For Professional Clients only

China Unleashed

Chinese Equity ETFs

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China has grown over the years to become the world’s second largest economy, accounting for around one fifth of the global GDP. Its dominance in the global economic landscape is also reflected in the size of its equity markets: the market capitalisation of China’s onshore equities’ amounts to USD 12.7tn3, making it second only to the US in the global pecking order.

Despite its well-recognised growth potential and the significant strides China has made in recent years to open up its markets and become better integrated with the global financial system, its equity markets remain under-represented in key global benchmarks.

In 2018, index providers, such as MSCI and FTSE, began recognising China’s deepening capital market reforms by allowing onshore equities into their widely tracked indices, supporting China’s efforts to attract foreign investments.

Going forward, we expect a near-constant trickle of incremental market reforms as China continues to internationalise its markets and journey its way to an eventual full inclusion in key equity indices and greater allocation in global investors’ portfolios.

The decision to invest in China ultimately depends on investors’ conviction on the Chinese economy, reforms and capital markets over the long term. Now that both MSCI and FTSE have started adding China A in their global benchmarks, investors worried about China’s investability and future may need to change their strategic asset allocation benchmarks to avoid taking additional exposure to the country. On the other hand, investors who are comfortable with an increased weight of Chinese assets in their benchmarks – or those who want to seize the opportunity to increase their exposures further – should act now and select the right tools to adjust their allocation.

This is why we offer the HSBC MSCI China UCITS ETF and the HSBC MSCI China A Inclusion ETF, giving investors simple and cost-efficient access to these assets.

Should China be a part of your portfolio?

Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and not guaranteed in any way. HSBC Global Asset Management accepts no liability for any failure to meet such forecast, projection or target.1. Source: National Bureau of Statistics of China, as at December 2020.2. Source: Bloomberg, as at January 2021.3. Source: Shanghai Stock Exchange, Shenzen Stock Exchange, as at 13 January 2021.

Chineseeconomy GDP is USD 15.7 trillion1

Estimates put Chinese economic growth at 8.2% in 20212

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The A-share market has a relatively low correlation with its developed and emerging market peers, as the domestically-traded market has been largely closed to foreign investors in the past. Chinese equities have also displayed the ability to shrug off negative headlines on the domestic and external front. Markets have advanced despite concerns over the ongoing trade dispute and slowing economic growth.

Chinese equitiesFrom niche to mainstream

Shortly after including China A-shares in some of its most widely-tracked benchmarks for the first time in 2018, MSCI, in February 2019, decided to step on the accelerator and increase China’s weighting in its key indices. They officially increased the index inclusion factor of all China A large-cap shares from 5% to 10% in May 2019 and increased the opportunity set by adding ChiNext Large Cap shares with a 10% inclusion factor. The August 2019 round saw the inclusion factor of more than 200 China A-shares increased to 15% and bumped up the A-share weighting in MSCI Emerging Markets to over 2.1%. The MSCI three-step inclusion eventually increased the weight of China A-shares to 4.0% of the MSCI Emerging Markets Index in November 2019.

FTSE Russell, another major index provider, started incorporating China A-shares in a three-step process that was completed in March 2020. In all, more than a thousand stocks traded on the Shanghai and Shenzhen exchanges were brought into the FTSE indices, with China A-shares representing approximately 5%3 of the FTSE Emerging Index.

Growing presence in global indices

1. Source: MSCI, as at 31 December 2020. Others include Brazil, South Africa, Russia, Mexico, etc.2. Source: MSCI, as at 31 December 2020. 3. Source: FTSE Russell, as at 31 December 2020.

Source: Bloomberg and HSBC Global Asset Management. Correlation calculated using weekly returns in local currency from January 2011 to January 2021. Past performance is not indicative of future performance. For illustrative purposes only.

The diversification argument

China Offshore29.5%

Korea13.5%

Taiwan12.8%

India9.2%

China A4.8%

Others30.2%

P-Chip33.0%

ADRs30.7%

H Shares16.7%

A Shares12.3%

Red Chip6.3%

B Shares0.9%

MSCI China A Onshore S&P500 Stoxx 50 Nikkei 225

MSCI AC World MSCI EM Hang Seng

MSCI China A Onshore 1.00

S&P500 0.29 1.00

Stoxx 50 0.24 0.75 1.00

Nikkei 225 0.27 0.63 0.67 1.00

MSCI AC World 0.34 0.96 0.84 0.70 1.00

MSCI EM 0.43 0.70 0.69 0.58 0.84 1.00

Hang Seng 0.51 0.56 0.58 0.58 0.70 0.88 1.00

MSCI Emerging Markets Index1 MSCI China Index2

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Investment objective

The fund seeks to replicate the performance of the MSCI China Index while minimising as far as possible the tracking error between the Fund’s performance and that of the Index. The Index is a market-capitalisation weighted index designed to measure the performance of the largest Chinese companies.

Benchmark MSCI China Index Net Total Return (NDEUCHF)

OCF 0.30%

Registration BE, CH, DE, DK, ES, FI, FR, IE, IT, LU, NL, PT, SE, SG, UK

Listings/Ticker

London Stock ExchangeHMCD LN (USD)HMCH LN (GBP)

Borsa ItalianaHMCH IM (EUR)

EuronextCNY FP (EUR)

XetraH4ZP GY (EUR)

SIX SwissHMCH SW (USD)

BIVAHMCDN MM (MXN)

Launch date 26 January 2011

ISIN IE00B44T3H88

Base currency USD

Fund domicile Ireland

UK reporting fund status (UKRS) Yes

Fund manager HSBC Global Asset Management (UK) Ltd

Assets under management USD 672.89m

Replication methodology Physical replication

Dividend treatment Distribution

Dividend Frequency Semi-annual

Simple solutions to access mainland China

Source: HSBC Global Asset Management, as at January 2021. AUM as at December 2020.

The HSBC MSCI China UCITS ETF and HSBC MSCI China A Inclusion UCITS ETF are quick and cost-efficient solutions, and can simply be added to existing allocations, meaning investors don’t have to reallocate.

HSBC MSCI China UCITS ETF

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Investment objective

The fund seeks to replicate the performance of the MSCI China A Inclusion Index while minimising as far as possible the tracking error between the Fund’s performance and that of the Index. The Index is designed to track the China A-Shares which are included in the MSCI Emerging Markets Index.

Benchmark MSCI China A Inclusion index Net Total Return (M1CNA)

OCF 0.30%

Registration AT, CH, DE, ES, FR, IE, IT, LU, NL, PT, SE, SG, UK

Listings / Ticker

London Stock ExchangeHMCT LN (USD)HMCA LN (GBP)

Borsa ItalianaHMCA IM (EUR)

XetraH41K GY (EUR)

SIX SwissHMCT SW (USD)

Launch date 27 July 2018

ISIN IE00BF4NQ904

Base currency USD

Fund domicile Ireland

UK reporting fund status (UKRS) Yes

Fund manager HSBC Global Asset Management (UK) Ltd

Assets under management USD 37.09m

Replication methodology Physical replication

Dividend treatment Distribution

Dividend Frequency Quarterly

Source: HSBC Global Asset Management, as at 31 December 2020.

HSBC MSCI China A Inclusion UCITS ETF

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HSBC’s footprint and solid expertise in China: HSBC Jintrust in Shanghai has been

embedded within the China A-share market since 2007 and provides on-the-ground

expertise and insight.

Our mainland Chinese solutions rely on our longstanding expertise in China and Hong Kong – meaning they can take

advantage of our intellectual property.

HSBC Global Asset Management in Hong Kong understands and meets the

requirements of international institutional investors in terms of investment oversight,

risk management and reporting

HSBC has a long heritage of investing in Chinese Equity, and asset management experience with strong

relationships with brokers in Asia

Our expertise in China

HSBC for your China exposureHSBC has the widest and deepest presence in China among all foreign financial institutions, and is the leading foreign bank in China, having been actively participating in free trade zone developments.

HSBC China’s knowledge of mainland China and international banking expertise enable it to provide customers with a wide range of specialised services:

Comprehensive services and solutions to meet corporate, institutional and commercial banking needs in mainland China

Comprehensive RMB and foreign currency services to HSBC retail banking and wealth management clients in mainland China

Launched in Beijing, Guangzhou and Shanghai in March 2008, the Private Banking business provides a wide range of services for high net worth individuals and their families

Any performance information shown refers to the past and should not be seen as an indication of future returns.

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Our expertise in ETFs

Source: HSBC Global Asset Management, as at 31 December 2020.

30 Years

TransparencyFully transparent, with physical

replication, no securities lending

All constituents online

Competitive pricingThe ability to offer competitive

TER/OCF across our ETFs

Well resourced teamsDedicated ETF Sales and ETF

Capital Market teams on hand to help

Team of investment management professionals with a depth of

experience in index based investing

Robust trackingAll our funds are either physically replicated or physically optimised

Our conscientious and value-added approach to passive management

has enabled us to consistently produce returns that closely track that of the index, while remaining

within the target tracking tolerances

Strong relationship with administrator

Partnership with administrator and custodian

Strong NAV tolerance tools – more accurate valuations

Investment team oversight

HSBC Global Asset Management’s commitment to passive investing goes back to 1988, when we launched its first index tracker fund in the UK. We have been a leader in a number of the key passive trends, including managing exchange-traded funds since 2003, when we launched our first products in Hong Kong. In late 2009, we launched our first UCITS ETFs in Europe. We now have a range of 35 ETFs for a total of USD 12.9bn of assets under management.

Experience in managing Exchange Traded Funds

We continuously invest in and develop leading technology to support our investment processes and seize opportunities for our clients as they emerge. Our proprietary technology ensures the efficiency and accuracy of information – supporting consistent tracking and fund performance. We integrate technological developments into our investment platform, providing:

In-house trade algorithms and portfolio optimisation techniques,

Direct feeds of large pools of data,

Risk management coded and embedded across the platform at both pre- and post-trade levels.

Our proprietary technology has been designed by our investment teams to meet our rigorous and robust requirements, ensuring cost savings and better performance outcomes for both our funds and our investors.

Investing in proprietary technology

The management and control of a range of risks are key to our investment process – not only during portfolio construction but throughout the life-cycle of the portfolio. Risk management is central to our investment process both before and after investment decisions are made.

Our ongoing risk management covers investment operating parameters, tracking error risk, counterparty risk, exposure risk and the accuracy of our analyses of performance attributions and exposures to different parts of the underlying market.

We also manage and implement the impact of index rebalancing, currency exchange rate exposures and, corporate action events such as mergers and acquisitions, stock splits, rights issues, spin-offs or the receipt of interest and dividends.

As a bank-owned asset manager, we are subject to very robust risk parameters and strict governance rules. Our risk management division also benefits from its alignment and operation within the global framework of HSBC Group – this facilitates the sharing of best practice, controls and ideas while also ensuring the independence of our risk management division.

Enhanced risk management, control and monitoring

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Source: HSBC Global Asset Management, as at 31 December 2020.

Fund name ISIN Base currency

TER/OCF

AUM USDm

Dividend frequency

Replication method

Developed markets – regional exposure

HSBC MSCI World UCITS ETF IE00B4X9L533 USD 0.15% 2,363.6 Quarterly Optimisation

HSBC MSCI Europe UCITS ETF IE00B5BD5K76 EUR 0.10% 21.1 Semi-annual Physical replication

HSBC EURO STOXX 50 UCITS ETF IE00B4K6B022 EUR 0.05% 200.4 Semi-annual Physical replication

HSBC MSCI Pacific ex Japan UCITS ETF IE00B5SG8Z57 USD 0.15% 229.5 Semi-annual Physical replication

Developed markets – single country exposure

HSBC S&P 500 UCITS ETF IE00B5KQNG97 USD 0.09% 4,894.9 Semi-annual Physical replication

HSBC MSCI USA UCITS ETF IE00B5WFQ436 USD 0.30% 33.4 Semi-annual Physical replication

HSBC FTSE 100 UCITS ETF IE00B42TW061 GBP 0.07% 494.8 Semi-annual Physical replication

HSBC FTSE 250 UCITS ETF IE00B64PTF05 GBP 0.35% 65.9 Semi-annual Physical replication

HSBC MSCI Canada UCITS ETF IE00B51B7Z02 USD 0.35% 30.9 Semi-annual Physical replication

HSBC MSCI Japan UCITS ETF IE00B5VX7566 USD 0.19% 240.2 Semi-annual Physical replication

Developed markets – property exposure

HSBC FTSE EPRA/NAREIT Developed UCITS ETF IE00B5L01S80 USD 0.40% 158.8 Quarterly Physical replication

Global markets – broad exposure

HSBC Multi Factor Worldwide Equity UCITS ETF IE00BKZGB098 USD 0.25% 1,111.3 Quarterly N/A (active)

Emerging markets – regional exposure

HSBC MSCI Emerging Markets UCITS ETF IE00B5SSQT16 USD 0.15% 848.6 Quarterly Optimisation

HSBC MSCI EM Far East UCITS ETF IE00B5LP3W10 USD 0.60% 23.8 Semi-annual Optimisation

HSBC MSCI AC Far East ex Japan UCITS ETF IE00BBQ2W338 USD 0.45% 602.3 Accumulating Physical replication

HSBC MSCI EM Latin America UCITS ETF IE00B4TS3815 USD 0.60% 23.8 Quarterly Physical replication

HSBC Global Asset Management ETF range

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Source: HSBC Global Asset Management, as at 31 December 2020.

Fund name ISIN Base currency

TER/OCF

AUM USDm

Dividend frequency

Replication method

Emerging markets – single country exposure

HSBC MSCI Brazil UCITS ETF IE00B5W34K94 USD 0.60% 55.4 Semi-annual Physical replication

HSBC MSCI China UCITS ETF IE00B44T3H88 USD 0.30% 672.9 Semi-annual Physical replication

HSBC MSCI China A Inclusion UCITS ETF IE00BF4NQ904 USD 0.30% 37.1 Quarterly Physical replication

HSBC MSCI Indonesia UCITS ETF IE00B46G8275 USD 0.60% 53.2 Semi-annual Physical replication

HSBC MSCI Korea Capped UCITS ETF IE00B3Z0X395 USD 0.60% 34.7 Semi-annual Physical replication

HSBC MSCI Malaysia UCITS ETF IE00B3X3R831 USD 0.60% 5.1 Semi-annual Physical replication

HSBC MSCI Mexico Capped UCITS ETF IE00B3QMYK80 USD 0.60% 12.3 Semi-annual Physical replication

HSBC MSCI Russia Capped UCITS ETF IE00B5LJZQ16 USD 0.60% 107.2 Semi-annual Physical replication

HSBC MSCI South Africa Capped UCITS ETF IE00B57S5Q22 USD 0.60% 3.4 Semi-annual Physical replication

HSBC MSCI Taiwan Capped UCITS ETF IE00B3S1J086 USD 0.60% 20.8 Semi-annual Physical replication

HSBC MSCI Turkey UCITS ETF IE00B5BRQB73 USD 0.60% 13.1 Semi-annual Physical replication

Sustainable ETFs

HSBC Europe Sustainable Equity UCITS ETF IE00BKY55W78 EUR 0.15% 21.1 Accumulating Physical replication

HSBC Japan Sustainable Equity UCITS ETF IE00BKY55S33 USD 0.18% 22.6 Accumulating Physical replication

HSBC USA Sustainable Equity UCITS ETF IE00BKY40J65 USD 0.12% 148.4 Accumulating Physical replication

HSBC Developed World Sustainable Equity UCITS ETF IE00BKY59K37 USD 0.18% 42.5 Accumulating Physical

replication

HSBC Asia Pacific ex Japan Sustainable Equity UCITS ETF IE00BKY58G26 USD 0.25% 35.7 Accumulating Physical

replication

HSBC Emerging Market Sustainable Equity UCITS ETF IE00BKY59G90 USD 0.18% 57.7 Accumulating Physical

replication

HSBC UK Sustainable Equity UCITS ETF IE00BKY53D40 GBP 0.12% 2.3 Accumulating Physical replication

Thematic ETFs

HSBC Hang Seng TECH UCITS ETF IE00BMWXKN31 HKD 0.50% 31.16 Accumulating Physical replication

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Important information For Professional Clients only and should not be distributed to or relied upon by Retail Clients.The material contained herein is for information only and does not constitute legal, tax or investment advice or a recommendation to any reader of this material to buy or sell investments. You must not, therefore, rely on the content of this document when making any investment decisions. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe to any investment. Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is indicative only and not guaranteed in any way. HSBC Global Asset Management (UK) Limited accepts no liability for any failure to meet such forecast, projection or target.HSBC ETFs are sub-funds of HSBC ETFs plc (“the Company”), an investment company with variable capital and segregated liability between sub-funds, incorporated in Ireland as a public limited company, and is authorised by the Central Bank of Ireland. The company is constituted as an umbrella fund, with segregated liability between sub-funds. Shares purchased on the secondary market cannot usually be sold directly back to the Company. Investors must buy and sell shares on the secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current Net Asset Value per share when buying shares and may receive less than the current Net Asset Value per Share when selling them. UK based investors in HSBC ETFs plc are advised that they may not be afforded some of the protections conveyed by the Financial Services and Markets Act (2000), (“the Act”). The Company is recognised in the United Kingdom by the Financial Conduct Authority under section 264 of the Act. The shares in HSBC ETFs plc have not been and will not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to its jurisdiction, or to United States Persons. Affiliated companies of HSBC Global Asset Management (UK) Limited may make markets in HSBC ETFs plc. All applications are made on the basis of the current HSBC ETFs plc Prospectus, relevant Key Investor Information Document (“KIID”), Supplementary Information Document (SID) and Fund supplement, and most recent annual and semi-annual reports, which can be obtained upon request free of charge from HSBC Global Asset Management (UK) Limited, 8 Canada Square, Canary Wharf, London, E14 5HQ. UK, or from a stockbroker or financial adviser. The indicative intra-day net asset value of the sub-funds is available on at least one major market data vendor terminal such as Bloomberg, as well as on a wide range of websites that display stock market data, including www.reuters.com. Investors and potential investors should read and note the risk warnings in the prospectus, relevant KIID and Fund supplement (where available) and additionally, in the case of retail clients, the information contained in the supporting SID.The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities or any index on which such funds or securities are based. The Supplement to the Prospectus contains a more detailed description of the limited relationship MSCI has with HSBC ETFs plc and any related funds. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Where overseas investments are held the rate of currency exchange may also cause the value of such investments to fluctuate. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Stock market investments should be viewed as a medium to long term investment and should be held for at least five years. Any performance information shown refers to the past and should not be seen as an indication of future returns. This sub-fund invests predominantly in one geographic area; therefore any decline in the economy of this area may affect the prices and value of the underlying assets. Markets in some countries are described as 'emerging markets'. Some of these may involve a higher risk than where investment is within a more established market. These risks include the possibility of failed or delayed settlement, registration and custody of securities and the level of investor protection offered. To help improve our service and in the interests of security we may record and/or monitor your communication with us. HSBC Global Asset Management (UK) Limited provides information to Institutions, Professional Advisers and their clients on the investment products and services of the HSBC Group. Approved for issue in the UK by HSBC Global Asset Management (UK) Limited, who are authorised and regulated by the Financial Conduct Authority. In Israel, HSBC Bank plc (Israel Branch) is regulated by the Bank of Israel. This document is only directed in Israel to qualified investors (under the Investment advice, Investment marketing and Investment portfolio management law-1995) of the Israeli Branch of HBEU for their own use only and is not intended for distribution.www.assetmanagement.hsbc.com/uk Copyright © HSBC Global Asset Management (UK) Limited 2021. All rights reserved. XB-1254 EXP: 30/09/2021

Key risksThe value of an investment in the portfolios and any income from them can go down as well as up and as with any investment you may not receive back the amount originally invested. Concentration Risk: The Fund may be concentrated in a limited number of securities, economic sectors and/or countries. As a result, it may be more

volatile and have a greater risk of loss than more broadly diversified funds Counterparty Risk: The possibility that the counterparty to a transaction may be unwilling or unable to meet its obligations Derivatives Risk: Derivatives can behave unexpectedly. The pricing and volatility of many derivatives may diverge from strictly reflecting the pricing or

volatility of their underlying reference(s), instrument or asset Emerging Markets Risk: Emerging markets are less established, and often more volatile, than developed markets and involve higher risks, particularly

market, liquidity and currency risks Exchange Rate Risk: Changes in currency exchange rates could reduce or increase investment gains or investment losses, in some cases significantly Index Tracking Risk: To the extent that the Fund seeks to replicate index performance by holding individual securities, there is no guarantee that its

composition or performance will exactly match that of the target index at any given time (“tracking error”) Investment Fund Risk: Investing in other funds involves certain risks an investor would not face if investing in markets directly. Governance of underlying

assets can be the responsibility of third-party managers Investment Leverage Risk: Investment Leverage occurs when the economic exposure is greater than the amount invested, such as when derivatives are

used. A Fund that employs leverage may experience greater gains and/or losses due to the amplification effect from a movement in the price of the reference source

Liquidity Risk: Liquidity Risk is the risk that a Fund may encounter difficulties meeting its obligations in respect of financial liabilities that are settled by delivering cash or other financial assets, thereby compromising existing or remaining investors

Operational Risk: Operational risks may subject the Fund to errors affecting transactions, valuation, accounting, and financial reporting, among other things

Real Estate Investments Risk: Real estate and related investments can be negatively impacted by any factor that makes an area or individual property less valuable

ContactsFor more information, please contact us:

Email: etfcapmarkets@hsbc.com | etf.sales@hsbc.com

Website: https://www.etf.hsbc.com

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