www.hsbc.com

HSBC Holdings plc Hong Kong

Hong KongMark McCombe, Chief Executive

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Forward-looking statements

This presentation contains non-GAAP financial information. Reconciliation of non-GAAP financial information to the most directly comparable measures under GAAP can be found in HSBC’s 2010 Interim Report in the Operating and Financial Review.

This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Interim Report. Past performance cannot be relied on as a guide to future performance.

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Hong Kong’s outlook is better than ever…

•

Sharp V-shaped recovery from crisis– Allowing normalization at elevated levels

– Transitioning into sustainable growth - 6.5% real GDP growth in Q210 2

– Mounting business confidence and buoyant domestic demand

•

Sustained Mainland China recovery to counter-balance any deterioration in the West

•

Rise of Greater China bringing significant people, trade and capital flow into HK

•

RMB internationalization – HK as offshore RMB centre

Source: [1] HSBC Global Research (nominal GDP)[2] HSBC Global Research, Hong Kong Chartbook, 16 September 2010

Nominal GDP (USDbn) and GDP growth (%)1

190

207215 209

229

6.4

2.4

5.4

(2.7)

7

0

50

100

150

200

250

300

2006 2007 2008 2009 2010e(3)

(2)

(1)

0

1

2

3

4

5

6

7

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HSBC is the Largest and Leading Bank in Hong Kong Well-Positioned to Capture Market Opportunities

Over 350,000 SME customers

Leading SME and cross-border bank

Over half of CMB customers are international

50 per cent of new CMB accounts are mainland

Chinese companies

No. 1 in mortgages; 22 per cent market

share1

Leading market shareNo. 1 in MPF; 32 per cent market

share3

No 1. in cards with 4.26m in

force; 47 per cent share in

balances4

No. 1 in life insurance; 26.7 per cent market

share2

No. 1 in Asia-ex Japan bonds since 20067

Top-ranked in trade, cash management, FX, investment banking6

Best Domestic Cash

Management House in

Hong Kong6

Led 9 of 13 RMB bond issuances

since 2007

No. 1 in HKD bonds since

20027

No. 1 in penetration into premium banking segment (46 per cent)5

Leading mass affluent and mid-market share

No. 1 in penetration into mid-market integrated accounts (49 per cent)5

Note:(1) mReferral(2) Office of the Commissioner of Insurance, H1 2010 (combined HSBC and Hang Seng share)(3) Hong Kong Mandatory Provident Fund(4) Hong Kong Monetary Authority Q1 2010(5) HSBC Wealth Management Tracker, OracleAddedValue(6) FinanceAsia 2010(7) Bloomberg

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Rise of Greater China Significant Economic Benefits for Hong Kong

TradeChina is the largest exporting country - USD1.2trn total exports in 2009 - Will surge to around USD2.4trn in 2020

Robust HK/China trade is robust - 53% exports/44% imports of HK to/from China - 51%/62% of HK re-exports to/from China

CapitalChina engages in active foreign asset acquisition and continued domestic infrastructure spending

Strong capital flow between China and HK - > 1/3 HK FDI originated from China in 2009 - 45% of overseas projects in China is HK related*

- 524 Mainland companies listed in HK (58% of total market cap)

Currency

Targeting full convertibility

Reserve currency?

RMB internationalization

PeopleChina has over 9m mass affluent, growing at 13% CAGR. 825k individuals of wealth over RMB10m

Spending power spilled over to HK - 10.5m Mainland tourists to HK in 1H10 - accounted for 30% of luxury retail sales# and - 1 in 4 HK flats sold to Mainland buyers in Jan – May 2010

China GDPUSD8.8trn GDP in 2009, at 8.7% growth

# in H1 2010 * World Trade Organization

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Rise of Greater China … and Significant Opportunities for Business

Rise of Wealth

Increasing SME activity into/from China

Active FDI into China

•Estimated 12m mass affluent in Mainland China by 2011

•560k+ potential new mass affluent customers in Hong Kong2

•Close to 50% HK SMEs to hold RMB accs in next 12 months1

•50% of new HK SME accounts are PRC companies

•> 50% HK MMEs plan to expand into China in the next two years1

• HSBC is the leading bank in HK for Greater China banking services

•1st to open dedicated Non-Resident Chinese (NRC) zones in HK

•Dedicated propositions for China and HK based SMEs with China interest (e.g. investment, trade)

•Dedicated staff and China Desk set up in HK/China targeting SOE/POEs 3

•Played key role in capital raising activities of PRC companies in HK

Opportunities for Hong Kong HSBC Strategic Positioning

Notes:(1) HSBC Small Business Confidence Monitor, July 2010(2) Datamonitor(3) POE – Privately-Owned Enterprise / SOE – State-Owned Enterprise

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The RMB Opportunity Chronology of RMB Developments

RMB full current account convertibilityExisting restrictions on capital accountDec 1996

RMB Personal Business Feb 2004

Designated Business CustomersDec 2005

RMB Trade SettlementJuly 2009

RMB Investment and Insurance Products Access to RMB inter bank bond marketJuly 2010

RMB Mini-QFIIRMB Securities, RMB Funds,RMB Delivered Forwards, RMB IPOs etc.??

Hong Kong becomes an Offshore RMB Center??

RMB fully convertible RMB as Reserve Currency for overseas countries< 2020 ??

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The RMB Opportunity Hong Kong as the Dedicated RMB Offshore Centre

Notes:(1) HSBC Global Research

Hong Kong as pilot centre for RMB internationalisation 0

500

1,000

Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-1007

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No. of Renminbi trade settlement (Lhs)Value of Renminbi trade settlement (Rhs)

RMB trade settlement, 2010(RMBbn)

RMB deposits in Hong Kong surpassed RMB100bn in Jul 2010

0

50

100

2004 2005 2006 2007 2008 2009 2010 Jun 2010 Jul

RMB deposits, 2010(RMBbn) RMB 103bn

•

Close ties with mainland China, both geographically and politically

•

Strong international network

•

Centre of Excellence for RMB product development

•

Experience and knowledge has been built up

•

Attracting international fund and trade flows – Over RMB30Bn RMB bonds issued in HK

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•Growth of Mainland ChinaMore customer growth (personal, corporate, institutional) will be RMB related. More future business will be RMB denominated.

•HK as Offshore RMB CentreAttract RMB trade flows and fund flows from other countries globally, e.g., correspondent bank relationships with overseas.

•Access to the Mainland financial marketOpportunities in interacting with the onshore RMB financial market, e.g., bond investment, interbank business.

Substitution IncrementalVs.

• Sustain and gain market shareMost products today are just a replica of the existing HKD/USD products.The rationale is then to sustain and gain market share.

The RMB OpportunitySubstitution or Incremental Business for Banks in Hong Kong?

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The RMB Opportunity Forecast RMB potential

Notes: (1) HSBC in-house estimates(2) HSBC Trade Confidence Index

2010 | 2011 | 2015| 2020|

• 56% of exporters and importers in HK expect to settle trade transactions in RMB by 2011 2

• 17 major markets in Asia-Pacific expect to increase RMB trade activity by 2011 2

More than half of China’s total trade flows will be settled in RMB by 2015, being primarily bilateral trade with emerging markets 1

Hong Kong's RMB trade settlement volume will reach RMB 2.2trn by 2020. This is the same size as Hong Kong's total trade in all currencies today 1

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HSBC will be a leader in RMB internationalization

•

First foreign bank to settle cross-border RMB Trade in Hong Kong & Macau

•

First foreign bank to settle cross-border RMB Trade in all ASEAN countries with HSBC presence

•

First to issue RMB Bonds in Hong Kong•

First-in-the-market: HSBC RMB Trade Finance Standard Rate: 3.88%

•

>160,000 Commercial accounts with RMB capabilities•

First to launch RMB structured deposit •

Launched RMB insurance (one of the earliest in the market)•

First offshore RMB Certificate of Deposits•

First to complete transactions in all the 2nd batch provinces/cities in China

•

Only foreign bank market maker of RMB-Ringgit direct quotation •

RMB capability in 29 countries, across all continents

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Key Takeaways

Rise of Greater China and RMB internationalization will be the most significant opportunities for HK going forward

HSBC, as the largest and leading banking group in HK, is ideally positioned to capture all market opportunities

HSBC is actively positioning our franchise for the future

Outlook for HK is as robust as ever ….