KUALA LUMPUR (March 14): HSBC Bank Malaysia Bhd has launched the Solactive Luxury Dynamic Factors Index (Luxury Index).

In a statement, the bank said the index is available as both a conventional and shariah-compliant solution, providing an investment opportunity for its wealth clients to capitalise on the growing luxury consumption in Asia.

According to HSBC Malaysia, the Luxury Index provides investors with dynamic exposure to a list of global stocks that have high exposure to the luxury sector. This index will also be made available in other key wealth markets in Asia.

The bank explained that the index aims to capture the luxury trends present in Asia, which are expected to play more important roles in a post-Covid-19 environment.

It added that multifactor investing is used to identify stocks that show persistent sources of returns and to better weather cyclical factors.

The index also incorporates a daily volatility control mechanism to reduce exposure to equities when markets are unstable.

It added that structured products linked to the Luxury Index will be denominated in Asian currencies — i.e. yuan in Hong Kong and ringgit in Malaysia — in either a fully or partially principal-protected structured product.

According to the bank, this is the first time it has implemented factor investor or smart beta investing, which is a well-established investment technique among institutional investors that is based on a rules-based approach focused on persistent sources of returns in the equity market.

"HSBC is the global exclusive licensor of the Luxury Index and its performance can be tracked on the Solactive website. The Luxury Index is calculated and administrated by Solactive AG, the third party index administrator," said HSBC Malaysia.

Meanwhile, HSBC Malaysia head of global markets Alvin Kong said: "To accelerate the growth of the wealth business in Asia, Global Markets continues to invest in our product manufacturing capabilities leveraging our market expertise, and deliver bespoke solutions for wealth clients. The Luxury Index sits within our theme of stocks benefitting from Asian discretionary spending. Against the backdrop of the Covid-19 crisis, luxury as an investment theme is poised to benefit from strong economic recovery led by Asian economies."

Kong added that the luxury goods market in mainland China will likely achieve double-digit growth in 2020, doubling its overall share of the global luxury market in 2020 with further growth expected through to 2025.

HSBC Malaysia wealth and personal banking head of wealth Jon Chivers said it makes prudent sense to keep some investments in an index with protection such as the Luxury Index amid the pandemic.

"This index-linked structured product exemplifies our commitment to meeting clients' diverse wealth management needs aligned to prevalent investment themes even in these trying times. The Luxury Index enables investors to gain exposure to the sector, while maintaining a high level of principal protection," said Chivers.