 Interest in countries positively impacted by falling oil & commodity prices is rising  EMEA equities and energy sector – most unloved by fund managers  Fund flows data continue to suggest fading interest in EM equities The recent turbulence in EM assets caused by the sudden and sharp fall in oil prices, along with the steep rise in the USD (and associated EM FX volatility), have dampened the risk appetite of investors. During November 2014, EM equities saw sizeable net outflows and our higher frequency (weekly) data suggest ongoing outflows from EM funds (see GEM funds flows, 19 December 2014). Other issues, such as Russia and the Greek election, aren’t helping EM sentiment either, leading to 2014 annual outflows (based on weekly data) for EM equity funds to outpace those in 2013. Global fund managers have reacted to this turbulence by reducing their active weights in EM equities, a trend observed through 2014 (see bottom chart on page 12). By EM region, GEM fund managers are at their most underweight EMEA equities in two years with fund flows plummeting. By country, GEMs equity fund managers have significantly reduced their exposure to countries including Qatar, UAE and Russia as oil prices have fallen. At the sector level, Energy funds posted their highest outflows in November (see bottom chart on page 4). However, countries that are positively impacted by falling oil and commodity prices are seeing rising interest (see charts below). Equity Strategy Global Emerging Markets Monthly GEMs equity flows Of oil and commodity-related themes John Lomax* Head of Global Emerging Market Equity Strategy HSBC Bank plc +44 20 7992 3712 john.lomax@hsbcib.com Santoshkumar Chandrasekar* Associate Bangalore View HSBC Global Research at http://www.research.hsbc.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations Issuer of report: HSBC Bank plc 5 January 2015Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it Countries positively** and negatively*** impacted by falling oil and commodity prices: active allocations by GEMs funds* and cumulative flows into country dedicated funds -0.8-0.7-0.6-0.5-0.4-0.3-0.2-0.1Jan-10Oct -10Jul-11Apr-12Jan-13Oct -13Jul-14Positively impacted**Negativ ely im pac ted** * -15.0-10.0-5.00.05.010.015.0Jan-10 Oct-10Jul-11Apr-12Jan-13 Oct-13Jul-14Positively impacted**Negativ ely im pac ted** *USDbn Notes: *active weights may not sum to 0 due to off-benchmark positions of the GEMs funds. **Average for active weights (and sum for the fund flows) of China, Czech Republic, Egypt, Greece, Hungary, India, Philippines, Poland, South Korea, Taiwan, Thailand and Turkey. *** Average for active weights (and sum for the fund flows) of Brazil, Chile, Colombia, Indonesia, Malaysia, Mexico, Peru, Russia and South Africa Source: EPFR Global, HSBC abc 2 Equity Strategy Global Emerging Markets 5 January 2015 Funds flows 3 Cross-sectional comparison of Flow of Funds (% of AuM) 4 Monthly Flow (% of AuM) 5 Cumulative flows to EM and DM equity funds (% of AuM) 6 Cumulative flows to EM and DM equity funds split by ETFs and non-ETFs (% of AuM) 6 Cumulative flows into EM regional equity funds (% of AuM) 7 Cumulative flows into EM regional equity funds split by ETFs and non-ETFs (% of AuM) 7 AuM of EM regional equity funds 8 AuM of EM regional equity funds split by ETFs and non-ETFs 8 GEM fund positioning 10 GEM Equity Fund Allocations 12 CEEMEA 13 Russia 14 South Africa 14 Turkey 15 Egypt 15 Poland 16 Hungary 16 Czech Republic 17 Greece 17 Qatar 18 UAE 18 LatAm 19 Brazil 20 Mexico 20 Chile