Download - DWS China Equity Fund - Oct 2011_final
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China: Amidst markets uncertainty… Still a
worthy asset class? 4th October 2011
Deutsche Asset Management: Business divisions
Clients Clients
Products Products
Clients
Products
Clients
Products
Retail
Private Banking
High Net Worth
Institutional
General account assets of insurance companies worldwide
Pension Funds
Foundations and Endowments
Public/Government Funds
Corporates
Mutual Funds
Structured Products
Complex Assets
Hedge Funds and Fund of Funds
Quantitative Strategies
Real Estate
Infrastructure
Private Equity Fund of Funds
Insurance Fixed Income
Strategic Asset Allocation
Asset-Liability Modeling
Multi-Asset Portfolio
Management
Insurance Advisory
Services
Equity
Fixed Income
Hedge Funds and Hedge Fund of Funds
Quantitative Strategies
Liquidity Management
Institutional
High Net Worth
Private Banking
Retail
Retail (AuM EUR 175 bn*)
Alternatives (AuM EUR 46 bn*)
Insurance (AuM EUR 143 bn*)
Institutional (AuM EUR 164 bn*)
AuM EUR 529 bn*
* As of March 2011; Source: Deutsche Asset Management 2
3
Assets in Asia Pacific ex-Japan: by Country
Singapore
Seoul
Mumbai
Taipei
Sydney & Melbourne
EUR 2.0 bn
EUR 3.9 bn
EUR 1.6 bn
EUR 4.0 bn
EUR 0.6 bn
Hong Kong
30% shareholding in Harvest FM
EUR 1.1 bn
Source: DB Group Finance
Serviced AuM for DeAM companies as of June 2011.
* Source: HSBC Trustees / Deutsche Asset Management / State Street as of end August 2011.
Philippines
EUR 1.5 bn
Funds registered in Singapore
Authorized funds Fund sizes
(SGD mio)*
DWS Premier Select Trust 189.05
DWS Lion Bond Fund 283.75
DWS Asia Premier Trust 71.16
DWS Global Themes Equity Fund 34.13
DWS Singapore Equity Fund 71.93
DWS India Equity Fund 351.77
DWS China Equity Fund 490.35
DWS Singapore Small/Mid Cap Fund 5.83
DWS Global Clean Tech Fund 4.65
DWS Asian Small/Mid Cap Fund 16.96
Recognized funds Fund sizes
(USD mio)*
DWS Global Agribusiness 942.60
DWS Noor Precious Metals Sec. Fund 145.21
4
Agenda
Economy Update 1
3 DWS China Equity Fund
2 China Market Outlook
4 Appendix
Global equities sell-off after U.S. rating downgrade and Europe crisis concerns
5
History will mark down the date - August 5th
2011, S&P downgraded the U.S. credit rating
from AAA to AA+.
Moody’s and Fitch also considered that
downgrade would be possible.
Global stock markets slumped after
rating downgrade.
MSCI AC World Index plummeted
5.1% on August 8th, the first trading
day after US downgraded.
Greek / Euro sovereign debt issues
exacerbate the current situation
(Spain, Italy, France)
Source: Bloomberg
Will China be immune?
6
Key concerns:
A slowdown in US and Europe
will impact the export sector in
China
Inflation rate still persistently
high and remains the top
concern for the Chinese
government
Slowdown in Fixed Asset
Investments (FAI)
Risk of asset bubbles forming
i.e. property sector
“Hot money” flows (event
driven and unpredictable)
Local government debt
* Source: UBS research (Aug 2011)
Global GDP Growth Forecast*
% YoY 2011 (F) 2012 (F)
Old New Old New
USA 1.8 1.6 2.3 2.3
Japan -0.4 -0.4 3.5 2.9
Euroland 1.8 1.8 2.0 1.0
UK 1.1 1.1 2.1 1.5
China 9.3 9.0 9.0 8.3
LATAM 4.6 4.6 4.2 4.2
EMEA 4.2 4.5 4.5 3.3
Advanced Economies 1.9 1.8 2.8 2.3
World 3.3 3.3 3.8 3.3
Base case scenario: Slower rate of growth expected.
Despite the concerns, China will still stand out from the
rest of the countries in terms of absolute GDP growth
What do these international brands have in common?
7
Luxury brands listing in Hong Kong to tap
the growing wealth segment indicative
of rising consumption demand
Positive signs for Chinese equities
1. Signals to turn positive for China’s market – Money supply in check
M2 bottomed when M2 met the target …
and stock market rose subsequently
… as it happened in 2004
Source: WIND, Harvest Global Investments Ltd.
10
12
14
16
18
20
22
Jan 04 Mar 04 May 04 Jul 04 Sep 04 Nov 04 Dec 04
20
21
22
23
24
25
26
27
28M2 YoY growth
MSCI China (RHS)
(%)
M1, M2 and loan growth falling in-line as money tightening policies are introduced to curb inflation
9
0%
5%
10%
15%
20%
25%
30%
35%
Jan 0
3
Jan 0
4
Jan 0
5
Jan 0
6
Jan 0
7
Jan 0
8
Jan 0
9
Jan 1
0
Jan 1
1
0
20
40
60
80
100
120
MSCI CN - RHS
M2 YoY
Possible uptrend in the Chinese stock market after M2 reaches the target
2. Valuations appear attractive
Source: Bloomberg as of 31st August 2011.
Figures obtained for P/E and P/B Ratios are for a period 1st September 2011 to 31st August 2011 10
40
PB
ratio
PE
ratio
Price to Earning (P/E) Ratio of the Chinese markets Price to Book (P/B) Ratio of the Chinese markets
Potential upside for China equities – from a historical standpoint
MSCI China (as of 31st August 2011)
Current: 8.95
10 yr avg: 14.67
0
5
10
15
20
25
30
35
Se
p-0
1
Ap
r-02
No
v-0
2
Ju
n-0
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Ja
n-0
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Au
g-0
4
Ma
r-05
Oct-
05
Ma
y-0
6
De
c-0
6
Ju
l-07
Feb-0
8
Sep-0
8
Ap
r-09
No
v-0
9
Ju
n-1
0
Ja
n-1
1
Au
g-1
1
P/E ratio
LT average
MSCI China (as of 31st August 2011)
Current: 1.82
10 yr avg: 2.19
0
1
2
3
4
5
6
Se
p-0
1
Ap
r-02
No
v-0
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n-0
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Ja
n-0
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Au
g-0
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Ma
r-05
Oct-
05
Ma
y-0
6
De
c-0
6
Ju
l-07
Feb-0
8
Se
p-0
8
Ap
r-09
No
v-0
9
Ju
n-1
0
Ja
n-1
1
Au
g-1
1
P/B ratio
LT average
3. Inflows into emerging markets holding up
Source: Datastream, HSBC, Harvest Global Investments Ltd. 11
Confidence in China remains?
4. China is an increasingly important contributor to world GDP, yet still “under-invested” by global investors
MSCI AC World Index World Economy (in PPP terms)
No. of Stocks Weight Distribution of World
GDP in 2010
% Contribution to
World GDP Growth
2000-2008
Emerging Markets (Total) 2785 13.63 50.2 70.7
China 454 2.34 16.3 29.3
India 372 1.15 5.3 7.3
Latin America 250 2.99 8.0 7.3
Russia and other CIS 56 0.79 4.4 7.3
Developed Markets
(Total) 6270 86.37 49.8 29.3
USA 2590 43.12 18.3 9.8
EU-15* 1330 20.44 17.7 9.8
Japan 1158 8.64 5.6 2.4
AC World Index (Total)/
World Economy 9055 100.00 100.0 100.0
Source: MSCI Barra (as of 31 Dec 2010), the Conference Board, Russell Investments, iFAST Compilations
*EU-15 includes Austria, Belgium, Germany, Denmark, Spain, Finland, France, United Kingdom, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal and Sweden.
12
What do these Chinese companies have in common?
13
For illustrative purpose only.
This does not constitute as a recommendation to buy or sell any of the securities mentioned
What do these Chinese companies have in common?
14
“Chinese” versions of western Information
Technology products and services
For illustrative purpose only.
This does not constitute as a recommendation to buy or sell any of the securities mentioned
5. Economy remains well-supported
15
a) Slower GDP growth, but overall level remains high
b) Inflation remains above 5% but expected to peak in July/ August
c) Timely governmental intervention: Property policy is working
d) Export and consumption levels are stable
e) Rising income levels contribute to increasing consumption
f) 12th Five year plan sets out new investment opportunities
Source: Harvest Global Investments Ltd.
a. GDP growth decreases, but overall level remains high
Source: WIND, Harvest Fund Management
1Q GDP growth was lower than that from 4Q, but the overall level is not considered low.
We expect investment to drop modestly in 2Q and 3Q, consumption to remain stable, trade surplus
will rise, and GDP growth is to be lower than 1Q.
Purchasing Managers Index (PMI) was 50.9 in August, which remained above the expanding
threshold of 50.
16
35
40
45
50
55
60
65
PMI
11.9
10.3 9.6 9.8 9.7 9.5 9.6
8.4 8.0
10Q1 10Q2 10Q3 10Q4 11Q1 11Q2(E)
GDP, YOY % GDP, Quarter to Quarter %
GDP Growth (2010-2011) Purchasing Managers Index (PMI)
b. Inflation remains above 5% but expected to peak in Q3
Source: WIND, CRR, Datastream, CLSA Asia-Pacific Markets, Harvest Global Investments Ltd. 17
In 2Q, CPI remained relatively high on rising food prices, high base effect and imported inflation.
We expect CPI to fall after July / August but to remain modestly high for the whole year.
M1 is a leading indicator for CPI: credit tightening reduces overheating in the economy
CPI growth %
5.5
Jan 10
Base effect CPI, YoY %
0
5
10
15
20
25
30
35
40
45
(4)
(2)
0
2
4
6
8
10
1998 2000 2002 2004 2006 2008 2010 2012
CPI YoY (LHS)
M1 YoY (leading by 12M)
(%) (%)
CPI Growth (2010 - 2011) CPI & M1 levels
May 10 Sept 10 Jan 11 May 11 July 11E Sept 11E
c. Government is reactive to property prices - policies are working
Source: WIND, CLSA Asia-Pacific Markets, Datastream; Harvest Global Investments Ltd. 18
(0.8)
(0.6)
(0.4)
(0.2)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Nov 0
7
Jan 0
8
Mar
08
May 0
8
Jul 08
Sep 0
8
Nov 0
8
Jan 0
9
Mar
09
May 0
9
Jul 09
Sep 0
9
Nov 0
9
Jan 1
0
Mar
10
May 1
0
Jul 10
Sep 1
0
Nov 1
0
Jan 1
1
MoM home price increase % (nationals avg of 72 cities)
Tighter HBR applied
to 35 cities; property
tax launched in SH
and CQ (-)
Sales tax
reduction, stamp
duty excluded (+)
Gov't tightened
downpayment
requirement for 2nd
mortgage (-)
First introduction of
Home-buying restriction
(HBR) in Beijing; strict
mortgage policy (-)
HBR implemented to 14
cities; stricter mortgage
policy nationwide (-)
c. Social housing to support government investments
19
-2
-1
0
1
2
3
4
5
6
7
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11
-10
-5
0
5
10
15
20
25
30%MoM
%YoY (RHS)
(%MoM) (%YoY)
经济适用房
Source: China Realty Research, CLSA Chris Wood
20 Source: CLSA, Harvest Global Investments Ltd.
0
5
10
15
20
25
Jan-0
1
May-0
1
Sep-0
1
Jan-0
2
May-0
2
Sep-0
2
Jan-0
3
May-0
3
Sep-0
3
Jan-0
4
May-0
4
Sep-0
4
Jan-0
5
May-0
5
Sep-0
5
Jan-0
6
May-0
6
Sep-0
6
Jan-0
7
May-0
7
Sep-0
7
Jan-0
8
May-0
8
Sep-0
8
Jan-0
9
May-0
9
Sep-0
9
Jan-1
0
May-1
0
Sep-1
0
Jan-1
1
May-1
1
(%)
(40)
(20)
-
20
40
60
Jan-0
1
May-0
1
Sep-0
1
Jan-0
2
May-0
2
Sep-0
2
Jan-0
3
May-0
3
Sep-0
3
Jan-0
4
May-0
4
Sep-0
4
Jan-0
5
May-0
5
Sep-0
5
Jan-0
6
May-0
6
Sep-0
6
Jan-0
7
May-0
7
Sep-0
7
Jan-0
8
May-0
8
Sep-0
8
Jan-0
9
May-0
9
Sep-0
9
Jan-1
0
May-1
0
Sep-1
0
Jan-1
1
May-1
1
d. Export may taper off but consumption levels are stable
Trade surplus increased slightly in 2Q,
partly due to Japan earthquake.
Retails sales YoY
Export value YoY (%)
Retail sales growth trend – Rising wages
We expect both income and
private consumption to rise over
the years
e. Income and consumption growth expected to pick up
Discretionary consumption will be the biggest beneficiary
Increasingly affluent middle class
Higher spending on other goods and
services as the household income
increases
Discretionary consumption will be
the largest beneficiary
Source: Credit Suisse; Harvest Global Investments Ltd. 21
30
40
50
60
70
80
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010E 2012E 2014E
% o
f G
DP
Wage Other Income Private Consumption
0
5
10
15
20
25
30
35
40
45
0 5,000 10,000 15,000 20,000 25,000
Monthly household income (Rmb)
Foo
d co
nsum
ptio
n as
% o
f inc
ome
Growth driver: Strong auto sales as domestic demand improves
In 2009 China sold more cars (10.3 Mio) than US and turns into largest auto market
22 Source: Morgan Stanley, HSBS Halbis 2009, Bloomberg 2010
China auto sales und penetration rate 2000 – 2009
Auto sales in million.
10.3
5.7 5.3
2.5 3.1
4.2
1.9 1.1 0.7 0.6
0.8% 0.9% 1.1% 1.3% 1.6%
2.0% 2.4%
2.9%
5.1%
0.7%
0
4
8
12
2000 2001 2002 2003 2004 2005 006 2007 2008 2009 0.0%
2.0%
4.0%
6.0%
Penetration Rate (per 100 household)
Unit sales (LHS) Penetration rate (RHS)
Highlights of 12th five-year plan
5-year
plan Period Announced Theme
Benefited
sectors
12th 2011 -
2015
TBC Mar-11
NPC
- Inclusive growth, focusing on income growth for low-income groups.
- Using energy efficiency as the lever to upgrade the value chain.
- Develop 7 new strategic industries.
- Boost domestic consumption, including tourism, media, etc.
- Continue the urbanization development.
Consumer,
Internet,
Tourism, New
Energy
11th 2006-
2010 Oct-05
- Fully implement the "Scientific Development theory" by President Hu
Jintao and develop harmonious society.
- Maintain stable and fast economic growth.
- Optimize the economic structure.
- Strengthen the local branding and intellectual property development.
- Enhance the international competitiveness of Chinese enterprise.
- Improve industrial production efficiency and lower resources consumption.
- Accelerate the urbanization development.
Consumer, IT,
Property
10th 2001-
2005 Oct-00
- Accelerate the modernization of society and further improve the economic
development.
- Strengthen the service sector development. Increase the weighting of
service sector in GDP and employment.
- Enhance the IT and telecommunication network development.
- Strengthen the infrastructure in water resources, transportation and
energy sectors.
- Develop the western part of China.
- Actively promote urbanization.
Telecom,
Transport
infrastructure,
Energy
Source: Harvest Global Investment 23
Market Outlook – Long Term
Overall market will
likely grow in line
with China’s GDP
growth while alpha
strategy (stock and
sector selection)
will likely matter
more
Drivers for long term:
• China’s weighting in the global index
weightings set to increase from current
low base
• Unleash of domestic liquidity and forex
reserve via QDII
• Further income growth and productivity
gain will drive demand upgrade
• Structural shift from export, investment
to consumption
• Low system debt level and high
savings ratio means room for further
leverage and investment
• Government will have the political will
for stimulus if necessary
Chinese Equity – A Worthy Separate Asset Class!
Secular growth
industries such
as consumption,
service and
healthcare will
likely deliver
alpha
24 Source: Harvest Global Investments Ltd.
Fund Update
26
DWS China Equity Fund: Fund facts
Investment Objective*: To achieve capital appreciation in the
medium to long term by investing in a diversified portfolio of
equity and equity-related securities issued by entities listed/to be
listed on stock exchanges of China, including Hong Kong;
entities organised or domiciled in China or of entities which have
significant assets, business, production activities, trading or
business interest in China.
Dealing currencies: SGD / USD
Subscription: Cash / CPS-OA / SRS
Fund Size^ (as of Aug 2011): SGD 490.35 million
Morningstar Rating** (as of Aug 2011):
Launch date: 04th January 2005
Management fee*: 1.5% p.a.
Benchmark: MSCI China Total Return Index
Awards:
The Edge-Lipper Fund Awards: Best Equity China Fund 3-Years
for 3 years (2008, 2009, 2010)
Recommendation: The Fund is recommended by
Fundsupermart.com (China equity)
*Please refer to the prospectus for details on the investment objective and the fees involved. ^Source: HSBC Trustees. **Source: Morningstar.
Year to Year Returns (%)
DWS China Equity Fund Calendar year performance (as of 30th September 2011)
2005 2006 2007 2008 2009 2010 2011
DWS China Equity (%) 19.66 73.74 64.87 (47.61) 64.45 (7.26) (21.54)
MSCI China (%) 18.78 64.34 52.93 (52.08) 55.56 (6.51) (25.19)
Outperformance(%) 0.88 9.40 11.94 4.47 8.89 (0.74) 3.65
Source: Bloomberg as of 30th September 2011. Performances are in SGD and on bid-bid basis. Past performance is not indicative of future performance
27
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
2005* 2006 2007 2008 2009 2010 2011^
DWS China Equity Fund MSCI China Index
DWS China Equity Fund Performance since inception (as of 30th September 2011)
28
+114.90%
+55.64%
Common based returns
DWS China
Equity Fund
Performance
since inception:
4th January 2005
Source: Bloomberg as of 30th September 2011. Performance in SGD and on bid-bid basis. Rebased at inception date: 04th January 2005 = 100. Past performance is not
necessarily indicative of future performance.
50
100
150
200
250
300
350
400
Ja
n-0
5
Ma
y-0
5
Se
p-0
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Ja
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6
Ma
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6
Se
p-0
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Ja
n-0
7
Ma
y-0
7
Se
p-0
7
Ja
n-0
8
Ma
y-0
8
Se
p-0
8
Ja
n-0
9
Ma
y-0
9
Se
p-0
9
Ja
n-1
0
Ma
y-1
0
Se
p-1
0
Ja
n-1
1
Ma
y-1
1
Se
p-1
1
DWS China Equity Fund MSCI China Index
Average Returns (annualized)
Standard Deviation (annualized)
DWS China Equity Fund Risk return comparison (as of 31st August 2011)
1 Year (%) 2 Years (%) 3 Years (%) 5 Years (%) Since Inception (%)
DWS China Equity 13.33 14.73 23.38 27.00 24.60
MSCI China 13.75 13.66 24.80 29.78 27.07
1 Year (%) 3 Years (%) 5 Years (%) Since Inception (%)
DWS China Equity -7.71 1.07 11.16 17.08
MSCI China -11.37 -2.17 6.42 13.03
Outperformance 3.66 3.24 4.74 4.05
Source: Harvest Global Investments Ltd., Gross of fees in SGD as of 31st August 2011, NAV publication date: 4th January 2005
Past performance is not indicative of future performance
Deutsche Asset Management (Asia) Limited (“DeAM Asia”) appointed Harvest Global Investments Limited as the sub-manager of DWS China Equity Fund (the “Fund”) with effect from 1
September 2009. Performance before 1 September 2009 refers to that of the Fund managed by DeAM Asia. The investment objective of the Fund remains the same and is managed by
the same management team with similar investment policies and strategies 29
DWS China Equity Fund Portfolio holdings (as of 31st August 2011)
Source: Harvest Global Investments Ltd., as of 31st August 2011 30
China Mobile Ltd. Telecommunication 8.39
Industrial & Commercial Bank of China Ltd. Financials 7.80
China Construction Bank Corp. Financials 6.04
CNOOC Ltd. Energy 4.99
PetroChina Co. Ltd. Energy 4.08
China Merchants Bank Co. Ltd. Financials 3.96
China Pacific Insurance (Grp) Financials 3.84
China Telecom Gorp. Ltd. Telecommunication 3.01
China Coal Energy Company Ltd. Energy 2.89
Ping An Insurance Co. Financials 2.83
For illustrative purpose only. Holdings are subject to change without notice
This does not constitute as a recommendation to buy or sell any of the securities mentioned
Principal holdings (%)
Importance of in-depth China knowledge and local expertise: Harvest Global Investments (HGI): Sub-manager of the DWS China Equity Fund
31 Source: Harvest Fund Management Ltd,, Harvest Global Investments Ltd. as of 30th June 2011.
The industry rank as of 30th June 2011 by Z-Ben Advisors.
In-depth knowledge of the China
market
2nd largest fund management
company
The largest amongst 36 Sino-Foreign
JV asset management companies in
China
To develop best-in-class investment
management platform for China and
Asia equities
A winning formula for managing China
Equities
Strengths of the DWS & Harvest
partnership:
Deutsche Asset Management (Asia)
Limited
China Credit Trust Co. , Ltd
Lixin Investment Co., Ltd
Harvest Fund Management Co. Ltd
(HFM)
Harvest Global Investments Limited
(HGI)
30%
40%
30%
100%
立信投资
One of the largest in-house research platforms for China
Harvest Investment/Research Team* (100+ Professionals)
Equity Investment
Research
Fixed-Income
Investment
Research
Other Research Trading Compliance &
Risk Management
Investment & Research
Professionals
33 Fund Managers
36 Sector Analysts
6 Fund Managers
5 Credit Analysts
7 Macro and
Quantitative
Analysts
21 Traders
(6 Portfolio
Controllers)
10 Compliance
Officers
3 Risk Managers
Average Industry
Experience (yrs)
7 8 4 5 4
Average Experience
at Harvest (yrs)
3 3 3 3 3
Hong Kong
Andrew TAN
(Head & Deputy CIO)
+ 3 PMs
Risk Management Team
[Wayne BI (Head)]* Chinese Equities Team Asia Equities Team
Trading Team
[Darren LIU (Head)]*
PR China
Beijing
TeamYiqian JIANG (Head)
+ 3 PMs (HK) + 2PMs (CH)
+ 1 Analyst (CH)
1 Risk ManagerTrading 2 Traders
CIO
Janice DAI*
* Based in Beijing with Harvest Fund Management Co., Ltd. 32
Industry recognition for the fund management team in 2010 – Harvest Global Investments Ltd. (HGI)
Performance / Greater China Region / Five years
Winner: Harvest Global Investments Ltd. managing DWS China Equity Fund
Hong Kong / Best Offshore China Fund House
Winner: Harvest Global Investments Ltd
33 Source: Harvest Global Investments Ltd.
Fund Awards
Best fund over 3 years – Equity China Best fund over 3 years – Equity China
2008 2009
Best fund over 3 years – Equity China
2010
34
Portfolio Positioning
DWS China Equity Fund Sector allocation as of 31st August 2011
Source: Harvest Global Investments Ltd. as of 31st August 2011, Benchmark: MSCI China Total 36
For illustrative purpose only. Holdings are subject to change without notice
Top 3 overweights
Consumer discretionary
Health Care
Utilities
0.00%
6.85%
34.05%
18.76%
5.56%
6.48%
6.03%
1.95%
13.47%
0.80%
6.04%
7.19%
1.81%
33.39%
14.11%
2.79%
4.91%
5.75%
2.30%
13.53%
2.31%
11.90%
0% 5% 10% 15% 20% 25% 30% 35% 40%
[Cash]
Industrials
Financials
Energy
Consumer Staples
Materials
Information Technology
Utilities
Telecommunication …
Health Care
Consumer Discretionary Portfolio Weight Benchmark Weight
(%)
Portfolio positioning
37 Source: Harvest Global Investments Ltd. as of 31st July 2011. Subject to change without notice.
We overweight:
Consumer discretionary (focusing on inflation beneficiaries especially
retailers with strong same-store-sales growth).
Information Technology (positive on Internet and IT servicing companies
which provide strong secular growth with little policy risk).
Healthcare (focusing on companies with leading, innovative products
which are less affected by price control by government).
We underweight:
Financials (life insurance premium growth slower-than-expected; property policies will
continue to be implemented).
Industrials (slower industrial production in China in the near term as well as slower overseas
demand).
Consumer staples (margin pressure as costs are rising while government restricts the
increase in product prices; rich valuation).
For illustrative purpose only.
This does not constitute as a recommendation to buy or sell any of the securities mentioned
Why invest in the DWS China Equity Fund?
38
1. Participate in the Chinese growth story
• Strong economic growth: Stable real consumption and
continued infrastructure growth through social housing
and hydraulic engineering projects will support the
economic growth.
• 12th Five Year Plan: Sustainable growth for key
industries
• Pro-active government measures: Diminishing
concerns over an over-heating economy and a hard-
lending scenario
• The Chinese consumer: Growing middle-class with a
high spending power
• Attractive equity market: Current Price / Earnings (P/E)
ratio of the Chinese market is below the long term
average1
2. Domestic advantage: Local research teams with in-depth
knowledge of the domestic equity markets and sector
trends
3. Award-winning fund: Best fund over 3 years (2008, 2009,
2010)
Appendix
Potential systematic risks to the Chinese economy
Source: BofA Merrill Lynch Global Research, Oct 2011, DeAM analysis 40
Impact to Chinese
economy
Sluggish US
economic growth
European debt
crisis
Sharp decline in
China’s exports
Loose monetary
policy
Persistently high
inflation
Potential default of
local government
debt
Bank’s balance
sheet under stress
Capital flight
Potential government measures:
Fiscal / Monetary policy
RMB appreciation / depreciation
China has both the political will and
fiscal capacity for stimulus if needed
Investing into China: The different share classes of Chinese companies
Source: Chinadaily, Citywire; illustrations by Deutsche Asset Management
A Share B Share H Share Red Chips S Chips
Listed on Shanghai
Shenzhen
Shanghai
Shenzhen
Hong Kong
(Chinese
companies)
Hong Kong
(Overseas
incorporated state-
owned or state-
controlled
enterprises)
Singapore
Stock
Exchange
Currency
traded in Renminbi
Shanghai (USD)
Shenzhen (HKD) HKD HKD SGD
Available for
sale to
Domestic Chinese
residents
Qualified foreign
institutions (QFII
scheme)
Non Chinese
residents
Residents with
appropriate foreign
currency dealing
accounts
No resident
restrictions
No resident
restrictions
No
restriction
Examples Bank of China Huaxin Cement
Sinopec
Shanghai
Petrochemical
Lenovo Yanlord
Land
41
Fund Managers
42
Jiang Yiqian, Director / Harvest Global Investments Ltd.
Ms. Jiang joined Harvest in September 2009 and is responsible for all Chinese equity investment
activities. Prior to Harvest, she worked at Deutsche Asset Management in Hong Kong for 9 years
as a portfolio manager for Chinese equities. Her previous experience includes 3 years as an
assistant manager of Shanghai International Asset Management (HK) Co., Ltd and 2 years in the
Shanghai B share market for Shanghai Shenyin Securities (currently known as Shenyin
Wanguo). Ms. Jiang graduated from Shanghai University of Finance and Economics with a degree
in Finance. She also holds an MBA in International Banking and Finance from the University of
Birmingham, UK.
Michael Huashen Yu, CFA, Portfolio Manager- Harvest Global Investment Ltd.
Michael Yu joined Harvest in May 2010. He starts co-managing the DWS Invest Chinese Equities
since September 2010 and is also responsible for China market strategy and China model portfolio.
Michael has 12 years of industry experience and 7 years of investment experience. Prior to
Harvest, Michael worked for Invesco (HK), managing the pooled HK and China Fund as well as
institutional mandates for 3 years. He also worked for China International Capital Corporation (HK)
and Cornerstone Asset Management in Canada. He had spent 5 years as a senior loan officer with
China Construction Bank. Michael holds a Master of Business Administration degree from the
University of Toronto and a Master of Finance degree from the Xiamen University. He is a holder of
the Chartered Financial Analyst designation.
Source: Harvest as at September 2010
Appendix: Investment Philosophy & Process
Investment Philosophy
Investment philosophy and core competence
We believe that markets (especially for emerging markets) are not always efficient. We believe
that fundamental bottom-up research with top-down sector allocation, coupled with strict risk
management provide the most reliable method to generate alpha on a consistent basis.
Our core competence lies in our ability to conduct in-depth, effective bottom-up fundamental
research and sector analysis
44
Investment Process
Our investment process is a close mapping to reflect our investment philosophy:
Investment process can be defined by the following 4 steps: information gathering, information analysis,
portfolio construction and risk control/compliance /trading.
We are totally committed to research. We are convinced that over the long term market prices are oriented
on “fundamental values”. For this reason, we follow an investment process that is based on our own, in-
house, fundamental evaluation of each individual stock. The functions of research analysis and portfolio
management are combined. Portfolio managers are responsible for research and stock selection within
their areas of responsibility.
Macro Research
Strategy Research
Equity Research
Sector Research
Quantitative Research
Daily Meeting
Weekly Meeting
Monthly Sector Meeting
Quarterly Strategy Meeting
Inve
stm
en
t Ta
rge
t
Ris
k M
an
age
me
nt D
ep
t
Tra
de
Portfolio
Risk Manager
Investment Committee
1. Information Collection
2. Information Analysis
3. Decision Making and Portfolio Construction
Portfolio
Construction
4. Trade and Risk Management
Fund Manager
45
Disclaimer
This is for information purposes only and is not the basis for any contract to deal in any security or instrument, or for Deutsche Asset Management (Asia) Limited (“DeAM”) or its affiliates to enter into or arrange any type of transaction as a consequence of any information contained. This shall not be construed as the making of any offer or invitation to anyone in any jurisdiction in which such offer is not authorised or in which the person making such offer is not qualified to do so or to anyone to whom it is unlawful to make such an offer.
The forecasts provided are based upon our opinion of the market as at this date and are subject to change, dependent on future changes in the market. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. Investments are subject to risks, including possible loss of principal amount invested. The value of shares/ units and their derived income may fall as well as rise. Past performance or any prediction or forecast is not necessarily indicative of future performance. No assurance is given that the investment objective or the targets will be met. This document does not constitute investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Investors should study all relevant information and consider whether the investment is appropriate for them. DeAM or its affiliates may hold positions in the securities referred. The investment schemes referred are not obligations of, deposits in, or guaranteed by DeAM or any of its affiliates.
As permitted under the Directives of the European Parliament and of the Council of 21st January 2002 relating to the undertakings for collective investment in transferable securities (“UCITS”), derivatives transactions may be used as part of the investment strategy of the investment schemes and not merely for efficient portfolio management and hedging purposes. Investors should consider the investment policy of that investment scheme and its associated risk profile as disclosed in the Singapore Prospectus.
You are not authorised to redistribute this document in any jurisdiction in which such distribution is prohibited, nor qualified to make any offer, representation or contract on behalf of DeAM or its affiliates. Although the information was compiled from sources believed to be reliable, no liability for any error or omission is accepted by DeAM or its affiliates or any of their directors or employees. The information and opinions contained may also change.
All third party data (such as MSCI, S&P & Bloomberg) are copyrighted by and proprietary to the provider.
DWS is the brand name of mutual funds offered by Deutsche Asset Management (Asia) Limited (Reg. No. 198701485N).
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