The structured product is linked to the Solactive Luxury Dynamic Factors Index, which includes global stocks that have high exposures to the luxury consumption sector.
“The Luxury index sits within our theme of stocks benefiting from Asian discretionary spending,” said Justin Chan, head of Greater China of global markets for Asia-Pacific at HSBC, in a statement.
The index includes securities in industries and services such distilleries, golf courses, country clubs, jewellery and gems production, leather, handbags and luggage goods, luxury hotels and resorts, according to the Solactive website.
The final composition comprises the 20 highest ranked securities according to factors such as quality, momentum and a value filter, and the index is rebalanced quarterly.
Top holdings in the index are mainly European brands, and include Hermes, L’Oreal, Ferrari and LVMH Moet Hennessy Louis Vuitton, according to the index factsheet.
The bank’s research estimates that the luxury goods market in mainland China is likely to achieve 48% growth in 2021, doubling its overall share of the global luxury market in 2020, with further growth expected through to 2025.
HSBC plans to grow its product offerings, digital wealth capabilities and platforms across Asia and build up its wealth teams. The bank said last month that it will invest $3.5bn in the next five years to accelerate the expansion of its wealth and personal banking business in the region.
The bank will hire around 5,000 customer-facing staff, such as relationship managers, investment counsellors and specialists to boost distribution capabilities in Hong Kong, mainland China, and Singapore and develop new products for its high net worth and ultra-high net worth clients.
“We are also bullish on the luxury sector due to the likely consolidation seen in the industry and the use of more affordable online sales channels. Luxury as an investment theme is also poised to benefit from strong economic recovery led by Asian economies in the post-Covid-19 world,” said Chan.
CAPITAL PROTECTION
The Luxury index is designed using smart beta (or factor) investing, based on a rules-based approach focused on persistent sources of returns in the equity market, according to the statement.
It is calculated and administrated by Solactive AG, the third-party index administrator. HSBC is the global exclusive licensor of the index and its performance can be tracked on the Solactive website.
The euro-denominated index has generated a cumulative return of 369% since inception on 20 April 2007, according to the website.
The product is available to HSBC’s Jade clients (that is, those with at least $1m at HSBC) in in Hong Kong and as a shariah-compliant investment for HSBC Amanah clients in Malaysia. The notes will be denominated in renminbi in Hong Kong, with a minimum investment of RMB 500,000 ($76,845) and ringgit in Malaysia, with either fully or partially protected principal.
“The product enables investors to gain exposure to the [luxury consumer] sector, while maintaining a high level of capital protection,” said Maggie Ng, head of wealth and personal banking, Hong Kong, at HSBC.
The product has been available since last week, and has no upfront fee, an HSBC spokeswoman told FSA.
It will also be available in other wealth markets later this year, she said.
Top components of Solactive Luxury Dynamic Factors Index
