16 August 2023

Equity Strategy
The Flying Dutchman Asia

Bangladesh: Plenty of potential

 We believe Bangladesh deserves more investor attention, as Herald van der Linde*, CFA
Head of Equity Strategy, Asia Pacific
it resembles where India and Vietnam were a while back The Hongkong and Shanghai Banking Corporation Limited
[email protected]
 We see scope for more IPOs diversifying its index; its fast- +852 2996 6575

growing economy can support earnings growth and valuations Prerna Garg*
Associate, Equity Strategy
The Hongkong and Shanghai Banking Corporation Limited
 Challenges lie in bad loans, a volatile currency, and politics [email protected]
+852 9831 6901

Nishu Singla*
Why look at Bangladesh? True, the market is small and illiquid. But, like India two Associate
decades ago or Vietnam a decade ago, it offers prospects for significant long-term Bangalore

capital appreciation driven by earnings growth. The country’s GDP growth averaged
6.4% in the past decade – faster than most of Asia – and its GDP per capita ratio has * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is
not registered/ qualified pursuant to FINRA regulations
recently overtaken India’s. Bangladesh is one of Asia’s most dynamic long-term
demographic stories. It’s less correlated with global macro and equity themes than
Vietnam. Plus, there’s scope for more IPOs – there have been just four since 2020.

A big consumer market by 2030e. One of the most startling projections for the
country is that it is on track to become a major consumer market by 2030, on HSBC
estimates, ahead of Vietnam or the Philippines. That’s on top of rising foreign
investments, not just from garment makers, but also from Indian conglomerates and
global tech giants such as Samsung Electronics, as well as Chinese firms. Plus,
employment is rising, and there are healthy remittances and good exports.

Earnings set to grow c20% in the next three years. We construct our own market
earnings estimates and find the potential earnings story is strong. Banks stand to
benefit from rising credit growth fuelled by high infrastructure spending and capex by
firms setting up factories. Meanwhile, tech is likely to gain from a push to make
Bangladesh more digital, and there is an effort to increase exports from information
and communication technology ICT industries, up to USD5bn by 2025 from USD1.5bn
now. In terms of valuations, the DSE30 index is trading at a 12-month trailing PE of
14.4x, 4% below its long-term average. This index includes the 30 biggest companies,
which make up half its market cap. We list these on page 20.

Risks include rising inflation, floor price restrictions on stocks – which dent investor
confidence – a volatile currency, and potential political instability. Also, more than
50% of the population is under 25; Bangladesh therefore needs to invest in education
that better equips its people for skills-intensive jobs, so they don’t fall behind by
focusing on low-tech garment work.

Shaping the future

Nine key themes to guide your outlook
Download guide

Disclosures & Disclaimer Issuer of report: The Hongkong and Shanghai

Banking Corporation Limited
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. View HSBC Global Research at:
https://www.research.hsbc.com
 Equity Strategy ● Asia
16 August 2023

The equity story

 Bangladesh’s equity market has been largely flat y-t-d, held back by
a lack of IPOs and issues like floor price restrictions on stocks …
 … but we see plenty of potential based on fast GDP growth, rising
foreign investment, more IPOs, and other likely catalysts
 We spin through all the equity essentials, including valuations
and sectors

Bangladesh’s economy has boomed …

Here is an interesting fact – Bangladesh’s economy has grown every year since independence in
On track to be a middle
income nation by 2031
1971, with growth averaging 6% since 2010. Not bad. That makes it one of the fastest-growing
countries globally, on track to progress from the UN’s least developed countries group by 2026
and then become a middle income nation by 2031. A lot of this growth is driven by all the new and
planned bridges, roads and subways, making it easier to get around its cities and provinces, which
are scattered across rivers and islands.

None of this has come easily though after a tumultuous past. Today, Bengalis are largely split
between Bangladesh and the neighbouring Indian state of West Bengal. They retain much in
common, including language and culinary traditions. And just as recipes for Hilsa fish curry – beloved
by Bengalis in both locations – vary in the amount of turmeric, mustard oil and black cumin, so the
stock markets between Bangladesh and India share characteristics, while also having major
differences, which we detail in this report.

Before we take a deep dive into the stock market, we first take a look at Bangladesh’s economy,
which is currently undergoing restructuring as it adopts IMF proposals. These have come about
as the country’s foreign-currency reserves slumped in recent years due to rising import bills and
efforts to stem the decline in its currency, leading the IMF to step in with loans and specify that
further disbursements will depend on implementation of financial reforms.

These include ensuring the central bank pursues an independent monetary policy to help
reduce non-performing loans and spur climate change funding. The IMF also wants Bangladesh
to boost the share of its tax revenue by 0.5% of GDP annually for the next two fiscal years. And
it has been asked to focus on policies that enable the currency to trade more freely.

The good news is the last decade has shown a rise in entrepreneurial enterprise among
Entrepreneurial
Bangladeshis, with small rice farmers diversifying into other crops and the country experiencing a
boom in tech start-ups. Women play a major role in the country’s large garment business with female
labour participation rates rising from 30% in 2010 to 38% in 2022, one of the biggest jumps in Asia.

But as it is with preparing a spicy Hilsa fish curry, let’s start with the basics, the key ingredients
of Bangladesh’s stock market, such as market performance and its composition.

2
 Equity Strategy ● Asia
16 August 2023

Market performance and composition

Chart 1. Bangladesh’s DSEX is up 2% and Chart 2. Real estate and materials are the
the DSE30 down 1.5% y-t-d1 best performing sectors y-t-d
200 20%

180 15%
160
10%
140
5%
120

100 0%

80 -5%
Jan-13 Jan-15 Jan-17 Jan-19 Jan-21 Jan-23 RE MT CS FN CD EN CMS ID UT HC IT
DSEX DSE 30 Y-t-d performance
Note: Sector performance is based on bottom up market cap change of all DSE stocks (local currency
terms)
Key: ID = Industrials, MT = Materials, CMS = Communication Services, HC = Health Care, FN =
Financials, CS = Consumer Staples, CD = Consumer Discretionary, EN = Energy, UT = Utilities
Source: Refinitiv Datastream, HSBC Source: Bloomberg, HSBC

Dhaka’s broad-based stock exchange index (DSEX) is up 2% y-t-d after falling 9.6% in 2022.
This has been accompanied by a significant increase in average daily turnover from USD39m at
the start of the year to USD86m now. But that’s still low as turnover reached USD300m in 2021.
And among the sectors, Real Estate and Materials have been the best performing y-t-d while
Healthcare and IT have performed the worst.

Chart 3. Average daily turnover of DSE has Chart 4. Long-term prospects might be
increased significantly in 2023 y-t-d good insofar as Vietnam is a guide:
Bangladesh is where Vietnam was in 2016
250 65
60
200 55
TH
50
150 45
SG ID
40 VN
ADTV

100 35
30 BD
50 25
MY
20
VN (2016) PH
0 15
11 12 13 14 15 16 17 18 19 20 21 22 23 Mcap
1m ADTV USDm Mcap USDbn, rhs
Source: CEIC, HSBC Source: Bloomberg, HSBC

Today, floor prices are a major overhang for the market and are one of the reasons for the
Price floors in place
recent unimpressive market performance. The process of price discovery and the amount of
liquidity is a key risk for Bangladesh stocks. The local regulators – the Bangladesh Securities
and Exchange Commission (BSEC) – placed floor price restrictions2 on most stocks for the first
time in March 2020, meaning they could fall below a certain point, aimed at halting a major
decline in the indexes. These restrictions were lifted on 169 companies in December 2022 but
then reintroduced in March this year.

______________________________________
1 Due to floor price restrictions, most of the stocks are not freely traded on the exchanges. Half of the DSE 30 stocks are
freely traded at the time of this writing.
2 https://sec.gov.bd/slaws/Order_01.03.2023_.pdf; https://sec.gov.bd/slaws/Order_on_Floor_Price_28.07.22.pdf

3
 Equity Strategy ● Asia
16 August 2023

Chart 5. Bangladesh’s and Vietnam’s equity markets were similar in size as recently as 2015
400
350
300
250
200
150
100
50
0
Apr-07 Apr-09 Apr-11 Apr-13 Apr-15 Apr-17 Apr-19 Apr-21 Apr-23
Vietnam market cap (USDbn) Bangladesh market cap (USDbn)
Source: Bloomberg, HSBC

The restrictions are different from stock circuit limits seen in other parts of Asia where daily
upper and lower price limits are set and trading is halted for the day when they are reached,
with trading resuming as normal the next day. With floor price restrictions, prices cannot fall
below a certain level and this impedes price discovery and dents investor confidence. No
wonder trading volumes have fallen significantly from their highs in 2021.

Chart 6. Communication services and Chart 7. Top five stocks make up 62% of
Healthcare make up c58% of the DSE30 the DSE30, and top 10 stocks form 79%
2% 90%
ID 3% 80%
7% 9% 70%
MT
4%
60%
CMS
50%
HC 16%
40%
FN 31% 30%
CS 20%
CD 10%
28%
0%
EN
Top 5 Top 10
Weight in DSE 30 index
Note: weights are calculated using free float weight of each DSE 30 constituent
Source: Bloomberg, HSBC Source: Bloomberg, HSBC

Still, investors can access the market via the so-called block market where buyers and sellers
are fixed in advance. Listed shares can be transacted at up to 10% lower than the floor price.

The DSE30 is highly concentrated, which is not uncommon for frontier markets, and dominated
by a few large stocks in Telecoms and Healthcare. The top five companies by market cap in the
DSE30 are Grameenphone, British American Tobacco, Square Pharma, Renata and
Bangladesh Export Import, a conglomerate. For details on all 30 constituents, see page 20.

The financial sector is fairly small, but it is growing as demand for private sector credit picks up
thanks to rising infrastructure spending and growing foreign direct investment.

With a market cap-to-GDP ratio of only 19%, down from c41% in 2010, we think Bangladesh
deserves more attention than it gets. Yes, the market is small, illiquid, and not that easy to
access, but so was Vietnam’s five years ago. The two markets were similar in size until 2015,
but Vietnam is now 4x its size at that time (from a total market cap of USD57bn in 2015 to
cUSD230bn now). Bangladesh now looks ready to close the gap with GDP growth averaging
6.4% in the past decade and GDP per capita having overtaken that of India.

4
 Equity Strategy ● Asia
16 August 2023

Chart 8. Financial sector market cap per Chart 9. The consumer sector is dominated
capita is highest for China and Indonesia by China, but is small in Bangladesh
and lowest for India and Bangladesh
2000 3000

2500
1500
2000

1000 1500

1000
500
500

0 0
CH ID VN IN BD CH IN ID VN BD
Financials mcap (USDbn)/population (14+ years above) Consumers mcap (USDbn)/population (14+ years above)
Note: Consumers market cap is the sum of consumer staples and consumer discretionary
Source: Bloomberg, CEIC, HSBC Source: Bloomberg, CEIC, HSBC

The market needs more IPOs One of the other issues holding back the market is that only four companies have listed in
Bangladesh since 2020, raising a combined cUSD96m. Still, this suggests the market has room
for more IPOs and listings, especially as the economy hums along.

Chart 10. Bangladesh has among the Chart 11. … and also the lowest market
lowest market/GDP ratios on the planet … caps per capita*
100% 10000
90% 9000
80% 8000
70% 7000
60% 6000
50% 5000
40% 4000
30% 3000
20% 2000
10% 1000
0% 0
IN VN CH ID BD CH VN IN ID BD
Mcap/GDP Mcap (USDbn)//population (14+ years above)
*Per capita is based on the population above 14 years of age
Source: Bloomberg, CEIC, DSE, HSBC Source: Bloomberg, CEIC, HSBC

Chart 12. There have been just four IPOs in Bangladesh since 2020, raising cUSD96m
200 18
180 16
160 14
140 12
120
10
100
8
80
60 6
40 4
20 2
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Value (USDm) Deal count, rhs
Source: Bloomberg, HSBC

5
 Equity Strategy ● Asia
16 August 2023

Chart 13. With an average annual GDP Chart 14. … and its GDP per capita is
growth of 6.4% since 2010, Bangladesh already higher than that of India
has outpaced Asian peers …

15 3000
GDP growth % (constant prices) GDP per capita
10 2500

2000
5
1500
0
1000
-5 500

-10 0
2010 2012 2014 2016 2018 2020 2022 2010 2012 2014 2016 2018 2020 2022
Bangladesh India Vietnam Bangladesh India
Source: International Monetary Fund, World Economic Outlook Database, HSBC Source: International Monetary Fund, World Economic Outlook Database, HSBC

Table 1. Comparative analysis of Bangladesh versus Vietnam

Bangladesh Vietnam
Population (m) 169.3 98.5
Nominal GDP (USDbn) 512 406
GDP per capita (USD) 2,657 4087
Market cap/GDP(%) 19% 66%
Net FDI (USDbn) 4.2 15.2
Net FDI (% GDP) 0.8 3.7
Listed domestic cos 355 1484
Literacy rate (% of people aged 15 and above) 74.9 95.8
3M ADTV (USDm) 63 573
1Y ADTV (USDm) 87 560
Source: Bloomberg, CEIC, HSBC

Earnings, valuations
It’s not easy to estimate earnings growth in Bangladesh as there are no consensus earnings for
Strong growth
the market, and the stock exchange does not disclose aggregate index earnings growth. But by
using aggregating earnings of the top 11 firms, we have constructed our own market earnings
estimates. Bangladesh earnings grow 20% in 2023e and another 20.5% in 2024e based on
consensus forecasts of the individual companies, compared to 3.6% and 21.4% earnings
growth for FTSE AxJ in 2023e and 2024e, respectively.

Chart 15. The market cap to GDP ratio has Chart 16. Earnings for FTSE Bangladesh
fallen from c41% in 2010 to 19.3% now are expected to grow by an annual average
of 18.5% from 2023-25

45 9 120
40 8 100
35 7 80
30 6 60
25 5 40
20 4 20
15 3 0
10 2 -20
5 1 -40
0 0 -60
2011 2013 2015 2017 2019 2021 2023* 2012 2014 2016 2018 2020 2022 2024e
Mkt. Cap. to GDP growh rate(%, rhs) FTSE Bangladesh EPSg
GDP ratio (%)
Note: FTSE considers only 11 companies out of 83 companies in the FTSE Bangladesh index for
Note: 2023 data as of April 2023 EPS growth calculations
Source: Dhaka stock exchange, HSBC Source: FTSE Russell, FactSet, HSBC

6
 Equity Strategy ● Asia
16 August 2023


Bangladesh’s earnings could grow 20% in 2023e and
another 20.5% in 2024e, based on individual companies
consensus forecasts

Meanwhile, Bangladesh trades at relatively low 12-month trailing PE multiples of 14.4x, though
there are pockets in the market where valuations are high. This is shown in the chart below.

Chart 17. The market is trading at TTM PE of 14.4x

100
90
80
70
60
50
40
30
20
10
0

12m trailing PE (April 2023)

Source: Dhaka Stock Exchange, HSBC

This means Bangladesh is neither as cheap as other markets, nor as fast-growing. Buying
Bangladeshi equities is therefore for the long-term. And, as in India two decades ago or Vietnam
a decade ago, we see potential in the market for significant long-term capital appreciation driven
by earnings growth (remember the economy has grown at a fast pace in the last decade and is
expected to continue to do so in the next one) and a rise in valuation multiples.

Chart 18. Consumer markets in Indonesia, Mexico, Bangladesh, and Vietnam to become
more important by 2030
2021 vs 2030, population (Mn) with daily income of more than USD20 (2011 PPP)
2021 vs 2030, population (m) with daily income of more than USD20 (2011 PPP)
2021 2030 2030 (Mn)
1 China China 801
2 India India 484
3 US US 204
4 Brazil Indonesia 120
5 Indonesia Brazil 104
6 Russia Russia 76
7 Japan Japan 65
R 8 Germany Mex ico 57
A 9 Mex ico Bangladesh 54
N 10 Türkiy e Vietnam 48
K 11 UK Türkiy e 47
12 Thailand Germany 47
13 Vietnam Philippines 43
14 Korea UK 41
15 Philippines Thailand 38
16 Bangladesh Egy pt 34
17 South Africa Korea 31
18 Egy pt South Africa 27
19 Nigeria Nigeria 26
20 Argentina Argentina 23
21 Malay sia Malay sia 20
22 Chile Chile 9

Source: HSBC estimates

7
 Equity Strategy ● Asia
16 August 2023

The chart on the preceding page illustrates this. It ranks countries by the number of people that
have a daily income of more than USD20. The fastest riser is Bangladesh, which we expect to
be more populous than Germany or the UK by 2030e.
Asian and global firms This is why Indian consumer goods companies like Marico, Dabur and VIP Industries are
entering Bangladesh already operating in Bangladesh, while international brands such as Hyundai Motors and
Samsung Electronics and some of the other large apparel brands are selling in Bangladesh.

And it’s not just the consumer they are after. Hyundai Motors and Samsung Electronics have
factories in the country to make goods to both sell abroad and locally, while the Bangladesh
Investment Development Authority says there are c510 Chinese companies operating in
Bangladesh. Recently, Japan has also proposed an industrial hub in the country given its
strategic location3 (Reuters, 11 April 2023).

For investors who want to go deeper, there are still pockets of the market with low valuations.

Chart 19. Some companies in the FTSE Bangladesh offer high earnings growth potential
and trade at low PE multiples
20
18
16 Singer BD Marico BD
12m fwd PE

14
12 Olympic Industries BAT BD
10 Grameenphone
8 SQUARE Pharma
6 Brac Bank
Eastern Bank
4
City Bank
2
0
0% 5% 10% 15% 20% 25%
Avg EPSg (2020-24)
Source: FTSE Russell, FactSet, HSBC

Another attractive point is that Bangladesh is less correlated with global macro and equity
themes compared to Vietnam and also receives far less attention from analysts, creating
opportunities for fund managers looking for diversification and ‘hidden gems’.

Chart 20. The correlation of the BDEX with Chart 21. … and Bangladesh’s 12-month
the FTSE AxJ and FTSE World has trailing PE is at a premium to FTSE AxJ,
strengthened since 2018 … FTSE FM
40% Bangladesh 5 y ear correlation 18
30% 16
20%
14
10%
0%
12
-10% 10
-20% 8
-30% 6
-40% 4
-50%
96 98 00 02 04 06 08 10 12 14 16 18 20 22 2
AxJ World 0
FTSE FM AxJ Bangladesh
Current 12m trailing PE 5yr average 10yr average
Source: CEIC, HSBC Source: Bloomberg, CEIC, HSBC

______________________________________
3 Reuters, “Japan proposes industrial hub in Bangladesh with supply chains to India” (12 April 2023)

8
 Equity Strategy ● Asia
16 August 2023

Chart 22. 12M trailing PE for the Bangladesh market now 4% below its long-term average
21

19

17

15

13

11

9
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
DSEX 12m trl PE Avg +/- Stdev
Source: DSE, HSBC

Sector dynamics: Banks

Bad loans held by banks have declined over the past two decades (See Chart 23). But during
COVID-19, the banking sector witnessed a small increase in non-performing loans (NPLs)
during Q3FY23, driven mainly by the end of more relaxed loan repayment policies. The ratio of
gross NPLs to total loans reached 8.8% at the end of Q3FY23 from 8.2% at the end of Q2FY23.

The sector now faces a double challenge of slowing deposit and credit growth coupled with
rising NPLs. Looking beyond this though, we expect banks to benefit from rising credit growth
fuelled by high infrastructure spending, investment in the power sector and higher capital
expenditure by companies setting up manufacturing units. Efforts to clean up and formalise the
economy as well as increase financial inclusion should also benefit banks in the medium term,
as it has in India or Indonesia in the past.

Chart 23. Non-performing loans have been Chart 24. … while private sector credit has
on a long-term decline and fell recently, grown since 2021, but has dipped recently
mainly due to the central bank’s relaxation
of loan classification rules …

30
28%
25 Pvt sector credit growth
23%
20
18%
15

10 13%

5 8%
03 06 09 12 15 18 21
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Feb-17
Feb-18
Feb-19
Feb-20
Feb-21
Feb-22
Feb-23

Non Performing Loan Ratio: Gross (Bangladesh)

Source: CEIC, HSBC Source: CEIC, HSBC

To comply with the conditions set out by the IMF under its loan agreement, Bangladesh plans to
switch to a new market-driven exchange rate regime and away from its current fixed exchange
regime, which it uses to manage the currency. The central bank, Bangladesh Bank, also
introduced a market-driven reference lending and deposit rate.

9
 Equity Strategy ● Asia
16 August 2023

Chart 25. Bank deposit growth has picked Chart 26. The local currency, the
up since Feb 2023 following the removal of Bangladeshi taka (BDT), has depreciated
deposit interest rate restrictions c7% y-t-d
BDT has depreciated c30% 25% 115
since 2021 vs USD
110
20%
105

15% 100
95
10% 90
85
5%
80
0% 75
00 03 06 09 12 15 18 21 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22
Bank deposit growth (% yoy) BDT vs USD
Source: CEIC, HSBC Source: CEIC, HSBC

This is already visible in total credit card spending. This metric has been on the rise in fiscal
year 2023 and in the first three quarters was almost as much as the whole of FY22. The rise of
e-commerce plays a role here, too.

Chart 27. Tax to GDP ratio for Bangladesh Chart 28. Credit card spending in the first
at c8% three quarters of FY23 is already near
spending for the whole of FY22

18 300

16 250

14 200

12 150

10 100

8 50

6 0
2011 2013 2015 2017 2019 2021 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22FY23*
Total credit card spends (USDm)
BD VN Outstanding amount on credit cards (USDm)
Note: Data for FY23 from July 2022-May 2023
Source: CEIC, HSBC Source: Bank Bangladesh, HSBC

IT and Telecoms

ICT industry exports Bangladesh’s government is planning “Smart Bangladesh by 2041”, a program which focuses on
expected to grow from four pillars: smart citizens, smart government, smart society, and a smart economy. According
USD1.5bn to USD5bn
to the Bangladesh Association of Software and Information Services (BASIS), exports from the
information and communication technology sector (ICT) are expected to rise to USD5bn by
2025e vs USD1.5bn now. BASIS expects Telecoms and IT industries to play a pivotal role in this
transformation with their share of GDP going up to 20% by 2041e from a negligible share now.
The good news is these two sectors are already flourishing.

10
 Equity Strategy ● Asia
16 August 2023

Chart 29. Number of mobile subscribers is Chart 30. … 130m internet subscribers,
now at c185m … with c39% internet penetration
Most of the population uses a 186 130
mobile phone 129
185
128
184
127
183 126
182 125
181 124
123
180
122
179 121
178 120
Aug-21 Dec-21 Apr-22 Aug-22 Dec-22 Apr-23 Aug-21 Dec-21 Apr-22 Aug-22 Dec-22 Apr-23
Total mobile subscribers (Mn) Total internet subscribers (Mn)
Source: BTRC, HSBC Source: BTRC, HSBC

Chart 31. c43% of the population have a Chart 32. IT exports grew 37.5% in the July
smart phone 22-April 23 period vs same period last year

100% 600
90%
80% 500
70%
400
60%
50% 300
40%
30% 200
20%
10% 100
0%
0
Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23
FY 21-22 July 21-April 22 July 22-April 23
Smart Phone Feature Phone Exports of IT services (USDm)
Note: Data does not include imported phones
Source: BTRC, HSBC Source: Export Promotion Bureau, HSBC

11
 Equity Strategy ● Asia
16 August 2023

Demographics
 Bangladesh is expected to be the ninth-largest consumer market by
2030, ahead of Germany and the UK
 Much of this is powered by its demographic dividend: Bangladesh is
one of Asia’s most dynamic long-term demographic stories
 Investment in areas like health, education and skills can make the
best use of this “demographic window of opportunity”

Dynamic demographics …

Bangladesh is one of Asia’s most dynamic long-term demographic stories in Asia, in our view.
But whether it can capitalise on this is a different matter. Its population is young and large –
there are as many Bangladeshis as there are Thais and Vietnamese combined. Urbanisation,
smaller households and more working women are powerful consumption drivers that support
high levels of growth (see Herald van der Linde and James Pomeroy, Global Demographics –
Mapping out a century of changes, 9 February 2021).

Chart 33. Working age population formed Chart 34. … and this is expected to rise to
c55% of the total population in 2021 … 57% by 2030e …
80+ 80+
Bangladesh Bangladesh
70-74 70-74
60-64 60-64
50-54 50-54
40-44 40-44
30-34 30-34
20-24 20-24
10-14 10-14
0-4 0-4
10 5 0 5 10 10 5 0 5 10
% Male % Female % Male % Female
Source: United Nations’ World Population Prospects, HSBC Source: United Nations’ World Population Prospects, HSBC

Chart 35. … and stay at those levels in the Chart 36. Bangladesh has a declining
decade thereafter dependency ratio
80+ 70
Bangladesh
70-74 60
60-64 50
50-54
40
40-44
30-34 30
20-24 20
10-14 10
0-4
0
10 5 0 5 10 2010 2012 2014 2016 2018 2020
% Male % Female Bangladesh Vietnam
Source: United Nations’ World Population Prospects, HSBC Source: World Bank, HSBC

12
 Equity Strategy ● Asia
16 August 2023

Chart 37. Female labour participation in Bangladesh has gone up from 30% in 2010 to
38% in 2022
80
70
60
50
40
30
20
10
0
Vietnam China Thailand Malaysia Indonesia Philippines Bangladesh India
2010 2022
Note: Female labour participation is the number of working females (age 15+) divided by total female population (age 15+)
Source: World Bank, HSBC

Chart 38. Half of Bangladesh is expected to be urbanised by 2035

70
60
50
40
30
20
10
0
1950 1960 1970 1980 1990 2000 2010 2020 2030e 2040e 2050e
Asia Bangladesh
Source: United Nations: World Urbanization Prospects 2018, HSBC

… but more needs to be done on education

Education is key in improving the long-term prospects of a nation, impacting factors from birth
rates to the ability to attract investment and generate growth. And it’s not just about getting a lot
of people through primary school so they can read and write. To really attract investment, a
large proportion of a country needs to have received at least upper secondary education too.

To illustrate this, we calculated an Education Index,4 which looks at the proportion of a

population that receives either primary, lower and upper secondary or tertiary education. The
index calculates a score from zero to a maximum of 400. At zero, nobody gets any education. At
100, everyone gets primary education only. At 400, everyone receives tertiary education.

Higher education levels attract investments and support growth. This is confirmed in a few
recent demographic studies. Better education does not only lead to higher individual income,
but also is a necessary (although not always sufficient) precondition for long-term economic
growth. In that sense, it is a concern that young Bangladeshis (under 25 years old), who now
represent more than 50% of the population, lack access to good education.

______________________________________
4 Our education index takes the proportion of pupils that finish either primary, lower secondary, higher secondary or tertiary
education in each country. It assigns scores to each education level (primary =0, tertiary =4). If everybody in a country has tertiary
education, the score would be 400. A score of 200 suggests that half of the population has an education level that exceeds upper
secondary education. The data is from the World Bank. The methodology is from Global Demographics, a consultancy.

13
 Equity Strategy ● Asia
16 August 2023

Chart 39. No economy with an education index <200 has a GDP/capita exceeding
USD25,000

120,000

100,000
GDP per capita (USD, 2019) SG
80,000

60,000 HK
40,000 KR TW

20,000 ID PH CH MY
BD IN TH EG AG VN
SA
0
0 50 100 150 200 250 300
Education index (2020)
Source: World Bank, Global Demographics, HSBC

But this is changing. There is an understanding that Bangladesh faces challenges from the rise
of automation and artificial intelligence, which might replace the type of low-skilled labour-
intensive jobs in which it is competitive. As per a recent analysis by Aspire to Innovate (a2i5),
c47% of jobs in Bangladesh may be at risk by 2041 — including 60% of jobs in garments, which
currently represent 81% of exports.

This is why a new program has been developed – Smart Bangladesh vision 2041 – in which
education and job training are central. One initiative is to create digital content across 35
subjects to allow for digital remote learning by students at all levels.

Chart 40. Bangladesh spends among the least on education, as of 2020

World av erage
350 Coasting Maintaining
300
Education index (2020)

250 SA
PH MY VN KR HK
200
EG AG CH
150 ID
BD IN TH
100
Doing the right thing
50
Not enough
0
0 5 10 15 20 25 30 35 40 45 50 55
Proportion of GDP spent on education allocated to school age children (5-18 years)

Source: World Bank, Global Demographics, HSBC

______________________________________
5 a2i is a Bangladesh government program which aims to promote citizen-friendly public service innovations by simplifying
governance and bringing services closer to people.

14
 Equity Strategy ● Asia
16 August 2023

A supportive macro backdrop

 Inflation at a decade high and volatile food and energy prices are the
key drags on the economy …
 … while rising exports and FDI investments, along with moving up
the value chain in terms of goods exported, are key growth catalysts
 Bangladesh remains the preferred location for many labour-intensive
manufacturers given cheap labour and its strategic location in Asia

The macro backdrop

Bangladesh’s economy has grown at an average of 6% over the last decade, with much of this
driven by its growing export garment sector. The country’s ready-made garment industry
recovered quickly from COVID-19 with monthly garment exports reaching all-time highs in
Jan-Oct 2022. We believe exports from Bangladesh will see a slowdown, due to decelerating
economies in the US and Europe, and from the fast global inflation.

Another issue is power supply. Unpredictable power outages that can stretch over five hours
Better power supply
impact the garment industry. The result is many firms have their own power supplies, but this
comes at a cost as they depend on imported gas, which is prone to price fluctuations as well as
swings in the US dollar, which can erode Bangladesh’s cost advantages.

The government is trying to diversify away from expensive imported gas and is leaning more on
cheaper, dirtier coal. It is also drilling for domestic fossil fuel supplies offshore in the Bay of
Bengal. And it is building its first nuclear power plant, due to start operating by mid next year.

However, the apparel and textiles sectors are falling as a proportion of total exports to the US,
despite their being at all-time highs in value terms, with footwear, cell phones and other household
goods rising. The export sector is diversifying and “moving up the ladder”.

Chart 41. Gradually, the share of high value products in exports to the US is increasing
100%

98%

96%

94%

92%

90%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Apparel & textiles Footwear Cell phones and other household
Toys, games, and sporting goods Furniture, household goods, etc. Others
Source: US census, HSBC

15
 Equity Strategy ● Asia
16 August 2023


Bangladesh aims to capture c10% of the global apparel
market by 2025 and earn USD100bn from apparel exports
by 2030
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA)

Chart 42. Garment exports are now near Chart 43. Overseas remittances have
all-time highs normalised to near pre COVID-19 levels
with cUSD13bn remitted y-t-d

350 3,000
Exports: Ready Made Garments (BDTm)
Thousands

300 2,500
250
2,000
200
1,500
150
1,000
100
50 500

0 0
Jan-12

Jan-14

Jan-17

Jan-19

Jan-22
Jan-13

Jan-15
Jan-16

Jan-18

Jan-20
Jan-21

Jan-23

May-17 May-18 May-19 May-20 May-21 May-22 May-23

Overseas workers Remittances (Bangladesh, USDm)
Source: CEIC, HSBC Source: CEIC, HSBC

Bangladesh has another source of foreign income – foreign remittances from its workers who
are mostly in the Middle East. These flow in through formal banking channels with a cash
incentive of 2.5% given by the government over and above the remitted amount to encourage
remittances through legal channels. We expect remittances to increase as Bangladeshi workers
return back to work and a weaker currency (BDT) boosts the amount converted into BDT. In
2022, USD21bn was remitted by overseas workers to Bangladesh. To compare, that is 4x the
total foreign investments in Bangladesh. Y-t-d overseas worker remittances are at cUSD13bn.

Chart 44. Bangladesh received cUSD5bn Chart 45. Current account balance is back
worth of FDI inflows in CY2022 and in surplus now
USD1.2bn in 1Q23
1,800 4
1,600
2
1,400
1,200 0
1,000
-2
800
600 -4
400
-6
200
0 -8
2012 2013 2014 2015 2017 2018 2019 2020 2022 12 13 14 15 16 17 18 19 20 21 22 23

Quarterly gross FDI inflow (USDm) Current Account Balance (USDbn)

Source: CEIC, HSBC Source: CEIC, HSBC

Foreign Direct Investment (FDI) inflows in CY 2022 increased 27% from USD3.9bn in 2021 to
USD5bn in 2022. These FDI inflows are rising fast and for the first quarter of CY2023 were at
USD1.2bn. It is mostly Korean, Chinese and Indian corporates that enter Bangladesh.

16
 Equity Strategy ● Asia
16 August 2023

As with elsewhere in Asia, inflation has been an issue, rising again since March 2023, with
headline inflation for May 2023 at 9.9%, the highest ever, and at 9.7% in July 2023. This is
driven by rising food and energy prices in Bangladesh.

Chart 46. Inflationary pressures have Chart 47. … and the policy rate is now at
resurfaced, with Bangladesh recording its 6.5%
highest ever inflation rate in May 2023 …

8
10%
7.5
7
8%
6.5
6% 6
5.5
4% 5
4.5
2% 4
14 15 16 17 18 19 20 21 22 23 13 14 15 16 17 18 19 20 21 22 23
Headline CPI Food CPI Bangladesh policy rate (%)
Note: Data for Food CPI as of March 2023, Headline CPI as of July 2023. Base year
changed to 2021-22 from April 2023 onwards
Source: CEIC, HSBC Source: CEIC, HSBC


IMF recently approved a USD4.7bn support package, which
includes a facility for climate investments

Chart 48. Food’s weight in inflation has Chart 49. Total exports to the US have risen
come down only marginally since 2020, c70% since 2019
making it a key contributor to high inflation

100% 12
90%
80% 10
70%
8
60%
50% 6
40%
30% 4
20%
2
10%
0% 0
2011 2013 2015 2017 2019 2021 2023 13 14 15 16 17 18 19 20 21 22
Food Non-food Total exports from Bangladesh to US (USDbn)
Source: CEIC, HSBC Source: US census, HSBC

17
 Equity Strategy ● Asia
16 August 2023

Political landscape

General elections are scheduled to be held in Bangladesh in January 2024. The past two elections
in 2014 and 2018 were mired in controversy over the fairness of the elections between major
parties (see, e.g., Deutsche Welle, “Bangladesh ruling party dominance prompts democracy
concerns”, 3 December 2022). The current President Sheikh Hasina Wazed is the longest-
serving elected female head of government, having governed Bangladesh from 1996 to 2001
and again from 2009 through today. There are two major parties in Bangladesh, the Bangladesh
Awami League led by the current prime minister Sheikh Hasina Wazed, and the Bangladesh
Nationalist Party led by former prime minister Khaleda Zia.


As much as USD1.71bn is needed annually over the next
18 years to move away from expensive fossil-fuel imports
and generate 40% of electricity from renewable sources
Institute for Energy Economics and Financial Analysis

Climate vulnerability

Wai-Shin Chan, CFA

On the flip side of the potential in Bangladesh’s equity market and economy, climate change is a
Head, Climate Change Centre; key risk for the development of Bangladesh. In Fragile Plant 2022 (27 March 2022), we assess
Head, ESG Research
The Hongkong and Shanghai 77 economies on their resilience and vulnerability in the facing of rising climate risks. Bangladesh
Banking Corporation Limited
is one of the most, if not the most, vulnerable economies to climate change, with much room for
[email protected]
+852 2822 4870 improvement in climate mitigation, adaptation, governance, and green opportunities.
Polo Heung
Associate, ESG Research Chart 50. Working hours lost to heat stress Chart 51. Working hours lost to heat stress
The Hongkong and Shanghai in Agriculture & Construction (1995 to 2030) in Manufacturing (1995 to 2030)
Banking Corporation Limited
[email protected] 12 7 12 7
+852 2914 9861
6 10 6
10

mutiplier (1995 to 2030)

mutiplier (1995 to 2030)

5 5
8 8
% hours lost
% hours lost

4 4
6 6
3 3

4 4
2 2

2 2 1
1

0 0 0 0
Mainland Turkey India Bangladesh Vietnam Mainland Turkey India Bangladesh Vietnam
China
China
1995 2030 Change (RHS) 1995 2030 Change (RHS)

Source: International Labour Organization (2019) Source: International Labour Organization (2019)

Heat stress, low accessibility to clean water and high exposure to extreme weather events are
serious concerns in Bangladesh. Dhaka, the capital, reached 40.6C, a record high temperature
in April 20236. The impacts of heat stress on labour productivity are set to rise with the frequency
of heatwaves and the number of labour-intensive facilities in Bangladesh (Indoor heat stress:
Apparel supply chain – a key area of risk, 18 April 2023). The International Labour Organization

______________________________________
6 BBC, “Climate change: The record summer that scorched Asia”, 8 August 2023

18
 Equity Strategy ● Asia
16 August 2023

estimates working hours lost to heat stress in Bangladesh at c5% (i.e. c3.8m full-time jobs) by
20307. However, the Bangladesh Labour Act is quite general when it comes to temperature, e.g.
high temperature allowance or pure drinking water supply requirements are not stated.

Bangladesh is also very sensitive to climate events such as cyclones and flooding due to its
geographical location. The number of households affected by natural disasters rose by c72%
from 2015 to 20218, with subsequent loss and damage rising c873% over that period. The floods
in Bangladesh last year illustrated the country’s sensitivity, affecting at least 7 million people9. In
response to rising frequency and intensity of climate events, the Government of Bangladesh
released its National Adaptation Plan (2023-2050) in November 2022, which shows its
commitments to mitigating climate risks, but the plan will need substantial financial support from
external sources to fulfil the investment gap.

Apart from climate physical risk, Bangladesh also exhibits transition risks in its weak
decarbonisation strategy, although its absolute greenhouse gas emissions level is relatively low.
Bangladesh has committed to reducing only c15% GHG emissions (2021-2030) compared to a
business-as-usual scenario, and generating 40% power from clean energy sources by 204110.
In the FY22-23 (up to December 22), renewable energy accounted for 1.69% of national energy
generation according to the Ministry of Finance11. Notably, in contrast to other ASEAN
economies, Bangladesh has not committed to net zero emissions.

______________________________________
7 International Labour Organization, Working on a warmer planet, 2019
8 Bangladesh Bureau of Statistics, Bangladesh Disaster-related Statistics, 2022
9 CNN, “7 million in Bangladesh need aid after ‘worst floods in memory,’ Red Cross says”, 29 June 2022
10 BSS, “Plan for 40pc power generation from clean energy by 2041-Nasrul Hamid”, 17 January 2023
11 Ministry of Finance of Bangladesh, Bangladesh Economic Review 2023, 1 June 2023

19
20

DSE30 index all constituents

Table 2. The Bangladesh DSE30 index – 30 biggest companies covering around half of total market cap
Current PE PB EPSg ROE
Mkt cap 3M ADTV PE prem/disc PB- prem/disc 5yr avg 5yr avg
Ticker Name Company description Sector (USDm) (USDm) (x) to 5yr avg Current to 5yr avg (%) (%)
1 GRAM BD Equity GRAMEENPHONE LTD Grameenphone offers cellular telephone services to both rural and Communication 3569 0.5 11.9 -8.9% 7.3 -27.7% 2.6 79.4
urban customers in Bangladesh. It also provides internet access via Services
mobile telephones.
2 BATBC BD Equity BRITISH AMERICAN British American Tobacco Bangladesh manufactures a wide range of Consumer Staples 2583 0.7 15.4 -45.4% 6.2 -79.6% 38.9 37.1
TOBACCO BAN tobacco products.
3 SQUARE BD Equity SQUARE Square Pharmaceuticals manufactures pharmaceuticals. It makes Health Care 1716.70 0.8 9.9 -30.0% 1.7 -34.5% 11.7 19.4
PHARMACEUTICALS PLC aceclofenac, acetylcysteine, aciclovir, topical preparations, systemic
antiviral, and nutraceuticals products, as well as agrovet and
pesticides. Square Pharmaceuticals serves customers worldwide.
4 RENATA BD Equity RENATA LTD Renata Ltd. manufactures pharmaceuticals for humans and animals. Health Care 1288.20 0.5 -100.0% 4.6 -9.5% 14.1 20.9
It produces antibacterials, antiulcerants, antispasmodics, laxatives,
antihemorrhoidal, analgesics, anti-allergy, antidiabetic, cardiovascular,
vitamins, calcium supplements, urinary incontinence, hormone
preparations, steroids, hair regrowth preparations, and vaccines.
5 BEXIMC BD Equity BANGLADESH EXPORT Bangladesh Export Import is a diversified company. It operates in Industrials 934.2 0.2 8.8 -41.7% 1.2 77.0% 277.8 6.5
IMPORT CO the textiles, real estate & hospitality, marine food & commodities
trading, ICT/media, ceramics and aviation sectors. Its primary
division is textiles which makes cotton and polyester blended
garments for men, women and children, for both the domestic and
export markets.
6 LHBLBD BD Equity LAFARGEHOLCIM LafargeHolcim Bangladesh produces building materials like Materials 737.92 0.1 14.8 -42.9% 4.0 16.5% 42.0 15.6
BANGLADESH LTD limestone and composite cement, raw material limestone,
aggregates, and concrete.
7 BXPHAR BD Equity BEXIMCO Beximco Pharmaceuticals Limited manufactures and sells generic Health Care 601.5 5.2 14.6 15.8% 1.5 -71.1% 19.0 11.9
PHARMACEUTICALS LTD pharmaceutical formulation products, active pharmaceutical
ingredients and intravenous fluids. Its product portfolio includes
goods in a variety of therapeutic categories, such as analgesics,
antibiotics, cardiovascular, central nervous system, dermatology,
gastrointestinal and respiratory.
8 BRAC BD Equity BRAC BANK LTD Brac Bank is a full service commercial bank. It attracts deposits from Financials 531.1 0.9 9.6 -28.5% 0.9 -40.0% 3.7 12.4
the general public and uses those funds to originate a wide variety of
loans.
9 BPL BD Equity BEACON Beacon Pharmaceuticals is a pharmaceutical company that serves Health Care 521.9 0.7 80.9 97.1% 9.2 115.3% 74.7 10.4
PHARMACEUTICALS customers worldwide. It focuses on developing and manufacturing
PLC/B anti-cancer and bio-tech products; cardiovascular drugs, antibiotics,
generic drugs, and oncology products for the treatment of patients.
10 ISLAMI BD Equity ISLAMI BANK Islami Bank Bangladesh Ltd. is a commercial bank, offering Financials 484.02 0.6 9.3 13.7% 7.6 5.4 9.1
BANGLADESH LTD commercial banking products and services.

Equity Strategy ● Asia

11 BSCC BD Equity BANGLADESH Bangladesh Submarine Cable Company Ltd offers broadband Communication 332.9 0.2 12.9 -79.6% 2.9 -3.4% 164.7 15.2
SUBMARINE CABLE C internet access. It operates co-location centers at which customers Services
can connect their fiber optic cables to international private-leased

16 August 2023
circuits in Bangladesh.
12 EBL BD Equity EASTERN BANK LTD Eastern Bank Ltd. is a commercial bank offering consumer, banking, Financials 327.3 0.8 7.1 -3.0% 1.1 2.7% 16.5 15.4
and treasury services.
13 OLYMPI BD Equity OLYMPIC INDUSTRIES Olympic Industries manufactures, markets and distributes biscuits, Consumer Staples 263.67 0.4 17.4 -14.9% 2.9 -39.1% -3.7 24.1
LTD candies, dry-cell batteries and ballpoint pens for local consumption
and exports.


 Table 2. The Bangladesh DSE30 index – 30 biggest companies covering around half of total market cap
Current PE PB EPSg ROE
Mkt cap 3M ADTV PE prem/disc PB- prem/disc 5yr avg 5yr avg
Ticker Name Company description Sector (USDm) (USDm) (x) to 5yr avg Current to 5yr avg (%) (%)
14 SEAPEARL BD SEA PEARL BEACH Sea Pearl Beach Resort & Spa owns and operates a chain of hotels. Consumer Discretionary 243.75 0.1 53.2 15.4 37.3 5.8
Equity RESORT & SPA It offers amenities such as water parks, tennis and badminton
courts, movie halls, amphitheatres, spas, and gyms.
15 CITYBA BD Equity CITY BANK LIMITED/THE City Bank is a commercial bank offering corporate and investment Financials 230.17 0.3 5.6 -26.6% 0.8 -27.8% 11.8 13.7
banking, retail banking, SME banking, as well as treasury and
market risk services.
16 MPL BD Equity MEGHNA PETROLEUM Meghna Petroleum Limited markets and distributes crude oil and Energy 200.69 0.1 5.7 -7.5% 1.1 -16.1% 10.9 23.1
LTD petroleum products.
17 IPDC BD Equity IPDC FINANCE LTD Industrial Promotion & Development Company of Bangladesh offers Financials 197.12 0.1 3.1 -40.0% 18.2 13.5
finance and investing services. It provides long-term financing,
leasing, guarantees, equity investment syndication, corporate
finance, and capital market activities.
18 JMOIL BD Equity JAMUNA OIL CO LTD Jamuna Oil Co markets and distributes crude oil and petroleum Energy 182.38 0.4 9.2 -2.0
products.
19 DELTAL BD Equity DELTA LIFE INSURANCE Delta Life Insurance provides life and health insurance products and Financials 181.5 0.1 10.5 0.5 -19.5
CO LTD services.
20 UHRL BD Equity UNIQUE HOTEL & Unique Hotel & Resorts is a hotel and hospitality management Consumer Discretionary 179.46 0.1 12.0 -58.2% 0.7 22.3% 28.2 1.8
RESORTS PLC company. In addition to accommodation, the hotels offer meeting
rooms, bars, restaurants, swimming pools, and fitness centers.
21 OPL BD Equity ORION PHARMA LTD Orion Pharma is a pharmaceutical company with products including Health Care 171.77 0.4 26.6 81.5% 0.9 38.1% 3.5 4.7
vitamins, antibiotics and anti-inflammatory drugs.
22 HEID BD Equity HEIDELBERGER CEMENT Heidelberger Cement Bangladesh manufactures a wide range of Materials 150.59 0.5 36.3 4.3 49.4% 13.0 3.3
BANGLADE cement products.
23 UTTARA BD Equity UTTARA BANK PLC Uttara Bank PLC is a commercial bank, offering savings and deposit Financials 148.89 1.2 6.0 -2.0% 0.8 4.3% 12.2 12.8
accounts, personal and business loans, treasury services, and other
banking products and solutions.
24 PTL BD Equity PARAMOUNT TEXTILE Paramount Textile makes textile products. It manufactures a Consumer Discretionary 110.12 0.1 11.6 -31.6% 2.2 -6.2% 29.4 15.7
PLC diversified range of yarn and solid dyed woven fabrics which are
purchased by export-oriented garment industries in Bangladesh.
25 SONALI BD Equity SONALI PAPER & BOARD Sonali Paper & Board Mills manufactures paper products. Materials 103.82 1.2 107.3 3.6 98.1
MILLS
26 BBSCABL BD Equity BBS CABLES LTD BBS Cables Ltd. manufactures electrical components like electrical Industrials 97.42 0.1 13.1 12.3% 1.5 -40.7% 16.6 25.1
cables, wires, conductors, and other electrical equipment for
residential, commercial, and industrial applications.
27 ADNTEL BD Equity ADN TELECOM LTD ADN Telecom Ltd provides telecom services. It offers voice, video, Communication 84.13 0.3 36.6 4.8 0.7 12.3
data, internet, and managed services. Services
28 GENEXIL BD Equity GENEX INFOSYS LTD Genex Infosys Limited provides technology outsourcing services. It Information Technology 83.42 1.6 42.2 24.3
offers business re-engineering, risk and project management,
service automation, computer telephony integration, and dashboard
monitoring services.
29 EHL BD Equity EASTERN HOUSING LTD Eastern Housing Ltd. is a real estate development company. Real Estate 77.13 0.0 13.3 4.1% 1.2 51.7% 23.1 6.2

Equity Strategy ● Asia

30 RUPAI BD Equity RUPALI LIFE INSURANCE Rupali Life Insurance Company Ltd. offers life insurance coverage. It Financials 34.82 0.1 4.9 90.8% -5.2 20.4
CO LTD offers individual and Islamic life insurance and also pension plans.
Source: Bloomberg, HSBC

16 August 2023
21


 Equity Strategy ● Asia
16 August 2023

Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)
whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering
analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or
issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other
views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect
their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Herald van der Linde and Prerna Garg

Important disclosures
Equities: Stock ratings and basis for financial analysis
HSBC and its affiliates, including the issuer of this report (“HSBC”) believes an investor's decision to buy or sell a stock should
depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that
investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or
relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in
each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating
because research reports contain more complete information concerning the analysts' views and the basis for the rating.

From 23rd March 2015 HSBC has assigned ratings on the following basis:
The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12
months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will
be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a
Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between
5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20%
below the current share price, the stock will be classified as a Reduce.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change
in target price or estimates).

Upside/Downside is the percentage difference between the target price and the share price.

Prior to this date, HSBC’s rating structure was applied on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate,
regional market established by our strategy team. The target price for a stock represented the value the analyst expected the
stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight,
the potential return, which equals the percentage difference between the current share price and the target price, including the
forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12
months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was
expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage
points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.

*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months
(unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which
we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's
average of the daily 365-day moving average volatilities. To avoid misleadingly frequent changes in rating, however, volatility had
to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.

22
 Equity Strategy ● Asia
16 August 2023

Rating distribution for long-term investment opportunities

As of 30 June 2023, the distribution of all independent ratings published by HSBC is as follows:
Buy 61% (13% of these provided with Investment Banking Services in the past 12 months)
Hold 33% (13% of these provided with Investment Banking Services in the past 12 months)
Sell 6% (7% of these provided with Investment Banking Services in the past 12 months)
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current
rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy
= Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial
analysis” above.

For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at
http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.

To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please
use the following links to access the disclosure page:

Clients of HSBC Private Banking: www.research.privatebank.hsbc.com/Disclosures

All other clients: www.research.hsbc.com/A/Disclosures

HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt
(including derivatives) of companies covered in HSBC Research on a principal or agency basis or act as a market maker or
liquidity provider in the securities/instruments mentioned in this report.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking,
sales & trading, and principal trading revenues.

Whether, or in what time frame, an update of this analysis will be published is not determined in advance.

Non-US analysts may not be associated persons of HSBC Securities (USA) Inc. and therefore may not be subject to FINRA Rule
2241 or FINRA Rule 2242 restrictions on communications with the subject company, public appearances and trading securities
held by the analysts.

Economic sanctions imposed by the EU, the UK, the USA and certain other jurisdictions generally prohibit transacting or dealing in any
debt or equity issued by Russian SSI entities on or after 16 July 2014 (Restricted SSI Securities). Economic sanctions imposed by the
USA also generally prohibit US persons from purchasing or selling publicly traded securities issued by companies designated by the
US Government as “Chinese Military-Industrial Complex Companies” (CMICs) or any publicly traded securities that are derivative of,
or designed to provide investment exposure to, the targeted CMIC securities (collectively, Restricted CMIC Securities). This report
does not constitute advice in relation to any Restricted SSI Securities or Restricted CMIC Securities, and as such, this report should
not be construed as an inducement to transact in any Restricted SSI Securities or Restricted CMIC Securities.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company
available at www.hsbcnet.com/research. HSBC Private Banking clients should contact their Relationship Manager for queries
regarding other research reports. To find out more about the proprietary models used to produce this report, please contact the
authoring analyst.

23
 Equity Strategy ● Asia
16 August 2023

Additional disclosures
1 This report is dated as at 16 August 2023.
2 All market data included in this report are dated as at close 15 August 2023, unless a different date and/or a specific time
of day is indicated in the report.
3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of
Research operate and have a management reporting line independent of HSBC's Investment Banking business.
Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses
to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.
4 You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest
payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the
price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument,
and/or (iii) measuring the performance of a financial instrument or of an investment fund.

Production & distribution disclosures

1. This report was produced and signed off by the author on 15 Aug 2023 06:16 GMT.

2. To see when this report was first disseminated, please refer to the disclosure page available at
https://www.research.hsbc.com/R/34/kShwVDJ

24
 Equity Strategy ● Asia
16 August 2023

Disclaimer
Legal entities as at 30 June 2023: Issuer of report:
‘UAE' HSBC Bank Middle East Limited, DIFC; HSBC Bank Middle East Limited, UAE branch; ‘HK' The Hongkong and The Hongkong and Shanghai Banking Corporation
Shanghai Banking Corporation Limited, Hong Kong; ‘TW' HSBC Securities (Taiwan) Corporation Limited; ‘CA' HSBC Limited
Securities (Canada) Inc.; ‘France' HSBC Continental Europe; ‘Spain' HSBC Continental Europe, Sucursal en España; ‘Italy' Level 19, 1 Queen's Road Central
HSBC Continental Europe, Italy; ‘Sweden' HSBC Continental Europe Bank, Sweden Filial; ‘DE' HSBC Continental Europe Hong Kong SAR
SA, Germany; 000 HSBC Bank (RR), Moscow; ‘IN' HSBC Securities and Capital Markets (India) Private Limited, Mumbai; Telephone: +852 2843 9111
‘JP' HSBC Securities (Japan) Limited, Tokyo; ‘EG' HSBC Securities Egypt SAE, Cairo; ‘CN' HSBC Investment Bank Asia Fax: +852 2596 0200
Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Website: www.research.hsbc.com
Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai Banking
Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Tel
Aviv; ‘US' HSBC Securities (USA) Inc., New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA,
Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC
Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in
Hong Kong SAR; The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch; PT Bank HSBC Indonesia;
HSBC Qianhai Securities Limited; Banco HSBC SA
This document has been issued by The Hongkong and Shanghai Banking Corporation Limited ("HSBC") in the conduct of its Hong Kong regulated business for the information of its institutional
and professional investor (as defined by Securities and Future Ordinance (Chapter 571)) customers; it is not intended for and should not be distributed to retail customers in Hong Kong. The
Hongkong and Shanghai Banking Corporation Limited is regulated by the Hong Kong Monetary Authority. All enquires by recipients in Hong Kong must be directed to your HSBC contact in
Hong Kong. If it is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. This document
is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from
sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or
completeness. Expressions of opinion are those of the Research Division of HSBC only and are subject to change without notice. From time to time research analysts conduct site visits of
covered issuers. HSBC policies prohibit research analysts from accepting payment or reimbursement for travel expenses from the issuer for such visits. HSBC and its affiliates and/or their
officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such
securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in related
investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those
companies.
HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. The information contained herein is under no circumstances to
be construed as investment advice and is not tailored to the needs of the recipient. All US persons receiving and/or accessing this report and wishing to effect transactions in any security
discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report.
In the UK, this publication is distributed by HSBC Bank plc for the information of its Clients (as defined in the Rules of FCA) and those of its affiliates only. Nothing herein excludes or restricts
any duty or liability to a customer which HSBC Bank plc has under the Financial Services and Markets Act 2000 or under the Rules of FCA and PRA. A recipient who chooses to deal with any
person who is not a representative of HSBC Bank plc in the UK will not enjoy the protections afforded by the UK regulatory regime. HSBC Bank plc is regulated by the Financial Conduct Authority
and the Prudential Regulation Authority. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general information
of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) ("SFA") and accredited investors and other persons in accordance
with the conditions specified in Sections 275 and 305 of the SFA. Only Economics or Currencies reports are intended for distribution to a person who is not an Accredited Investor, Expert Investor
or Institutional Investor as defined in SFA. The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch accepts legal responsibility for the contents of reports. This publication
is not a prospectus as defined in the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and
Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking
Corporation Limited, Singapore Branch" representative in respect of any matters arising from, or in connection with this report. Please refer to The Hongkong and Shanghai Banking Corporation
Limited Singapore Branch's website at www.business.hsbc.com.sg for contact details. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation
Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its "wholesale" customers (as defined in the Corpora tions Act 2001). Where distributed to retail customers, this
research is distributed by HSBC Bank Australia Limited (ABN 48 006 434 162, AFSL No. 232595). These respective entities make no representations that the products or services mentioned in
this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the
particular investment objectives, financial situation or particular needs of any recipient. This publication is distributed i n New Zealand by The Hongkong and Shanghai Banking Corporation
Limited, New Zealand Branch incorporated in Hong Kong SAR.
In the European Economic Area, this publication has been distributed by HSBC Continental Europe or by such other HSBC affiliate from which the recipient receives relevant services.
In Japan, this publication has been distributed by HSBC Securities (Japan) Limited. It may not be further distributed in whol e or in part for any purpose. In Korea, this publication is distributed
by The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") for the general information of professional investors specified in Article 9 of the Financial
Investment Services and Capital Markets Act ("FSCMA"). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose.
HBAP SLS is regulated by the Financial Services Commission and the Financial Supervisory Service of Korea.
In Canada, this document has been distributed by HSBC Securities (Canada) Inc. (member IIROC), and/or its affiliates. The information contained herein is under no circumstances to be
construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. No securities commission or similar regulatory authority in Canada has
reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an
offense. In Brazil, this document has been distributed by Banco HSBC SA ("HSBC Brazil"), and/or its affiliates. As required by Resolution No. 20/2021 of the Securities and Exchange Commission
of Brazil (Comissão de Valores Mobiliários), potential conflicts of interest concerning (i) HSBC Brazil and/or its affiliates; and (ii) the analyst(s) responsible for authoring this report are stated on
the chart above labelled "HSBC & Analyst Disclosures".
If you are a customer of HSBC Wealth & Personal Banking ("WPB"), including Global Private Banking, you are eligible to receive this publication only if: (i) you have been approved to receive
relevant research publications by an applicable HSBC legal entity; (ii) you have agreed to the applicable HSBC entity's terms and conditions and/or customer declaration for accessing research;
and (iii) you have agreed to the terms and conditions of any other internet banking, online banking, mobile banking and/or in vestment services offered by that HSBC entity, through which you
will access research publications (collectively with (ii), the "Terms"). If you do not meet the above eligibility requirements, please disregard this publication and, if you are a WPB customer, please
notify your Relationship Manager or call the relevant customer hotline. Distribution of this publication is the sole responsibility of the HSBC entity with whom you have agreed the Terms. Receipt
of research publications is strictly subject to the Terms and any other conditions or disclaimers applicable to the provision of the publications that may be advised by WPB.
© Copyright 2023, The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED. No part of this publication 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. MCI (P) 017/01/2023, MCI (P) 027/10/2022

[1218342]

25
Global Equity Strategy Research Team
Global India
Head EM and Global Equity Strategist India Equity Strategist
Alastair Pinder, CFA +1 212 525 5972 Amit Sachdeva +91 22 2268 1240
[email protected] [email protected]

Anurag Dayal +91 22 6164 0686

Europe
[email protected]
Head of European Equity Strategy
Edward Stanford +44 20 7992 4207 Americas
[email protected]
LatAm Equity Strategist
European Equity Strategist, Climate Database Nicole Inui +55 11 98984 6169
Lead [email protected]
Amit Shrivastava +971 4 509 3349
[email protected]

Davey Jose +44 20 7991 1489

[email protected]

Henry Ward +44 20 7359 5611

[email protected]

CEEMEA
Head of Global Emerging Market Equity
Strategy
John Lomax +44 20 7992 3712
[email protected]

Asia
Head of Equity Strategy, Asia Pacific
Herald van der Linde, CFA +852 2996 6575
[email protected]

Raymond Liu +852 2996 6743

[email protected]

Prerna Garg +852 9831 6901

[email protected]

Taiwan
Head of Taiwan Research
Jeremy Chen +8862 6631 2866
[email protected]