HSBC Amanah Malaysia Berhad has launched the AI Powered US Equity 5 Index (AiPEX5) suite of structured products in Malaysia, the bank’s first to use artificial intelligence (AI) as a method in equity investing. The new index is said to be relevant to investors in the country through this period of financial market unpredictability as it is able to identify companies whose stock prices are poised for growth while managing draw-down risk during times of high market volatility.
AiPEX5 aims to generate positive long-term returns and build wealth for investors by using the latest techniques in AI. By processing data thousands of times faster than humans and working around the clock, AiPEX5 attempts to gain an informational advantage over the rest of the market and continues to learn and adapt as markets evolve and new information becomes available.
· Informational Advantage: The AI Powered US Equity Indexes are the first and only rules-based equity strategies to use IBM Watson1 to continuously analyse and learn from millions of pieces of structured and unstructured data each day, and turn the data into investment insight
The AiPEX5 selects stocks by applying AI driven insight to improve on fundamental equity portfolio management techniques. As risk of loss increases when there are more rapid movements in the market, AiPEX5 incorporates a daily volatility control mechanism to reduce exposure to equities when markets are unstable.
“In today’s highly volatile markets compounded by the impact of the Covid-19 pandemic, investors need strategies that focus on providing steady returns at a reduced risk. However, successful investment strategies must keep up with the growing amount of data being generated each day. AiPEX5 simulates a team of thousands of analysts and traders working around the clock to learn from millions of pieces of information and identify potential investment opportunities.
This not only empowers clients to keep up with their investments, but thrive in an increasingly complex world of change”, said Alvin Kong, Head of Global Markets, HSBC Malaysia. “For investors seeking to grow their wealth by investing in equities, the birth of Big Data signifies an unprecedented opportunity. Each new piece of data represents a new possible insight on a company or the markets that can potentially lead to better investment decisions. By investing in this structured product, investors will gain 1 Watson is IBM’s suite of enterprise-ready AI services, applications, and tooling.
AiPEX5 is forward-looking and works by synthesizing all available information in the past and present, in real time”, said Tara Latini, Head of Wealth and Personal Banking, HSBC Malaysia. The AiPEX family of indices, which AiPEX5 is a part of, was developed by EquBot2 and leverage the AI capabilities of EquBot and IBM Watson™ to ingest and learn from the vast amounts of publicly available and continuously generated data points.
Data points could include a company announcement, a tweet, a satellite image of a store parking lot, or even the tone of language a CEO uses during an earnings presentation. Applying what has been learned through Big Data and AI, AiPEX5 uses a rules-based process to objectively evaluate each of the 1,000 largest U.S. publicly traded companies.
AiPEX5 rebalances its equity portfolio monthly, and to manage short-term volatility, reallocates between the equity portfolio and cash component on a daily basis. AiPEX5 selects companies with stock prices that may be poised for growth according to an objective selection process that is similar to a fundamental equity research approach, only thousands of times faster and broader in scope.
HSBC Group is the exclusive licensee of AiPEX5, and is offering a variety of investment solutions based on the indices to its clients globally. Products linked to the AiPEX family indices have also been launched by HSBC in the US and in Singapore.