HSBC Bank USA, N.A.Trade and Supply Chain

Trade & Supply Chain

May 2010

2 |

Global Macro Trends

Emerging markets are growing faster than developed markets

In Q1 manufacturing and services output in emerging markets rose at fastest rate since Q4 2007

Manufacturing sector reported the largest quarterly rise in output since data was first available in Q2 2004

Employment shows largest increase since Q4 2007

Sales buoyed by rising exports, which showed the largest quarterly increase since Q2 2004.

HSBC expects Chinese GDP to expand at a rate of 9.5% in 2010 after an 8.5% gain in 2009 – despite drop in U.S. consumer demand

Emerging market growth impacting commodity prices

Chinese demand for commodities and other goods has kept prices high

Elevated commodity prices will continue to bolster the export earnings of emerging nations, supporting intra-regional trade within the emerging world

Economic recovery across emerging nations accompanied by a return of pricing pressures, particularly for raw materials

*Source HSBC Emerging Markets Index Q4 2009 and Q1 2010

3 |

Global Macro Trends

Economic recovery worldwide beginning to materialize in Q1 2010

All nations, both developed and emerging, have seen a robust manufacturing response in recent quarters, reflecting an end to destocking and a synchronized recovery in world trade

U.S. sales rose 1.6% in March from the prior month

Retail sales have increased 8.2% in the past year

World trade grows faster than GDP

Historically World Trade has grown at a faster pace than GDP

Although world trade declined during the 2007-9 global economic crisis, we anticipate that trade will recover quickly when GDP growth returns

*Source HSBC Emerging Markets Index Q4 2009 and Emerging Markets Index Q1 2010 and U.S. Department of Commerce

4 |

Trade and the Global Economy

Supplier / Buyer outlook – Cautious optimism in developed markets Small and medium business conducting cross-border trade report:

Increased optimism about global trade prospects Increased optimism about the global economy Confidence that they will have access to adequate credit to finance business growth

Trade continues with a stable focus on risk management throughout the trade cycle Due diligence on trading partners

*Trade Confidence Index – May 2010

115

128 129 132 133 134

116114111120 120

111104

95

108 109107 110

France Germany Australia UK Canada US Singapore HK SaudiArabia

Malaysia Mexico China Indonesia Brazil Vietnam India UAE Globalindex

Note: (1) The Global index is the unweighted average of the 17 markets listed above in 1H10

HSBC Trade Confidence Index 1H 2010 – global

overview

5 |

U.S. Trade Outlook

Buyer/Supplier Outlook – US Businesses Expect increasing trade volume

14

4438

21

10

31

48

83

%

Increase SignificantlyIncrease SlightlyMaintain Same LevelDecrease SlightlyDecrease Significantly

2H09 1H102H09 1H10 2H09 1H102H09 1H101H102H09

Outlook on trade volume in the next 6 months

6 |

Notes:Greater China includes Hong Kong SAR, Mainland China, Taiwan, Macau^ New code added in 1H10#Modified from Central/Eastern Europe to Central/Eastern Europe (excl. Germany) in 1H10##Modified from Western Europe (Incl. UK) to Western Europe (excl. UK) in 1H10

U.S Trade Outlook

%

+Figures with less than 1% mentions are not shown.

^ Germany

Don’t Know/Refused

Sub-Saharan Africa

# Central/Eastern Europe (excl Germany)

Australia/ New Zealand

^ UK

Rest of Asia

## Western Europe (excl UK)

Middle East

Southeast Asia

Canada

Greater China (HKG, PRC, TWN, Macau)

Latin America 1H10(Change

from 2H09)

1 (/)

4 (0)

27 (+13)

23 (+3)

16 (-10)

7 (-1)

5 (+1)

4 (-6)

4 (0)

3 (/)

3 (+1)

2 (-3)

1 (-2)

Emerging markets are most promising regions for growth

7 |

U.S. Trade Outlook

Need to mitigate risk still significant

U.S. Outlook on Buyer Default

Note: Figures may not add up to 100% due to rounding and the exclusion of “Don’t know/Refused” responses.

1

8

73

12

2 2

11

70

14

1

%

Decrease Significantly

Decrease Slightly

Maintain Same Level

Increase SlightlyIncrease

Significantly

2H09 1H102H09 1H10 2H09 1H102H09 1H101H102H09

-

15

79

11

1 17

77

11

%Decrease

SignificantlyDecrease Slightly

Maintain Same Level

Increase Slightly

Increase Significantly

2H09 1H102H09 1H10 2H09 1H102H09 1H101H102H09

-

Note: Figures may not add up to 100% due to rounding and the exclusion of “Don’t know/Refused” responses.

U.S. Outlook on Supplier Non-Delivery

8 |

U.S. Trade Outlook

%

3 (-1)

4 (-4)

7 (+6)

39 (+10)

35 (+9)

32 (-4)

29 (+3)

25 (-2)

15 (-4)

10 (-3)

8 (-4)

2 (+1)

1 (-1)

1 (0)

40 (+11)Fluctuating exchange rates

Costs of essential services such as shipping, logistics and storage

Government trade regulation

Lack of product demand

Insufficient margins or profitability

Availability of credit / liquidity

Rising interest rates

Buyers defaulting on payment

Suppliers not honoring agreed trade arrangements

Competition from other companies

Global economy contracts, business becomes unstable

Availability/costs of raw materials

Others

No barriers to growth

Don’t Know/ Refused

1H10(Change

from 2H09)

Exchange rates an increasing concern

9 |

Trade and the Global Economy

Trends over the past 12 months Improving outlook in the economy/marketplace

Continued focus on risk management: Due diligence on trading partners Return to traditional trade finance terms and products that provide greater structure and

control over transactions Working with financial providers that have capital strength

Government and non-government agencies have implemented a number of stimulus packages aimed at encouraging cross-border trade

10 |

Summary

U.S. businesses are cautiously optimistic about trade growth and the global economy, while emerging markets are the most confident

Confident about their need for and their ability to obtain trade financing

Still cautious about buyer defaults and supply non delivery risks

Emerging markets leading trade rebound and global economic recovery and present an enormous opportunity for U.S. exporters and importers

Latin America becoming an increasingly important player for U.S. companies

Increased domestic consumption in emerging markets presents an opportunity for new trade corridors that can benefit both developed and emerging economies

Intra-regional trade will underpin global trade activity including intra-regional trade between U.S. and Canada

Fluctuations in exchange rates and trade regulations represent the biggest barriers to trade

International businesses need to focus on risk mitigation:

FX

Trading partner relationships

Availability of finance

Disclaimer

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