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U.S. Companies Eye Growth Overseas

16 July 2008

HSBC reports findings of inaugural survey of under-researched market segment, representing nearly $6 trillion in sales and employing 32 million.

New York - July 16, 2008 - HSBC Bank USA, N.A. announced today the result of an inaugural survey of U.S. middle-market companies, a vital yet under-researched segment of the U.S. economy. The HSBC poll which, queried 500 senior financial executives from companies with annual sales between $20 million and $5 billion, focused on the opportunities and challenges they face when expanding into markets overseas.

Titled HSBC's Financial and International Needs ("F.I.N.")sm survey, the research found that many middle-market companies - a group representing roughly $6 trillion in sales and employing nearly 32 million Americans - have already made the initial leap into foreign markets. Many are now taking on more complex tasks like hedging foreign exchange risk and raising debt in multiple currencies.

Among the most salient findings, over two-thirds (67%) said their company's international sales are growing faster than their domestic revenue.

"We're fast approaching a tipping point among U.S. companies as a growing number of them derive a significant portion of their revenue overseas," said Christopher P. Davies, senior executive vice president, and head of commercial banking for North America. "Given the risks, many need to devote more time to financial management, especially in light of the current market environment and volatility of currency markets."

The survey showed 92% of respondents have actively reviewed their exposure to volatility in the markets, notably to currencies, interest rates and commodities. Nearly two-thirds are actively managing their risks through a formal hedging policy.

Almost 69% have centralized their liquidity management activity to monitor how much money is held in overseas accounts, borrowed from overseas lenders, and owed in accounts payable. HSBC maintains this is a critical step in maintaining the lowest overall cost of capital in already tight debt markets.

Additional key findings from HSBC's Financial and International Needs survey include:

  • Almost half (49%) plan to increase their international revenue objectives should the U.S. economy continue to slow.
  • Almost two-thirds (59%) consider China to offer the greatest opportunity for growth over the next 12 months.
  • The most common risk of doing business internationally referenced by respondents was the complexity of local regulations and laws.
  • When asked what factors can inhibit their international growth, most cited the high cost of doing business internationally; difficulty maintaining customer relationships; and foreign competition.
  • Over half (56%) accumulate foreign currency assets, and 44% incur debt in a foreign currency.

Most companies indicate China, India and Brazil hold the greatest opportunity for growth next year. Interestingly, the United Arab Emirates ranked between Germany and Japan - as the Middle East rises in stature as a business destination.

"US companies are truly broadening their horizons as they look not only beyond their local markets, but also beyond America's traditional export markets," said Davies.

Methodology

From May 2-11, senior financial decision-makers (CEOs, CFOs, corporate treasurers, senior partners or other senior financial executives) from 500 companies engaging in international business were polled for their responses. The survey included a nearly even distribution of companies along a spectrum of annual sales ranging from USD$20 million to USD$5 billion.

About HSBC Bank USA, N.A.

HSBC Bank has more than 460 bank branches throughout the United States, with about 380 in New York State and a growing network of branches in New Jersey, Florida and California. The bank also has branches in Delaware, Washington, D.C., Washington State, Pennsylvania, and Oregon. It is the principal subsidiary of HSBC USA Inc., an indirectly-held, wholly-owned subsidiary of HSBC North America Holdings Inc. HSBC USA Inc. is one of the nation's 10 largest bank holding companies by assets.

About HSBC Holdings plc

HSBC Holdings plc serves over 128 million customers worldwide through around 10,000 offices in 84 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of some US$2,354 billion at 31 December 2007, HSBC is one of the world's largest banking and financial services organizations. HSBC is marketed worldwide as 'the world's local bank'.

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