not for u.s. investors · 2019-04-10 · april 2019 china for qualified investor use only. not for...
TRANSCRIPT
April 2019
China
For Qualified Investor Use Only. Not for public distribution
Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.
Not for U.S. investors
The very big picture
2
The mother of all “mean reversion” trades is underway
Asia’s share of global GDP is reverting to mean Source: Angus Madison
“Historical Statistics for the World
Economy:1-2006 AD”, DB GMR,
Jun 08
For illustrative purposes only
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 501 1001 1501 2001Year
China India Europe & North America Japan Rest of world
GD
P S
ha
re (
19
90
in
tern
atio
nal d
olla
r)
3
Urbanization is the key event in Asia
Source: McKinsey & Company “Urban world: Cities and the rise of the consuming class”, June 2012. Population Division of the United Nations; Angus Maddison via Timetrics; Global Insight; Census reports of England
& Wales; Honda in Steckel & Floud, 1997; Bairoch, 1975
1. Definition of urbanisation varies by country; pre-1950 figures for the United Kingdom are estimated
2. Historical per capita GDP series expressed in 1990 Geary-Khamis dollars, which reflect PPP
Per capita GDP and urbanization1
4
Asia is getting healthier…
Source: United Nations Population Divisions, Oct 14
For illustrative purposes only
Life Expectancy has shot up in countries like China since 1960
36
67
42 42
54 53
64
54
62
55
76
84
65
72
76
73
84 81
75 75
35
40
45
50
55
60
65
70
75
80
85
China HK India Indonesia Malaysia Philippines Singapore South Korea Sri Lanka Thailand
Life e
xpecta
ncy in y
ears
1960 1980 2014
5
…and wealthier…
Source: International Monetary Fund, World Economic Outlook Database, Oct 14
GDP per capita has risen sharply since 1960
76 84 55 287 267 92 143 108
7,333
1,584
3,417
11,387
2,935 3,385
5,450
0
5,000
10,000
China India Indonesia Malaysia Philippines South Korea Sri Lanka Thailand
GD
P P
er
Capital (U
S$,
curr
ent
prices)
1960 1980 2014
25,931
6
…especially in the big cities
Source: * Country GDP per capita is sourced from International Monetary Fund, World Economic Outlook Database, Oct 14. GDP per capita is based on current prices
* Largest city GDP per capita is sourced from Brookings analysis, Oxford Economics, Moody’s Analytics, and the U.S. Census Bureau, Nov 12. GDP per capita is based on current prices
For illustrative purposes only
Sydney watch out!
Shanghai
Mumbai Jakarta
Seoul
Kuala Lumpur
Manila
Taipei
Bangkok
Sydney
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
India Philippines Indonesia Thailand China Malaysia Taiwan S. Korea Hong Kong Singapore Australia
GD
P p
er
cap
ita i
n U
SD
Country GDP Per capita Largest City GDP Per capita
7
It is driving the growth of the middle classes Concentration of middle classes will be in Asia
Source: The Emerging Middle Class in Developing Countries, Homi Kharas, Jan 10. Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or
results may differ materially.
525 M
1,740 M
3,228 M
8
Global Share of World PPP GDP Weights in MSCI AC World Index Weights in Barclays Global Agg Index
37.6%
16.9%
5.7% 5.3%
0.7% 0.1% 0%
5%
10%
15%
20%
25%
30%
35%
40%
United S
tate
s
Jap
an
UK
Germ
any
Chin
a
India
Source: Barclays, 31 Jan 18
For illustrative purposes only
Source: MSCI, 31 Jan 18
For illustrative purposes only
18.8%
15.1%
7.7%
4.1% 3.2%
2.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Chin
a
United S
tate
s
India
Jap
an
Germ
any
UK
52.2%
7.8% 5.7%
3.7% 3.2% 1.0%
0%
10%
20%
30%
40%
50%
60%
United S
tate
s
Jap
an
UK
Chin
a
Germ
any
India
The case for investing in Asia in one slide
Source: IMF, Mar 18, figures are based on IMF 2018 estimates
For illustrative purposes only
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. Individuals cannot invest directly in an index
9
China’s demographic problem
Source: UN WPP 2015
Forecasts are offered as opinion and are not reflective of potential performance. Forecasts are not
guaranteed and actual events or results may differ materially. Indexes are unmanaged and have
been provided for comparison purposes only. No fees or expenses are reflected. Individuals cannot
invest directly in an index. For illustrative purposes only
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
China’s working population
Source: United Nations, Department of Economic and Social Affairs, Population Division (2017)
For illustrative purposes only
0
2
4
6
8
2015
2020
2025
2030
2035
2040
2045
2050
China: number of workers per retiree
bill
ion
Forecasts
4
2
Ratio
Workers = 15-64 years, Retirees = 65 years and older
Index inclusion 2019 is the year that China arrives on the world’s financial stage
11
The SDR pre and post CNY inclusion
Source: International Monetary Fund, 31 Dec 17
For illustrative purposes only
Before inclusion
USD 41.9%
EUR 37.4%
JPY 9.4%
GBP 11.3%
After inclusion (1st October 2016)
USD 41.7%
EUR 30.9%
CNY 10.9%
JPY 8.3%
GBP 8.1%
12
Global bond indices have ignored China, but not for long Chinese onshore bonds are under-represented in global indices
Source: FTSE, Bloomberg, JP Morgan, 31 Dec 18
China: 0% 5% China: 0% 5.5% China: 0% 7%
FTSE WGBI
(top 10)
Barclays Global Aggregate
(top 10)
JPM GBI EM Global Diversified
(top 10)
37.0%
19.5%
8.1%
7.3%
5.6%
5.3%
4.7%
2.0% 1.7% 1.7%
United States of America USA Japan
France Italy
Germany Great Britain
Spain Belgium
Netherlands Australia
39.5%
17.2%
5.9%
5.2%
5.2%
3.6% 3.2%
2.6% 2.2% 1.7%
United States of America USA
Japan
France
Great Britain
Germany
Italy
Canada
Spain
SUPRANATIONAL
Netherlands
10.0%
10.0%
9.4%
9.0% 8.5%
8.3%
7.1%
7.1%
5.7% 5.0%
Mexico
Brazil
Indonesia
Poland
South Africa
Thailand
Colombia
Russia
Malaysia
Turkey
13
11.16%
88.84%
China
Non China
MSCI began to include A shares in May 2018 Weightings will increase again in May 2019
Source: Aberdeen Standard Investments
0.42%
17.52%
82.06%
China A
Other China
Non China2018
2013
19.81%
80.19%
China
Non China
0.71%
29.70%
69.59%
China A
Other China
Non China2018
2013
2.10%
97.90%
China
Non China
0.08%
3.52%
96.40%
China A
Other China
Non China2018
2013
Asia Pacific Emerging Markets AC World
Why China A?
15
China shares
Source: Aberdeen Standard Investments
For illustrative purposes only. These securities have been used for illustrative purposes only to demonstrate the investment management style, not as an indication of performance and should not be considered as a
solicitation or recommendation of these securities. A full list of holdings is available upon request. Your portfolio may not include these securities. This information should not be considered a recommendation to
purchase or sell any security. There is no assurance that any securities discussed herein will remain in the fund at the time you receive this report or that securities sold have not been repurchased. Securities discussed
do not represent the entire fund and in the aggregate may represent only a small percentage of the fund’s holdings.
Shares Listing Currency Country of
Incorporation
Country where company
does most business
Index inclusion Comment Chinese investors
can buy ?
China A shares Shanghai +
Shenzhen RMB China China
CSI / 300 or MSCI
China A. MSCI EM
started in June 2018
Some have dual listing
in HK H share market Y
China B shares Shanghai +
Shenzhen USD + HKD China China None
Interest has collapsed
since H share arrival Y
China H shares HK HKD China China MSCI China, MSCI EM Often dual listing with a
shares Y
HK "Red chips" HK HKD HK China MSCI China, MSCI EM May have ADR too Y
HK "P" chips HK HKD Cayman China MSCI China, MSCI EM May have ADR too Y
Singapore "S" chips Singapore SGD Various China No major N
ADR NY USD Cayman China MSCI China, MSCI EM
Usually sinle US listed,
may come back to
China as CDR
N
16
Breadth
Total market cap (in USD bn) Number of listed companies
Source: MSCI, 31 Aug 18
These securities have been used for illustrative purposes only to demonstrate the investment management style, not as an indication of performance and should not be considered as a solicitation or recommendation of
these securities. For illustrative purposes only
3,519
97 256 268
164 61
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
A’ shares B’ shares H’ shares US-listedADRs
Red Chips S’ Chips
8,227
164
806
4,160
721
6 -
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
A’ shares B’ shares H’ shares US-listedADRs
Red Chips S’ Chips
17
Low correlation to global markets
Source: Aberdeen Standard Investments, Bloomberg, 31 Dec 18
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. Individuals cannot invest directly in an index
For illustrative purposes only
15 year Correlation, based on monthly data, USD unhedged indices MSCI China A
Onshore
MSCI China MSCI World
Index
MSCI EM
(Emerging
Markets)
MSCI EM
Asia
MSCI AC
Asia ex JP
S&P 500 FTSE 100 TOPIX
MSCI China A Onshore 1.00 0.62 0.39 0.49 0.53 0.53 0.35 0.33 0.26
MSCI China 1.00 0.70 0.86 0.89 0.88 0.62 0.66 0.49
MSCI World Index 1.00 0.85 0.82 0.83 0.97 0.90 0.72
MSCI EM (Emerging Markets)
1.00 0.97 0.98 0.76 0.72 0.64
MSCI EM Asia 1.00 0.98 0.74 0.69 0.62
MSCI AC Asia ex JP 1.00 0.78 0.75 0.64
S&P 500 1.00 0.79 0.63
FTSE 100 1.00 0.58
TOPIX 1.00
18
Stronger earnings growth
Source: Bloomberg, 31 Dec 18. Forecasts are offered as opinion and are not reflective of potential performance. Forecasts are not guaranteed and actual events or results may differ materially. Indexes are unmanaged
and have been provided for comparison purposes only. No fees or expenses are reflected. Individuals cannot invest directly in an index. For illustrative purposes only
EPS YoY growth estimates
0%
5%
10%
15%
20%
25%
30%
35%
40%
MSCI China AOnshore
MSCI China MSCI World MSCI EmergingMarkets
2017 2018 2019
P/E ratio (x) 2017 2018 2019
MSCI China A Onshore 17.6 10.8 9.6
MSCI China 15.9 11.4 10.0
MSCI World 19.5 14.3 13.3
MSCI Emerging Markets 15.1 11.3 10.5
19
2018 was a terrible year for equities, especially China A
Source: Bloomberg, 31 Dec 18. Past performance is not indicative of future results
For illustrative purposes only
YTD Total returns (MSCI, in USD terms)
-35% -30% -25% -20% -15% -10% -5% 0%
MSCI World
MSCI World Developed
MSCI Asia Pacific ex-Japan
MSCI Emerging Markets
MSCI China
MSCI China A Onshore
20
Sentiment in China is awful
Source: Bloomberg, 20 Jun 18. Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.
RMB depreciation
• FX reserves have been stable
• Hold domestic stocks
Tariff War
• Impact could be 0.5% of GDP growth
• Hold domestic stocks
Slowing economy
• Some slowness in autos and real estate
• Holdings are still demonstrating growth
Financial deleveraging
• Short-term pain for long-term gain
• Avoid industries and companies
that are reliant on debt
Appendices
22
Recommended reading on China
Source: Aberdeen Standard Investments, Amazon.com, Jan 16
23
Important: The above is strictly for private circulation and information purposes only and should not be considered as an offer, or solicitation, to deal in any of the investments mentioned
herein. Aberdeen Standard Investments(“ASI”) does not warrant the accuracy, adequacy or completeness of the information and materials contained in this document and expressly
disclaims liability for errors or omissions in such information and materials. Past performance is not necessarily a guide to the future. Any research or analysis used in the preparation of this
document has been procured by ASI or its affiliates for their own use and may have been acted on for their own purpose. The results thus obtained are made available only coincidentally
and the information is not guaranteed as to its accuracy. Some of the information in this document may contain projections or other forward looking statements regarding future events or
future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make his/her own
assessment of the relevance, accuracy and adequacy of the information contained in this document and make such independent investigations, as he/she may consider necessary or
appropriate for the purpose of such assessment. Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Neither
ASI nor any of its agents have given any consideration to nor have they made any investigation of the investment objectives, financial situation or particular need of the reader, any specific
person or group of persons. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader,
any person or group of persons acting on any information, opinion or estimate contained in this document. The information herein including any expressions of opinion or forecast have been
obtained from or is based upon sources believed by ASI to be reliable but is not guaranteed as to accuracy or completeness. The information is given without obligation and on the
understanding that any person who acts upon it or otherwise changes his position in reliance there on does so entirely at his or her own risk. ASI reserves the right to make changes and
corrections to its opinions expressed in this document at any time, without notice. Any unauthorized disclosure, use or dissemination, either whole or partial, of this document is prohibited
and this document is not to be reproduced, copied, made available to others.
Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial
instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from marketing) any kind of investment
decision and may not be relied on as such. Historical data and analysis, should not be taken as an indication or guarantee of any future performance analysis forecast or prediction. The
MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other
person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI” Parties) expressly disclaims all warranties (including without limitation, any
warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the
foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages
(msci.com).
Disclaimer
24
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political
and economic risks. These risks are enhanced in emerging market countries.
Before investing, investors should consider carefully the investment objective, risks, charges, and expenses of a fund. This and other important information is contained in the prospectus,
which can be obtained from a financial advisor and are also available on www.aberdeen-asset.com. Prospective investors should read the prospectus carefully before investing.
This document does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on
in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. This document does not constitute investment advice and ASI is not holding itself out as
engaging in the business of advising others as to the investing in or the buying or selling of securities. In considering the prior performance information contained herein, potential investors
should bear in mind that past performance is not necessarily indicative of future results, and there can be no assurance that the AAM will achieve comparable results.
Aberdeen Standard Investments is a brand of the investment businesses of Standard Life Aberdeen plc., its affiliates and subsidiaries. In the United States, Aberdeen Standard Investments
is the marketing name for the following affiliated, registered investment advisers: Aberdeen Standard Investments Inc., Aberdeen Asset Managers Ltd., Aberdeen Standard Investments
Australia Ltd., Aberdeen Standard Investments (Asia) Ltd., Aberdeen Capital Management LLC, Aberdeen Standard Investments ETFs Advisors LLC and Standard Life Investments
(Corporate Funds) Ltd. For Professional Use Only. Not for Public Distribution
© 2019, Aberdeen Standard Investments
ID#: US-010219-81874-1
aberdeenstandard.com
Disclaimer