The US-China Game of Dare
A Guide to Higher Education Abroad
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Keep Your Investment Goals on Track
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The US-China Game of Dare
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YOUR FINANCES AND ALL THAT MATTERS TO YOU
BY HSBC BANK MALAYSIA BERHAD
37JUNE 2018
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Publisher HSBC Bank Malaysia Berhad (Company No. 127776-V), No. 2, Leboh Ampang, 50100 Kuala Lumpur. Editorial Rozalynn Zainul, Magdelyn Choo, Foong Ken Voon, Looi Miin Wei. Printed by Hoffset Printing Sdn. Bhd. (Company No. 667106-X), 1, Jalan TPK 1/6, Taman Perindustrian Kinrara, 47180 Puchong, Selangor. For more information on HSBC products and services, please feel free to contact us. • Call 1 300 88 9393 • Click www.hsbc.com.my • Visit your nearest
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The opinions, statements and information contained in this publication are based on available data delivered to be reliable. HSBC does not warrant the accuracy, completeness or fairness of such opinions, statements and information and reliance thereon shall not give rise to any claim whatsoever against HSBC. © Copyright. HSBC Bank Malaysia Berhad (Company No. 127776-V) 2018. All rights reserved. You may, at any time, choose not to receive direct marketing literature/information about our products and services. Please write to Direct Mailing Exclusion Coordinator at P.O. Box 13688, 50818 Kuala Lumpur, Malaysia with your request and we will delete your name from our direct mailing lists without charge. Issued by HSBC Bank Malaysia Berhad (Company No. 127776-V).
37No.
Lim Eng Seong Country Head Retail Banking and Wealth Management
Just when we thought 2018 had gotten off to a good start, US President Donald Trump decided to impose tariffs on Chinese imported goods to the US. Of course, China did not take this lying down, and responded accordingly with the announcement of tariffs of their own on US exports to China.
While the tit-for-tat moves have not materialised into actual imposition of tariffs yet, the possibility of a trade war between the world’s two largest economies has the rest of us sitting on the edge of our seats. A full-blown trade war would send ripples through the global economy and impact investments. So in our first article, we take a look at how a potential trade war may impact the global economy and the implications it could have on investors like yourself.
While there is no need to panic, it is important to stay informed and review your investment portfolio if necessary to counter any negative impact of a possible trade war between the US and China.
Since we are on the subject of reviewing your investment portfolio, have you reviewed your investment portfolio recently? This issue’s second article offers some good reasons why it is good to conduct periodic reviews of your investments and rebalance your portfolio when necessary. Portfolio
rebalancing is a good way to keep your investment strategy on track while ensuring that your risks are minimised.
I encourage you to speak to your Relationship Manager or walk into any branch to arrange a portfolio review to tune up your investments.
Finally, we delve into the world of higher education abroad. If you are planning to send your child overseas to pursue their university education, you would know that choosing the right place to study and funding your child’s future is a huge undertaking. So we thought we could give you a helping hand on higher education abroad focusing on the top three destinations of choice for Malaysian students – Australia, UK and the US.
Happy reading!
Staying On Course with Your Investments
OFF CUFFTHE
Enjoy higher interest rates* when you integrate your Business and Personal relationship.At HSBC, we don’t just manage your personal economy, but strive to provide you with a range of solutions that allow you to easily manage your business and personal finances in one place.
Sign up for HSBC Retail Business Banking today and gain access to funding, financial guidance and opportunities so you can focus on what you enjoy most: growing your business. What’s more, integrate your new HSBC Retail Business Banking’s 1-Biz Account with your existing Premier Account to enjoy higher interest rates*.
} 1-Biz Account: Enjoy higher interest rates* determined by the Integrated Total Relationship Balance of your HSBC Premier Account and 1-Biz Account
} HSBCnet: Designed to increase productivity by simplifying daily processes online anytime, anywhere
} Cash Management Solutions
} Business ATM Card
} SMS Alert
Kindly contact your Relationship Manager or walk into any HSBC branch to find out more about HSBC Retail Business Banking.
Issued by HSBC Bank Malaysia Berhad (Company No. 127776-V). *Based on comparison between one who holds HSBC Premier Account and 1-Biz Account and another who holds 1-Biz Account only. 1-Biz Account oers tiered interest rates based on Total Relationship Balances for Business and Personal Accounts.
Since March 2018, the US and China have been locked in a battle of words over trade that has resulted in announcements of new tariffs on products from both countries.2 While the tit-for-tat tariffs have not turned into a full scale trade war just yet, it has shaken investors, causing markets to swing in the days following the announcements.1
So why are we in this perilous state of a possible trade war between the world’s two largest economies1?
US President Donald Trump has given several reasons for the US to act against China. The key reason is trade imbalance and the large trade deficit the US has with China that has continued to widen in recent years.2 In 2017, the US imported USD504 billion worth of goods from China, while China imported USD130 billion from
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A potential trade war is brewing between the world’s two largest economies1 with a fallout that will impact the rest of the world.
GAME DARE OFthe US.2 President Trump argues that the growing deficit shows how China is unfairly restricting US exports while boosting its domestic producers.2
The US administration has also alleged that China has sought to misappropriate US intellectual property through joint-venture
requirements, unfair technology licensing rules, purchases of US technology firms with state funding and outright theft.3
The imposing of new tariffs on Chinese imports is meant to crack down on Chinese intellectual property theft and address unfair trade practices.4
GAME DARE
The Widening Trade Gap
• Data: United States International Trade Commission. As published by Barron’s, The Brewing U.S.-China Trade War, Explained in Charts, 9 April 2018.
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US Import of Chinese Products China Import of US Products
US-China Game of Dare Timeline
• Sources: CNN Money, US-China Trade Battle: Catch Up Here, 8 April 2018.
January 2018US announces a 30% tariff on imported solar panels – most of which come from China – and taxes on large residential washing machines starting at 20%.
3 April 2018US threatens to target another USD50 billion in Chinese goods with a proposed 25% tax on close to 1,300 Chinese goods from the aerospace, machinery and medical industries.
9 March 2018US imposes tariffs on steel imports, taxing steel imports at 25% and imported aluminium at 10%.
4 April 2018China retaliates and warns of tariffs on another USD50 billion in American goods including aircraft, automobiles, soybeans and chemicals.
5 April 2018President Trump calls for additional new tariffs worth USD100 billion on Chinese imports.
5 April 2018China warns that it would retaliate to any additional tariffs imposed by the US with already formulated countermeasures.
2 April 2018China hits back by imposing tariffs on US imports worth USD3 billion: 15% duty on 120 American products including fruits, nuts, wine and steel pipes, and a 25% tax on eight other products including recycled aluminium and pork.
• Data: United States International Trade Commission. As published by Barron’s, The Brewing U.S.-China Trade War, Explained in Charts, 9 April 2018.
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While the US has announced new tariffs on USD50 billion worth of imports from China covering over 1,300 products at a 25% tariff rate, and China has retaliated by announcing its own set of tariffs on USD50 billion worth of US imports at an identical 25% rate on 106 products, neither country has actually implemented the new measures.5
The Chinese government has not specified when the tariffs will be implemented, saying the rollout would depend on when the US introduces its own tariffs. And for the time being, China has signalled their willingness to negotiate.5 On the other side of the Pacific, the US has said it will consult with businesses over a 30-day period before making its final decision.5
It would seem neither side really wants a trade war.
A full-fledged trade war between the US and China would have a severe impact on the global economy and there is a risk global growth could fall quickly, according to the director-general of the World Trade Organisation, Roberto Azevedo.6 The hope is that it will not get to that stage. While China has said it is not afraid of a trade war, it maintains that negotiations should remain open.6 The US has also said that it was cautiously hopeful that the two countries could come to an agreement on trade issues.6
HSBC views China’s somewhat tougher than expected response – including suggested tariffs on some commercially-important and politically-sensitive goods such as soybeans – as a
strategy of forcing the US to the negotiating table.5 HSBC believes there is a good chance that China may make some concessions in the coming weeks, which may help to calm tensions.5
Potential Economic Impact
For the time being, assuming the Chinese tariffs are imposed, the impact on the US economy is likely to be minimal.5 The tariffs affect roughly 38% of US exports to China, but it represents only 3% of total US exports in 2017.5 Also, for some products such as aircraft or soybeans, Chinese buyers may accept higher prices given the limited availability of substitutes in the global market.5
For China, the tariffs may push inflation slightly higher, but affected goods only represent a fraction of total Chinese imports, so the overall impact is likely to be muted.5 The Chinese government may also counter adverse economic impacts by some policy support measures.5
However, if a full-blown trade war were to eventuate, the consequences could be dire not just for the US and China, but for other countries as well.7 Countries that sell intermediate goods to China that are used to make products exported to the US like Taiwan and Malaysia could end up on the losing end.7 South Korea, which counts both the US and China among its largest trading partners, could also be a major casualty if a trade war breaks out.7
Overall, Asian economies would likely to be significantly impacted by a full-blown trade war, being export-oriented countries and key suppliers of components to China.7 Big financial centres like Hong Kong and Singapore, which rely greatly on the Chinese manufacturing sector, would also suffer if trade tensions escalate.7
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Possible Winners and Losers of the Trade War
• Sources: ABC News, The Winners and Losers in a US-China Trade War, 6 April 2018.
A full-blown trade war would also impact the West.7 Fears of a trade war between the US and China are already driving up borrowing costs and pushing stock prices down.7 Companies with global operations like BMW have also warned that a US-China trade war would ripple around the world.7 BMW said in a statement that barrier-free access to markets is a key factor for growth, welfare and employment throughout the global economy, and a further escalation of the trade conflict between the US and China would be harmful for all stakeholders.7
However, there could be winners as well in this US-China trade war saga.7 Some regions could benefit from a drop in exports of US goods such as soybeans.7 China was the largest buyer of soybeans from the US in 2017, and given that China’s agricultural import needs are generally inelastic, there would likely be a redistribution in trade flow which could see China substitute US soybeans with those from Latin America.7
China’s proposed tariffs on fossil fuel imports from the US could also see the Middle East gaining a greater share of Chinese trade.7 China already sources most of its polyethylene imports from the Middle East and could further increase its reliance on the region if it decides to tax American imports.7 While the US currently accounts for less than 5% of China’s imports of the commonly used plastic, bank analysts expect that number to triple over the next two years if tariffs aren’t imposed.7
The Losers
Car CompaniesThe imposition of tariffs on most passenger vehicles by China would have a significant impact on the American car industry. Major US carmakers General Motors, Ford and Tesla depend on China for 17% of their total revenue. GM has urged both countries to engage in constructive dialogue over trade, while Ford encouraged both governments to work together to resolve issues.
Boeing and IndustrialsThe Chinese list of goods that will be hit with a 25% tariff includes aircraft up to 45 tonnes in weight, which would affect some older Boeing narrow-body models. While it is not immediately clear how much the tariffs would impact newer Boeing aircraft, the company already saw its shares fall as a result of the tariff announcements along with fellow manufacturing company 3M.
US Farmers and Chemical MakersFarming equipment maker Deere has seen its shares drop by nearly USD10 as the dispute has escalated, while DowDuPont Inc – one of
the world’s largest chemical companies – said its agriculture unit could be affected by the escalating conflict, warning about price declines for soybeans. Grain traders which trade US soybeans in China are also expected to suffer from new tariffs on soybeans.
US ConsumersUS consumers are much more reliant on imports than Chinese consumers. Taxing Chinese imports would cause a rise in consumer goods prices and inflation for US consumers.
The Winners
Meat ProcessorsWhile the price of soybeans going down is bad news for farmers, US meat processors and exporters have been given a boost. The new tariffs mean that feedstock soybeans will be cheaper, which have driven the share prices of US meat processor Tyson Foods Inc and meat exporter Hormel Foods Corp up.
Chinese ConsumersChina has been very careful in picking US products that can be replaced to impose tariffs on to ensure the impact on China’s economy is controllable.
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While the situation continues to play out, it may be useful to discuss with your Relationship Manager or independent financial advisor about strategies to help your investment portfolio survive a changing trade environment, if indeed the worst case scenario happens.8 In particular, it would be beneficial to review investments that are within and affected by the Pacific Rim.8
In the meantime, a good course of action would be to continue to monitor the situation closely and weigh the potential implications of any further escalation.5 Key risks to investments include a potential breakdown of talks and the implementation of further measures with more economically damaging quotas and investment restrictions.5 Your Relationship Manager will be able to provide you with updates and how any change in the situation may affect your investments.
Investment Implications
There may be a natural fear that the proposed tariffs on both sides may hurt investment portfolios but it is important to react slowly.8 While the stakes seem high, getting rid of portfolios containing Chinese investments before careful analysis may not be the way to go.8
For the time being, HSBC has not altered our asset class views, which includes an overweight stance on global equities.5 The tariffs have yet to be implemented and remain dependent on the outcome of the 30-day consultation period, providing room for the US and China to negotiate.5 There are major incentives for both sides of the table to reach an agreement.5
World economic activity remains very strong and global trade growth is above trend, providing a supportive backdrop for global equities.10 As such, HSBC’s current valuations remain consistent with an overweight stance on the global equities asset class.10
In a sign that level heads may prevail, President Trump decided to send a large delegation to China at the end of April 2018 to negotiate a tariff deal, and has somewhat allayed fears that a full-blown trade war would materialise.9
• Sources: 1 World Economic Forum, The World’s Biggest Economies in 2018, 18 April 2018. 2 Barron’s, The Brewing U.S.-China Trade War, Explained in Charts, 9 April 2018. 3 The Star Online, Trapped in US-China Trade War, 8 April 2018. 4 South China Morning Post, Donald Trump May Crack Down on China’s ‘IP theft’ Laws With US$30b tariffs – Upsetting US Chamber of Commerce, 23 March 2018. 5 HSBC Global Investment Event, China Retaliates Against US Tariffs, Talks Now Likely, 4 April 2018. 6 BBC, WTO: US-China Trade War Would Have ‘Severe’ Economic Impact, 28 March 2018. 7 CNN Money, How a US-China Trade War Could Hurt (and Help) Others, 10 April 2018. 8 CNBC, Can Your Portfolio Withstand a US Trade War With China? 23 April 2018. 9 Forbes, Fears of a Trade War With China Are Receding, 25 April 2018. 10 HSBC Global Investment Event, US Announces Tariffs Against Chinese Imports, 26 March 2018.
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We often discuss the importance of making strategic investment choices, having an asset allocation strategy and putting a financial plan in place for the future, yet we seldom talk about an important part of managing our investment portfolio – rebalancing.
If you have an investment portfolio, each security within your portfolio would provide a different return over the course of three months, six months or the year, resulting in a weighting change of your portfolio.1 Portfolio rebalancing is like a periodic tune-up for your portfolio: it helps you keep your risk levels in check as well as minimise risks.1
Simply explained, rebalancing is the process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state.1
Why Rebalance Your Portfolio? Periodic rebalancing of your investment portfolio is a good way to keep your investing strategy on track and ensure that your portfolio is not becoming too risky when the market surges or too conservative after major market setbacks.2 Rebalancing is also useful when your personal situation changes – for example, as you move through different life stages, or perhaps when
you start a family – as this may change your long-term goals, risk tolerance and asset allocation strategy.3
It is inevitable that over a period of time, differing returns from various asset classes within your portfolio will change the percentages that you have allocated to your original asset mix.1 This change may increase or decrease the risk of your portfolio.1
To understand how rebalancing works, let’s look at a case study comparing a rebalanced portfolio versus one which hasn’t been rebalanced, and the potential results of neglected allocations in a portfolio.
Periodic reviews of your investment portfolio and rebalancing can help keep your investment strategy on track and minimise your risks.
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At the end of the second year, the equity fund performs poorly and loses 7%. At the same time, the bond fund performs well and gains 15%, while Treasuries remain relatively stable with a 2% increase. If Lee had rebalanced his portfolio after the first year, his total portfolio value would be RM118,500 – an increase of 5%.
But if Lee had left his portfolio unchanged, his total portfolio value would be RM116,858 – a gain of only 3.5%. In this case, rebalancing would have been the optimal strategy.
It could have been possible that if the stock markets had rallied again through the second year, Lee’s equity fund would have appreciated more, and the unchanged portfolio may have realised a greater gain in value. But at what risk? Just as with many hedging strategies, the upside potential may be limited, but by rebalancing, you are adhering to your risk-return tolerance level.1
Remember: the goal of rebalancing is not about boosting your long-term returns.2 Rather, the aim of rebalancing is to manage risk.2 It is a way to keep your portfolio's asset mix in sync with your risk tolerance level.2
A Rebalancing Case StudyLee has RM100,000 to invest. He decides to invest 50% in a bond fund, 10% in a Treasury fund and 40% in an equity fund.
At the end of the year, Lee’s equity fund portion of his portfolio has dramatically outperformed the other two asset classes. As a result, the percentages of his asset mix have changed considerably.
As the chart above shows, Lee's RM40,000 investment in the equity fund has grown to RM55,000 – an increase of 37%. Meanwhile, the bond fund has registered a loss of 5% and the Treasury fund realised a modest increase of 4%.
The overall return on Lee's portfolio was 12.9%, but now, there's more weight on equities than on bonds. Lee might be willing to leave the asset mix as it is for the time being, but leaving it for too long could result in an overweighting in the equity fund, which is riskier than the bond and Treasury funds.
A popular belief among many investors is that if an investment has performed well over the last year, it should perform well over the next year. As a result, many investors like Lee may remain heavily invested in last year’s “winning” equity fund and drop his portfolio weighting in last year’s “losing”fixed income fund.
So let’s compare the values of Lee’s rebalanced portfolio versus if he had left it unchanged the following year.
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Record
If you have decided on an asset allocation strategy that seems perfect for you and purchased the appropriate securities in each asset class, keep a record of the total cost of each security at that time as well as the total cost of your portfolio. These numbers will provide you with historical data of your portfolio, so at a future date, you can compare them with current values.
Compare
On a chosen future date, review the current value of your portfolio and of each asset class. Calculate the weightings of each fund in your portfolio by dividing the current value of each asset class by the total current portfolio value. Compare this figure to the original weightings. Are there any significant changes? If not – and if you have no need to liquidate your portfolio in the short term – it may be better to remain passive.
Adjust
If you find that changes in your asset class weightings have distorted the portfolio's exposure to risk, take the current total value of your portfolio and multiply it by each of the (percentage) weightings
originally assigned to each asset class. The figures you calculate will be the amounts that should be invested in each asset class in order to maintain your original asset allocation.
Cost
If you have to sell or purchase assets to rebalance your portfolio, it is also worthwhile to consider the cost implications involved. Transactions involving your investments may incur fees that could eat into your portfolio value, particularly if you are buying and selling too often. There are also tax implications to readjusting your portfolio.
Basic Steps for Rebalancing Your Portfolio
• Sources: Wealth Advocates, Portfolio Rebalancing in Today’s Market, 20 December 2017.
Rebalancing Strategies There are several rebalancing strategies that you can utilise to create an optimal investment process.
Calendar RebalancingCalendar rebalancing is the most basic rebalancing approach.4 This strategy simply involves analysing your investment holdings within your portfolio at predetermined time intervals and adjusting to the original asset allocation at a desired frequency.4 Monthly and quarterly assessments are typically preferred because weekly rebalancing would be too costly while a yearly approach
would allow for too much intermediate portfolio drift.4 The ideal frequency of rebalancing should be determined based on time constraints, transaction costs and allowable drift.4
The advantage of calendar rebalancing over formulaic rebalancing is that it is less time consuming, since formulaic rebalancing requires continuous attention.4
Percentage of Portfolio RebalancingA preferred but slightly more intensive approach involves a rebalancing schedule based on the allowable percentage
composition of an asset in your portfolio.4 Each asset class is given a target weight and a corresponding tolerance range.4
For example, your allocation strategy may include the requirement to hold 30% in emerging market equities, 30% in domestic blue chips and 40% in government bonds with a tolerance of +/-5% for each asset class.4 When the weight of any one asset class drifts outside the allowable band – in this case 25% to 35% for emerging market and blue chip equities and 35% to 45% for government bonds – the entire portfolio is rebalanced to reflect the initial target composition.4
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Constant Proportion Portfolio InsuranceThis third rebalancing approach strategy assumes that as your wealth increases as an investor, so does your risk tolerance.4 The basic premise of this strategy stems from having a preference of maintaining a minimum safety reserve held in either cash or risk-free government bonds.4 When the value of the portfolio increases, more funds are invested in equities, while a fall in portfolio value results in a smaller position towards risky assets.4 This strategy of rebalancing is useful when you need to maintain
a safety reserve – whether it will be used to fund your child’s educational expenses or be put towards the purchase of a home.4
Whichever strategy you choose, portfolio rebalancing ultimately provides protection and discipline for your chosen investment strategy.4 The ideal strategy will balance out the overall needs of rebalancing with the costs associated with the strategy chosen.4
Absolute AmountApart from rebalancing your existing portfolio, you can also increase the overall portfolio
size by topping up your portfolio value. It’s worth noting that if you are adding new money to your portfolio, in some cases it might be more beneficial to simply not contribute any new funds to the asset class that is overweighted while continuing to contribute to other asset classes that are underweighted. Your portfolio might be able to rebalance over time without you incurring capital gains taxes.3
Speak to your Relationship Manager or walk into any HSBC branch for your portfolio review and rebalancing.
Freezing at the Wheel
The idea may be sticking to a long-term plan tailored to your goals such as education funding and retirement, but if your job situation changes or you come into an inheritance, it may be time to revise your plan to emphasise safety over big returns – to change direction because the planned route may not take you where you want to go.
Deciding when to rebalance is a judgement call that can vary with circumstances. You may need to allow for a wider diversion from your goals one time and a narrower one at other times.
Becoming Obsessive
Markets fluctuate at such a pace that the changes you made to your portfolio yesterday may seem like a bad decision today. However, you should resist the temptation to constantly rebalance because fees and taxes can erode your holdings. Some funds restrict the frequency of trades as well, so an unnecessary move might be tricky to reverse if you need to soon after.
Rebalancing too often could result in a lot of transactions and fees, and could trigger damaging capital gains taxes as well.
Losing Focus
You won’t rebalance effectively if you don’t know what’s going on. HSBC’s Wealth Dashboard, for example, allows you to log on and monitor your investment portfolio day-by-day. It’s less about finding the most optimal time to rebalance and more about finding a system that works for you as an investor so you can stick with it. Consistency matters more than the actual day or month.
Mistakes to Avoid When Rebalancing Your Portfolio
• Sources: CNBC.com, 5 Mistakes to Avoid When Rebalancing a Portfolio, 15 February 2017.
• Sources: 1 Investopedia, Rebalance Your Portfolio to Stay on Track, 30 January 2018. 2 CNN Money, Is it Really Necessary to Rebalance Your Investment Portfolio? 24 January 2018. 3 Wealth Advocates, Portfolio Rebalancing in Today’s Market, 20 December 2017. 4 Investopedia, Types of Rebalancing Strategies, 30 January 2018.
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Beyond thinking about what country and in which university your children plan to pursue their university studies, it is also important to plan financially for their higher education.Sending your children overseas to further their higher education is a significant decision in your family’s life journey. With so many options of destination countries, choices of universities and degrees to pursue, the decision can be exciting and daunting at the same time.
Australia, UK and US are the most popular destinations of choice for Malaysian parents and students – with about 6 out of 10 Malaysian students studying abroad choosing these three countries annually.1 Here are some things to think about when sending your child abroad.
Higher Education Abroad
A Guide to
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It’s no surprise that Australia continues to be a favourite destination for Malaysian students choosing to further their education abroad due to its proximity, world-class education and living.2 About 20,000 Malaysians choose to study in Australia annually at its over 1,100 institutions offering more than 22,000 courses.3 Eight Australian universities rank in the top 100 universities in the world.3
Sydney Australia’s largest city plays host to two of the country’s prestigious Group of Eight institutions – University of New South Wales (ranked 45th in the world) and University of Sydney (ranked 50th in the world) – alongside other options like University of Technology Sydney (176th), Macquarie University (240th) and University of Western Sydney (551-600).4
MelbourneThe cultural capital of Australia is home to a number of the country’s top universities including the University of Melbourne (ranked joint 41st in the world) and Monash University (60th) – which are both Group of Eight institutions – as well as Royal Melbourne Institute of Technology (RMIT) (joint 247th), Deakin University (joint 293rd), La Trobe University (360th) and Swinburne University of Technology (421-430).4
BrisbaneFor those hoping for weather that’s a bit closer to home, Australia’s third largest city also has quality institutions of higher learning including the University of Queensland, ranked joint 47th in the QS World University Rankings 2016-2017, together with Queensland University of Technology (joint 247th) and Griffith University (joint 325th).4
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Why Australia?Why not? Australian universities are known to be strong proponents of internationalisation and are accustomed to welcoming large numbers of international students each year.4 It is also recognised as one of the most liveable countries in the world.3
To ensure that international students receive a high quality of education, Australia has a
national regulatory and quality agency for higher education – the Tertiary Education Quality and Standards Agency (TEQSA) – that monitors quality and regulates university and non-university higher education providers.2 Meanwhile, The Australian Qualification Framework (AQF) will allow the qualification your children receive in Australia to be recognised around the world.3
Applying to AustraliaThere is no federal or state-level application system for international students applying to universities in Australia, so your children can apply directly to the universities of their choice; the other option is to apply through an Australian education agent.3
As part of the application process to the university and for your children’s visa, they will need to fulfil certain entry requirements including:
Academic requirements.3
English language requirements.3
Evidence of funds to support your study.3
Overseas student health cover.3
Getting a Student VisaOnce your children receive the electronic Confirmation of Enrolment certificate from the university, they can then apply for their student visa themselves or through an education agent.3 The common student visa for university studies in Australia is Subclass 500.3
The typical requirements needed for the student visa include:
An electronic Confirmation of Enrolment (eCoE) certificate.3
Meet the Genuine Temporary Entrant requirement.3 (More information is available on the Department of Home Affairs website.)
Sufficient funds for airfares, course fees and living costs.3
English language proficiency.3
Meet health and character requirements.3
Acceptable Overseas Student Health Cover (OSHC).3
Once your children have confirmed where they will be studying, you can look for accommodation for them that suits their needs and your budget. There are several options when it comes to student accommodations in Australia.
RentalYour children can rent or lease a property by themselves or share with friends.3 This can be done through a real estate agent or privately.3 You will need to pay a security deposit or bond (usually four weeks rent) and rent in advance (also usually four weeks).3 Expect to pay between AUD165 to AUD440 per week.3
On CampusCampus living is a good option to minimise travel.3 Most universities have comfortable and furnished apartment-style living on campus or nearby, sometimes with meals and cleaning included.3 On-campus accommodation typically costs between AUD90 to AUD280 per week.3
HomestayWith homestay, your children will live with a family in their home.3 It is a good option if you want your children to have the comforts of an established home, often with meals and cleaning included.3 Families offering homestay accommodation to international students are thoroughly screened to ensure they can provide a suitable living environment for students.3 The cost of homestay accommodation ranges from AUD235 to AUD325 per week.3
The CostThe cost of studying in Australia can vary depending on the university and course your children choose, as well as the city they are in.3 Annual fees for an undergraduate Bachelor degree ranges from AUD15,000 to AUD33,000, but high value courses such as veterinary and medicine can be higher.3
Based on the Australian government’s Department of Home Affair’s financial requirement to receive an Australian student visa, the minimum cost of living per year is estimated at AUD20,290.3 So you should expect to budget between AUD35,000 to AUD55,000 a year if your children intend to further their studies Down Under.
Accommodation
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LondonThe capital of UK ranks among the world’s best cities for students with an impressive 19 universities featured in the QS World University Rankings. This home to nine million people has some of the world’s best institutions: University College London and Imperial College London both ranking in the top
10 in the QS World University Rankings 2018, King’s College
London (joint 23rd in the world), London School of Economics and Political Science (35th) and many more.6
ManchesterBeyond being home to two of England’s popular football clubs – Manchester United and Manchester City – Manchester is also home to some of UK’s top-ranking universities including the University of Manchester (ranked 34th in the QS World University Rankings 2018), University of Salford (ranked 751-800) and Manchester Metropolitan University (ranked 801-1000).6
Oxford and CambridgeNo mention of higher education in UK would be complete without mentioning the country’s two most famous and prestigious universities. Based in the neighbouring cities of their namesake, the University of Cambridge is ranked fifth in the QS World University Rankings 2018, while the University of Oxford is sixth.6 Both Oxford and Cambridge are collegiate universities with their constituent colleges spread over the city centres.6
TopEducation
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om The United Kingdom continues to be a popular university destination for Malaysian students. For the 2015/16 enrolment year, there were just over 17,400 Malaysian students studying in the UK1
from over 400,000 international higher education students there.5 The UK is the world’s second leading study destination after the United States thanks to the strong global reputation of UK universities.6
Why UK?UK has long been regarded as a powerhouse in the field of education and research, with some of its top universities being in existence since the 12th and 13th centuries.7 Seventy one UK universities feature in the QS World University Rankings 2018 and four institutions are currently ranked in the global top 10.6
UK universities offer a flexible study environment with a strong focus on research and innovation as well as a pathway to work with some of the best global companies operating in the country.7 Among the preferred courses in the UK are management, medical sciences, engineering, law and economics.7
Accommodation
The CostDepending on the course your children decide to undertake and the university they are going to in the UK, tuition fees can vary between GBP7,000 to GBP35,000 per year for an undergraduate degree.6 In addition, you should budget at least GBP12,000 a year to cover living costs.6 If your children are studying at a university in London, living costs will be higher as rent and other costs are considerably higher in the capital than in the rest of the country.6
Applying to the UKApplying for an undergraduate course in the UK is simple. Through the Universities and College Admissions Service (UCAS), your children can register and apply to all UK universities and colleges at one place.8 The service allows you to apply for up to five courses at once for a small administration fee and UCAS handles everything else.8
As part of the online application process on the UCAS website, you will need to:
Complete the application form.8
Write a personal statement explaining why you are interested in a course, the skills you have that make you suitable, and your life experiences and achievements.8
A written reference from someone who can confirm your ability to do the course (like a school teacher or tutor).8
There are three application deadlines throughout the year:
January – for most undergraduate courses.8
March – for some art and design courses.8
October – for courses at the Universities of Oxford and Cambridge, or for most courses in medicine, veterinary medicine/science and dentistry.8
UCAS will contact your children with any offers from their chosen universities or colleges.8
Getting a Student VisaOnce your children have received an offer from a university or college, they can then apply for a UK student visa with the Confirmation of Acceptance of Studies document issued by the institution.7 Students 16 and over will need to apply for the Tier 4 (General) Student Visa.7
As part of the visa application, your children will need to provide the following documents:
A valid travel ID.7
Financial records showing the student can pay for the fees and expenses during the course.7
Medical test reports.7
Parental or legal guardian consent.7
There are a wide variety of accommodation options available to students in the UK. Universities and colleges will have dedicated accommodation teams that can help your children find the right type of living environment to suit their needs.9
University Owned AccommodationMost UK universities offer places for new students in their halls of residence.9 Halls can vary from single rooms with shared kitchen and living areas to self-contained studios.9 Your children can often choose from catered halls (with a dining room where you can buy meals) to self-catered halls (with kitchens where you can cook).9 Most halls are mixed male and female, but there are single sex halls as well.9
Private AccommodationMany students in the UK live in private, rented accommodation in the second year and onward, offering a taste of life beyond the campus.9 Most private accommodation is furnished except for personal items like kitchen utensils and bedding, and your children will also need to pay for utilities.9 Rental accommodation in the UK is strictly regulated, so your children will be able to get assistance if they have any issues.9
HomestayA homestay – where your children live with a UK family in their home – can be a great opportunity to experience UK culture first-hand.9 Your children’s university may be able to help them arrange this, or you can contact one of the homestay agencies registered with the British Council.9
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BostonIf you want your children to be surrounded by the best and brightest students and academics, then Boston is the place to be.10 Together with the nearby town of Cambridge, Boston plays host to Massachusetts Institute of Technology (MIT) and Harvard University – ranked first and third in the world in the QS World University Rankings 2018 – as well as other top universities including Boston University (ranked 81st), Tufts University (joint 243rd), Boston College (joint 339th), Northeastern University (joint 346th) and Brandeis University (411-420).10
ChicagoIf your children don’t mind cold winters and lots of snow, the third-most populous city located in the heart of the US offers a selection of some of the best institutions in the country.10 High ranking universities in Chicago and its surrounds include the University of Chicago (9th in the QA World University Rankings 2018), Northwestern University (joint 28th), University of Illinois at Urbana-Champaign (69th), University of Illinois, Chicago (joint 207th) and Illinois Institute of Technology (joint 395th).10
San Francisco and the Bay AreaBeyond being home to the Silicon Valley, San Francisco and the surrounding Bay Area is also home to two of the world’s most prestigious universities – Stanford University and the University of California, Berkeley, ranked 2nd and 27th respectively in the QS World University Rankings 2018.10 If the tech world is your children’s calling, then this city is certainly the place to be.
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ates The United States is the world’s leading study destination for international
students.10 It’s no wonder, considering the US has over 4,000 universities – more than ten times the academic institutions on average than any other country in the world.11 In 2015/2016, international student enrolment at US universities exceeded the one million mark for the first time.11
Why US?The US boasts over 150 leading universities in the QS World University Rankings11, and 50% of the world’s top 50 universities are based in the US.10 The American higher education system is the most flexible education system in the world, which offers countless programmes and degree courses.11 At the undergraduate level, your children will have the flexibility to pursue different courses before they declare their choice of major at the end of the first year.11 Hence,
if your children are undecided about a future career, they can explore different areas of interest before making a decision about their future.11
US degrees are widely recognised and accepted around the world, and often companies look positively at US degree holders because of the insights they offer from experiencing different fields of study and a broader perspective on things.11
The CostAs with Australia and the UK, the cost of a university education in the US can vary widely depending the university you choose, to the type of degree programme, to the location.11
It’s a safe estimate to say that if your children are pursuing a degree in the US, you should be budgeting about USD30,000 per year on tuition fees.11 Of course, if your children are enrolled in a highly ranked university, the tuition fees could be much higher; for example, MIT has set its tuition fees at USD49,580 for undergraduate studies for the 2017/18 academic year.10 Meanwhile, you should budget between USD8,000 to USD12,000 annually to cover the cost of living including accommodation, food and living expenses.12
While the cost of a university education in the US may seem high, the good news is that many students don’t have to pay full tuition fees.10 At many US universities, a majority of students receive some form of financial aid via grants, scholarships and loans.10
Applying to the USTo start your children’s university application to the US, they will need to apply directly to each of the universities they are interested in.10 Entry requirements for each university are different, but most involve completing standardised admissions test like TOEFL and SAT.10 Most universities will also ask for transcripts of their grades,
recommendation letters from teachers and a personal statement as part of their application.10
According to the Malaysian-American Commission on Educational Exchange website, these are the steps for the application process to US universities:
Choose a field of study.
Make a short list of universities.
Take the standardised tests like TOEFL and SAT.
Request application materials and catalogues from universities.
Send in application together with required documents.
Receive responses from universities.
Apply for visa.
Getting a Student VisaAfter your children have been accepted to study at a US university, they will be able to apply for the F-1 non-immigrant visa. In order to obtain the F-1 visa, your children will need to arrange for an interview at the US embassy and follow this process:
Pay the Machine Readable Visa (MRV) application fee of USD160.10
Complete a DS-160 form online and upload a photograph.10
Attend an interview with a consular officer with relevant documents.10
The embassy may request additional documents like proof of ability to cover your costs, academic preparation, etc so it is good to have these prepared for your children before the interview.10
There are three common accommodation options for students studying in the US.
On-Campus AccommodationMost universities have on-campus residence halls or apartments where your children can live.12 While it can be more expensive, it is a great option for first year students because they will get to know other students very fast and be fully immersed in campus life.12 Meals may also be included in your children’s on-campus accommodation.12
Off-Campus AccommodationYour children can rent a private or shared apartment or house outside of campus, usually for a lower price than living on-campus.12 The International Office at the university can usually help your children with information about private housing and where to look for them.12 It can also be useful for temporary accommodation in the first few weeks upon arriving.12
Host FamilyThis accommodation alternative is only offered by a few universities.12 It is more expensive compared to living off-campus, but gives your children the extra support of a family and ingrains them in American culture quickly.12
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An overseas education is a costly financial commitment and foreign exchange volatility could potentially add to the cost of funding your children’s university tuition fees and living expenses abroad. Foreign exchange rates rise and fall constantly. So if the Malaysian Ringgit were to weaken against the currency of the study destination your children have chosen i.e. AUD, GBP or USD, the cost of their tuition fees and living expenses will become more expensive in Ringgit terms.13
Planning AheadSo where do you start? If you have decided where to send your children to further their university education, then you could start saving or investing in the study destination’s currency to cushion the impact of potential currency fluctuations. For example, if you have decided to send your children to study in Australia, you could look at hedging the Ringgit against the Australian Dollar. Forex hedging is a strategy to protect an existing or anticipated position from an unwanted move in exchange rates to minimise future downside risk.15 It is worthwhile to note that hedging is not a money making strategy.15
Choosing a Currency to Protect Against FluctuationsLet’s use the scenario of pursuing a three-year undergraduate degree based on an annual cost of AUD50,000 in Australia using historical exchange rates as an example. So back in 2014, you made the decision to send your
children to Australia to start their undergraduate degree in 2017. In 2014, the exchange rate from Ringgit to the Australian Dollar was RM3.0405 to AUD1.14 Three years later, in 2017, the Ringgit had depreciated against the Australian Dollar with an exchange rate of RM3.2459 to AUD1.14
Due to the rise of the AUD, you would have had to pay RM30,810 more to cover the cost of your children’s education in Australia over that period because of currency fluctuations.
Protect Against Currency FluctuationsSome possible strategies to use for hedging your Ringgit include dual currency investments, buying and holding foreign currency denominated bonds, investing overseas and investing in stocks that may benefit from Ringgit volatility.16
For example, if you are planning to send your children to the UK in the next couple of years, you could put money into HSBC’s Dual Currency Investment17 with a currency pairing of MYR and GBP or hedge against any GBP fluctuations by opening a GBP denominated Foreign Currency Time Deposit account.
If you have a longer time horizon to plan for your children’s overseas education, you could also consider investing in HSBC's foreign currency unit trusts, bonds or perhaps invest in real estate abroad as a hedge against foreign currency movements.
Preparing for UniversityAs a Premier customer, you can take advantage of our foreign currency services available to make your children’s transition overseas easier and more seamless. For example, you are able to open a bank account for your children overseas from Malaysia before they move abroad.
With Global View Global Transfers, you have the convenience of managing all your accounts in one place and transfer money instantly between your local and overseas HSBC accounts at no cost18. In addition, you can make convenient online transfers abroad via our Telegraphic Transfer with Real-Time FX rates to get competitive exchange rates.
To find out more about how we can help with managing your children’s higher education funds, speak to your Relationship Manager or walk into any HSBC branch today.
3 Years Total CostCost at 2014 exchange rates (AUD1 = MYR3.0405) Exchange rate as at 16 April 2014
MYR456,075
Cost at 2017 exchange rates (AUD1 = MYR3.2459) Exchange rate as at 20 June 2017
MYR486,885
Difference MYR30,810
• Sources: 1 ICEF Monitor, Malaysian Government Cools on Study Abroad but Outbound Still Growing, 26 April 2017. 2 IDP.com, Study in Australia. 3 Study in Australia, Why Study in Australia?, as at 25 April 2018. 4 Top Universities, Study in Australia. 5 British Council, Want to Study in UK? 6 Top Universities, Study in the UK. 7 IDP.com, Study in UK. 8 Study UK, How to Apply, as at 25 April 2018. 9 Study UK, Accommodation. 10 Top Universities, Study in the US, as at 25 April 2018. 11 IDP.com, Study in USA. 12 Educations.com, Tuition Fees & Study Costs in the United States. 13 ICEF Monitor, The Relationship Between Currency Exchange and Student Mobility, 9 December 2015. 14 XE.com, XE Currency Converter. 15 Investopedia, Forex Hedge. 16 The Star Online, Five Ways to Hedge Against Ringgit Volatility, 2 May 2015. 17 Dual currency investment is for Sophisticated Investor only. 18 For Premier or Advance customers only.
Preparing Financially for an Overseas Education
Exchange rates are obtained from www.xe.com, as at 7 May 2018. Past performance is not indicative of future performance.
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You should consider investment products that have the same or lower product risk rating as your risk tolerance rating. Talk to your Relationship Manager for more information on the above funds.
• Investors are advised to read and understand the contents of the respective product offering documents or prospectus before investing. Among others, investors should consider the fees and charges involved. The price of units and distributions payable, if any, may go down as well as up. Top Performing Unit Trust Funds distributed by HSBC (ranked by 3 Years Performance Growth %). Data is sourced from Morningstar Asia Limited on May 8, 2018.
* Asset Type is based on Morningstar Asia Limited classification.
NAME OF FUNDS ASSET TYPE*1 MONTH
01.04.18 to 30.04.18
%
3 MONTHS01.02.18 to 30.04.18
%
6 MONTHS01.11.17 to 30.04.18
%
1 YEAR01.05.17 to 30.04.18
%
3 YEARS01.05.15 to 30.04.18
%
4 CIMB-Principal Greater China Equity Fund Equity 2.25 -5.21 -1.25 16.59 40.97
3 Affin Hwang Select Asia (ex Japan) Opportunity Fund Equity 1.96 -4.38 0.78 11.88 34.43
5 RHB Gold and General Fund Equity 3.42 -3.60 -5.21 -0.87 33.66
3 CIMB-Principal Asia Pacific Dynamic Income Fund (Class MYR) Equity 0.84 -4.12 -1.22 15.10 31.35
4 Manulife Investment Asia-Pacific REIT Fund Equity 2.17 -2.80 -2.55 3.67 31.32
4 Advantage Asia Pacific ex Japan Dividend Equity 3.30 -4.74 -3.57 5.20 30.77
4 Eastspring Investments Global Emerging Markets Fund Equity 0.67 -6.36 -3.71 9.65 30.69
4 CIMB-Principal Global Titans Fund (Class MYR) Equity 4.02 -2.94 -3.26 2.49 29.92
4 CIMB-Principal China-India-Indonesia Equity Fund Equity -1.28 -9.01 -7.11 5.17 29.75
4 AmSchroder European Equity Alpha Equity 5.81 -3.28 -3.31 1.93 29.06
3 Affin Hwang Select Dividend Fund Equity 0.97 -1.70 3.21 10.10 26.02
3 Affin Hwang Select Opportunity Fund Equity 0.69 -2.93 2.37 4.82 26.00
4 CIMB Islamic Asia Pacific Equity Fund Equity 0.84 -5.62 -6.61 11.37 25.01
3 Eastspring Investments Equity Income Fund Equity -0.66 -0.51 4.96 8.10 24.58
4 RHB US Focus Equity Fund Equity 1.61 -4.98 1.15 5.82 24.54
4 Franklin U.S. Opportunities Fund - MYR Class Equity 0.69 -1.43 6.51 13.44 24.40
3 RHB Asian Income Fund Allocation 1.56 -2.13 -1.32 2.17 24.22
4 Franklin U.S. Opportunities Fund - USD Class Equity 0.62 -1.38 7.01 13.81 22.51
2 AmTactical Bond Fixed Income 0.15 0.45 0.41 2.00 22.40
4 RHB GS US Equity Fund Equity 3.41 -3.19 4.96 9.20 20.60
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Risk Tolerance Rating
HSBC's Fund Selection
Short-TermFund Performance
Very Cautious (Risk Rating 1)
You are generally comfortable with achieving minimal level of return potential on your investment coupled with minimal risks.
Capital values of products that are potentially suitable for you can fluctuate and may fall below your original investment. In normal market conditions fluctuation is expected to be minimal (although this is not guaranteed), and you are comfortable with this level of fluctuation.
Cautious (Risk Rating 2)
You are generally comfortable with achieving a low level of return potential on your investment coupled with a low level of risk.
Capital values of products that are potentially suitable for you can fluctuate and may fall below your original investment. In normal market conditions fluctuation is expected to be low (although this is not guaranteed), and you are comfortable with this level of fluctuation.
Balanced (Risk Rating 3)
You are generally comfortable with achieving a moderate level of return potential on your investment coupled with a moderate level of risk.
Capital values can fluctuate and may fall below your original investment. Fluctuation is expected to be higher than products that are suitable for investors in lower risk tolerance categories, but not as much as for higher risk tolerance categories.
Adventurous (Risk Rating 4)
You are generally comfortable with achieving a high level of return potential on your investment coupled with high level of risk.
Capital values can fluctuate significantly and may fall quite substantially below your original investment. You understand the risk/reward equation, and are comfortable with this level of fluctuation.
Speculative (Risk Rating 5)
You are generally comfortable with maximising your return potential on investment coupled with maximised risk.
Capital values can fluctuate widely and may fall substantially below your original investment. You understand the risk/reward equation, and are comfortable with this level of fluctuation.
