
500 7
pilot centre for RMB
internationalisation 0 0
Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10
No. of Renminbi trade settlement (Lhs)
Value of Renminbi trade settlement (Rhs)
Notes:
(1) HSBC Global Research
8The RMB Opportunity
Substitution or Incremental Business for Banks in Hong Kong?
Substitution Vs. Incremental
• Sustain and gain market share •Growth of Mainland China
Most products today are just a More customer growth (personal, corporate,
replica of the existing HKD/USD institutional) will be RMB related. More future
products. business will be RMB denominated.
The rationale is then to sustain
and gain market share. •HK as Offshore RMB Centre
Attract RMB trade flows and fund flows from
other countries globally, e.g., correspondent bank
relationships with overseas.
•Access to the Mainland financial market
Opportunities in interacting with the onshore RMB
financial market, e.g., bond investment,
interbank business.
9The RMB Opportunity
Forecast RMB potential
• 56% of exporters and importers in HK expect to settle
trade transactions in RMB by 2011 2
• 17 major markets in Asia-Pacific expect to increase
RMB trade activity by 2011 2
More than half of China’s total trade flows will be settled
in RMB by 2015, being primarily bilateral trade with
emerging markets 1
Hong Kong's RMB trade settlement volume will reach
RMB 2.2trn by 2020. This is the same size as Hong
Kong's total trade in all currencies today 1
2010 | 2011 | 2015| 2020|
Notes:
(1) HSBC in-house estimates 10
(2) HSBC Trade Confidence IndexHSBC will be a leader in RMB internationalization
• First foreign bank to settle cross-border RMB Trade in
Hong Kong & Macau
• First foreign bank to settle cross-border RMB Trade in
all ASEAN countries with HSBC presence
• First to issue RMB Bonds in Hong Kong
• First-in-the-market:
HSBC RMB Trade Finance Standard Rate: 3.88%
• >160,000 Commercial accounts with RMB capabilities
• First to launch RMB structured deposit
• Launched RMB insurance (one of the earliest in the market)
• First offshore RMB Certificate of Deposits
• First to complete transactions in all the 2nd batch provinces/cities in
China
• Only foreign bank market maker of RMB-Ringgit direct quotation
• RMB capability in 29 countries, across all continents
11Key Takeaways
Outlook for HK is as robust as ever ….
HSBC, as the largest and leading banking group in HK, is ideally positioned to capture all
market opportunities
Rise of Greater China and RMB internationalization will be the most significant
opportunities for HK going forward
HSBC is actively positioning our franchise for the future
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