schroder asian total return investment company plc...pt waskita beton precast indonesia -7.9 -0.12...
TRANSCRIPT
Robin Parbrook – Head of Asian ex Japan Equities
Performance and strategy review
Schroder Asian Total Return Investment Company plc
April 2017
Marketing material
Robin Parbrook
Lee King Fuei
Management Fund managers of Schroder Asian Total Return Investment Company plc
1
1As at March 2017
Combined 45 years’ Asian investment experience and strong performance record
Lee King Fuei King Fuei has 18 years’ industry experience1. Initially he covered global stocks, then from 2001 he moved to work with the Asian investment team in Singapore. He is currently the Head of Asia Equities (Singapore) and a fund manager responsible for managing Asia Pacific ex-Japan mandates based in Singapore. He manages a variety of institutional Pacific ex Japan accounts including the award winning Nikko Global Wrap Developed Pacific Equity Fund and the SISF Asian Equity Yield Fund, which was awarded the best Asia Pacific ex Japan Fund by Lipper over 3 years in 2013.
Robin Parbrook Robin has 27 years’ experience1 covering Asia, all of it with Schroders. Robin is currently the Head of Asia ex Japan Equities and also a Regional and Alternatives fund manager, based in Hong Kong. In 2008 he moved to Edinburgh to focus on managing Asian investment strategies with a focus on absolute returns, and returned to Hong Kong in August 2010 to manage Asian Total Return as well as other Asian equity strategies. Prior to 2008 he was Head of the Asian Investment Team for Schroders, in which capacity he managed a range of Asian funds including the Morningstar five-star rated SISF Hong Kong Fund, which was awarded best Hong Kong Equity Fund by Lipper over 3, 5 and 10 years in 2008
Product overview – Schroder Asian Total Return Investment Company plc
2
Source: Schroders, as at 31 March 2017
Fund manager Robin Parbrook/Lee King Fuei
Industry experience (Yrs) Robin (27) King Fuei (18)
Schroders’ experience (Yrs) 45 years (combined)
Investment objective Fund aims
The Company seeks to provide a high rate of total return through investment in equities and equity related securities of companies trading in the Asia Pacific region (excluding Japan). The Company seeks to offer a degree of capital preservation through tactical use of derivative instruments. The Company will invest principally in a diversified portfolio of 40-70 companies operating primarily in Asia, including Australasia but excluding Japan. It is intended that the Company will have a bias to investing in small and mid cap companies.
Schroder Asian Total Return Investment Company plc Taking a different approach to investing in Asia
3
Securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.
– Where a stock is listed (e.g. Rusal in HK) is unimportant. It is what the company does that drives returns
– It is NOT about taking large country positions based on a discussion of widely available pieces of economic data. With little information advantage we believe the top down part of an Asian investment process is best left to quantitative models
– Only buy stocks that have upside to consistently calculated fair values made by experienced analysts, rather than worrying about overweight or underweight positions. In our view the primary goal for investors in Asia is to make money, whilst avoiding large losses, not relative performance
Ignore the index
Focus solely on absolute returns
Top Down is about understanding market risks, taking out volatility and aiming to provide capital preservation
If risk of short-term correction is high, remove more market risk
Schroder Asian Total Return Investment Company plc Investment process – an overview
4
Source: Schroders. The above is for illustrative purposes only and does not constitute a recommendation to invest in the country.
– Picking the best 50 stocks
Market risk removed to provide downside protection
– Which Asian markets are expensive or cheap in the medium term?
– Are there significant short-term market risks?
– Final portfolio 60 stocks as at 31
Mar 2017
Stock Selection
Step 1
Country view
Step 2
Tactical view
Step 3
Additional protection against short term market correction via ASX 200, HSI, HSCEI and TWSE put options
Country hedges for expensive markets
For expensive markets, remove country risk
Schroder Asian Total Return Investment Company plc 2016 and YTD 31st March 2017 Performance
Source: Schroders, Morningstar. All fund/trust data is after fees. In a change from earlier reviews, share price data is now sourced from Morningstar with NAV’s being on a cum income NAV. The reference index is the MSCI AC Asia Pacific ex Japan since March 2013, chain-linked to the original index. New strategy started from March 2013. Past performance is not indicative of future returns.
5
Performance Summary – in % GBP Total Returns
2016 %
Year to Date %
Net Asset Value total return 28.5 11.4
Share price total return 37.0 11.6
Peer group NAV total return 25.7 13.1
MSCI AC Asia Pacific ex Japan Index 27.3 11.5
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.
Schroder Asian Total Return Investment Company plc Long Term Performance
Source: Schroders, Morningstar. All data is after fees. Some performance differences between the fund and the reference index may arise because the fund performance is calculated at a different valuation point from the reference index. On 18 March 2013 the MSCI AC Asia Pacific ex Japan replaced the MSCI AC Asia ex Japan. The track record of the previous index has been kept and chain-linked to the new one. Schroders took over the management of the Company on 18 March 2013.
12 month ending 31 March
2013 31 March
2014 31 March
2015 31 March
2016 31 March
2017 March 2013
to March 2017
% % % % % % p.a.
Net Asset Value total return
9.4 -8.6 26.1 -2.1 35.0 11.1
Share Price total return 16.4 -13.6 26.5 -4.2 43.0 10.6
MSCI AC Asia Pacific ex Japan Index 12.7 -6.7 19.4 -8.7 35.9 8.4
6
Performance Summary – in % GBP
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.
Absolute contribution to returns in USD (%) Top and bottom 5 stock contributors
Schroder Asian Total Return Investment Company plc Performance attribution – Financial Year 2016
7
Source: FactSet. Securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.
Stock Country Returns (%)
Absolute Contribution (%)
Johnson Electric Hong Kong -5.7 -0.30
Pacific Textiles Hong Kong -10.0 -0.27
Hollysys Automation China -13.7 -0.27
IFast Singapore -24.7 -0.26
Karex Malaysia -14.9 -0.23
Stock Country Returns (%)
Absolute Contribution (%)
Largan Precision Taiwan 106.5 2.30 Taiwan Semiconductor Manufacturing
Taiwan 60.3 2.24
China Lodging Group China 97.8 1.72
Tencent China 48.8 1.67
Jardine Strategic Hong Kong 46.3 1.59
6.3
7.7
4.6
1.5
0.6 1.3
-0.2
0.0
1.0
0.2
7.6
2.4
-1.2
0.1
-0.2
Aust
ralia
Chin
a
Hon
g Ko
ng
Indi
a
Indo
nesi
a
Kore
a
Mal
aysi
a
New
Zea
land
Phili
ppin
es
Sing
apor
e
Taiw
an
Thai
land
Cash
Der
ivat
ives
FX F
orw
ards
Absolute contribution to returns in USD (%) Top and bottom 5 stock contributors
Schroder Asian Total Return Investment Company plc Performance attribution – for YTD 31 March 2017
8
Source: FactSet. Securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.
Stock Country Returns (%)
Absolute Contribution (%)
Brambles Australia -20.3 -0.53
PT Sumber Alfaria Trijaya Indonesia -16.9 -0.15
PT Waskita Beton Precast Indonesia -7.9 -0.12
Ifast Singapore -13.5 -0.08
RFM Corp Philippines -6.3 -0.07
Stock Country Returns (%)
Absolute Contribution (%)
Jardine Strategic Hong Kong 25.7 1.10
Largan Precision Taiwan 32.4 0.74
Alibaba China 21.3 0.71
Samsung Electronics Korea 22.0 0.64
HDFC Bank India 22.5 0.63 0.8
5.0
3.1
1.7
-0.3
1.3
0.0 0.0 0.0
0.0
2.3
0.2 0.2
-1.8
-0.5
Aust
ralia
Chin
a
Hon
g Ko
ng
Indi
a
Indo
nesi
a
Kore
a
Mal
aysi
a
New
Zea
land
Phili
ppin
es
Sing
apor
e
Taiw
an
Thai
land
Cash
Der
ivat
ives
FX F
orw
ards
Schroder Asian Total Return Investment Company plc Portfolio Positioning as at 31 March 2017
9
Source: Schroders, 31 March 2017. Sectors shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell
Country Positioning Sector Positioning
14.8%
25.1%
22.1%
11.7%
2.1%
7.2%
0.0%
1.9%
1.6%
16.8%
2.9%
0.5%
-6.7%
-7.4%
Australia
China
Hong Kong
India
Indonesia
Korea
Malaysia
New Zealand
Philippines
Singapore
Taiwan
Thailand
United States
Hedges - delta-adjusted
Cash
19.9%
1.6%
0.0%
14.2%
7.7%
11.2%
33.5%
6.4%
9.5%
1.5%
0.0%
1.2%
-7.4%
-6.7%
Consumer Disc.
Consumer Staples
Energy
Financials
Health Care
Industrials
Info Technology
Materials
Real Estate
Telecom Services
Utilities
Unit Trust
Hedges - delta-adjusted
Cash
Schroder Asian Total Return Investment Company plc Top 10 Holdings as at 31 March 2017
10
Source: Schroders. Data is for information only and it does not constitute any recommendation to invest or disinvest in the above-mentioned securities. Past performance is not indicative of future returns.
Security Country Sector Fund (%)
Jardine Strategic Hong Kong Industrials 4.8%
Taiwan Semiconductor Manufacturing Taiwan Info Tech 4.8%
Tencent China Info Tech 4.2%
Alibaba China Info Tech 3.8%
HDFC Bank India Financials 3.5%
Samsung Electronics Korea Info Tech 3.2%
Hon Hai Precision Taiwan Info Tech 2.7%
Largan Precision Taiwan Info Tech 2.5%
AIA Group Hong Kong Financials 2.5%
China Lodging Group China Consumer Discretionary 2.5%
Total 34.5%
Market Outlook
China’s Share of Global Investment (%) – China now commands ~27%-28% of global investment but only 15% of global GDP
Non-Financial sector credit World China China
share (%)
2001-2005 27,326 1,587 5.8%
2006 -2010 48,386 7,978 16.5%
2011-2016 30,143 16,535 54.9%
2014-2016 10,638 7,122 67.0%
China - QE and investment spend powers the world More important driver of cyclical rebound than Trump policies
12
Source: IMF, BIS, Macquarie Research, March 2017
Non-Financial Credit Growth (US$ bn) – China is responsible for 67% of net global credit creation and over 90% of global credit to NF corporates
Non-Financial corporate credit
World China China share (%)
2008-2013 12,973 9,874 76.1%
2014-2016 4,630 4,288 92.6%
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
24.0%
28.0%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
China Share (%) - Investment China Share GDP (%)
Take off post WTO
Take off post GFC
China – Credit/GDP spiralling upwards
Debt levels already very high and marginal return on new credit is falling
13
China - why continual stimulus is increasingly risky
China - Incremental Capital Output ratio (ICOR) Outstanding credit as a share of GDP
2
3
4
5
6
7
8
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
China - ICOR Average 1991-2007
80%
100%
120%
140%
160%
180%
200%
220%
240%
260%
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Total domestic claims Official TSF
Source: Emerging Advisors Group, January 2017 Source: World Bank, IMF, Macquarie Asia Strategy Research, January 2017
More credit growth needed for each dollar of GDP growth
Stimulus distorted cement demand over the last 8 years
0
500
1000
1500
2000
2500
3000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
E20
18E
2019
E20
20E
Est. cement demand WITH stimulusEst. cement demand WITHOUT stimulus
China - repeated stimulus has pulled forward demand Rebalancing means inevitable slowdown / fall in demand for key commodities
14
Source: WIND, CEIC, National Bureau of Statistics (NBS), China Cement Association (CCA), Digital Cement (DC), UBS estimates, October 2016 Source: JP Morgan as at October 2016 Regions shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell
mt Actual demand driven by stimulus
Organic demand estimate WITHOUT
stimulus
Driven by organic demand
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
0 6000 12000 18000 24000 30000 36000 42000 48000 54000 60000
Russia (1991-2015)Brazil (1985-2015)India (1985-2016)China (1985-2016)US (1930-2015)UK (1985-2015)Germany (1985-2015)Japan (1985-2015)Taiwan (1985-2015)South Korea (1985-2015)Mexico (1985-2015)Spain (1985-2015)Indonesia (1985-2015)
GDP per capita (USD)
Cement consumption per capita (tonnes)
US 2015
Russia 2015
Brazil 2015
Mexico 2015
S. Korea 2015
Taiwan 2015
UK 2015
Germany 2015 Japan 2015
India 2016E
1993: per capita cement consumption peaked in Taiwan
1997: per capita cement consumption peaked in Korea
Spain 2015
Indonesia 2015
China 2015
China 2016E
Peak for Spain in 2006
Assets of the Chinese financial system in 2008 China – estimated shadow banking stock …reaches Rmb 42 trillion
China - financial sector transparency down, fragility up. Rampant credit growth driven by shadow banking sector and smaller, marginal banks
15
Source: Emerging Advisors Group
Big four banks, 96%
Other banks, 100% Trust,
3%
Insurance, 11%
Securities, 8%
Asset/ WMP, 14%
Pension, 3%
Other finance, 4%
"Other" (informal),
9%
Total Assets: 248% of GDP
Assets of the Chinese financial system in 2016
Big four banks, 109%
Other banks, 185%
Trust, 24%
Insurance, 20%
Securities, 26%
Asset/ WMP, 46%
Pension, 8%
Other finance,
14%
"Other" (informal),
11%
Total Assets: 441% of GDP
Source: CEIC, Macquarie Research, March 2017
0%
10%
20%
30%
40%
50%
60%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
% of GDP RMB bn
Shadow Banking % of GDP
0.0% 3.0% 6.0% 9.0% 12.0% 15.0% 18.0%
Mexico
Italy
Brazil
India
France
Germany
United Kingdom
China
-10%0%
10%20%30%40%50%60%70%80%90%
100%110%
CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19USA Europe China Asia Pacific ex-China LatAm Other
E-commerce penetration by country (% of B2C retail sales) 2016
Share of incremental ecommerce growth in US$
China - E-commerce leads the world Weak off-line infrastructure and protectionism allows PRC on-line players to thrive
16
Source: Euromonitor and BofA-Merrill Lynch , January 2017 Source: Euromonitor and BofA-Merrill Lynch , January 2017
2016 Apparel
& Footwear
Beauty & Personal
Care
Consumer Appliances
Consumer Electronics
Consumer Health
Home Care
Home Improvement
& Gardening
Homewares & Home
Furnishings
Personal Accessories & Eyewear
Pet Care Traditional
Toys & Games
Video Games
Hardware Total
Australia 15% 6% 10% 18% 7% 2% 4% 4% 9% 1% 9% 10% 7% Brazil 3% 2% 13% 14% 1% 0% 1% 1% 1% 2% 9% 14% 4% Canada 3% 2% 5% 7% 1% 1% 1% 1% 1% 2% 6% 9% 2% China 26% 20% 33% 44% 16% 7% 6% 6% 6% 7% 4% 23% 17% France 17% 5% 9% 26% 5% 2% 3% 3% 4% 6% 21% 21% 7% Germany 19% 5% 10% 27% 13% 1% 5% 5% 6% 10% 20% 13% 9% India 7% 1% 1% 16% 3% 0% 2% 2% 2% 1% 1% 2% 4% Italy 6% 4% 5% 13% 1% 2% 1% 1% 3% 3% 8% 16% 3% Japan 13% 8% 9% 11% 4% 2% 8% 8% 9% 11% 14% 16% 8% Mexico 2% 1% 9% 13% 1% 1% 1% 1% 4% 0% 3% 5% 2% Russia 8% 4% 13% 21% 4% 2% 9% 9% 5% 4% 9% 9% 4% South Korea 21% 9% 11% 19% 11% 7% 15% 15% 8% 23% 24% 42% 17% Spain 5% 6% 3% 12% 1% 1% 3% 3% 6% 7% 14% 15% 4% United Kingdom 19% 11% 26% 34% 12% 7% 15% 15% 8% 8% 25% 22% 14% USA 15% 8% 21% 37% 11% 1% 9% 9% 11% 5% 17% 21% 11%
E-commerce penetration by end market (as % of B2C retail sales)
Source: Euromonitor and BofA-Merrill Lynch , January 2017
-10%
-5%
0%
5%
10%
15%
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2009 2010 2011 2012 2013 2014 2015 2016
Same-hotel RevPAR Growth
All hotels Non-Shanghai hotels
0
1,000
2,000
3,000
4,000
2011 2012 2013 2014 2015 2016
Leased and owned hotels
0
20
40
60
80
100
2011 2012 2013 2014 2015 2016
Rapid growth in membership program Rapid growth across multiple budget/mid-level brands Strong brand loyalty – 88% direct sales
China – strong growth from travel market China Lodging - cyclical upswing and longer term secular growth from rising leisure spending in China
17
Source: Company data, March 2017
Number of hotels in operation In millions
Share price re-rated as growth comes through Cyclical upswing in revenues as economy improves
For hotels in operation for at least 18 mths
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2010 2011 2012 2013 2014 2015 2016 2017
Share Price (USD)
MSCI Asia Pac ex JP ex financials, energy & materials – 12m Fwd PE (x)
MSCI Asia Pac ex JP ex financials, energy & materials – 12m Trailing PB (x)
Valuations - what is in the price in Asia? Stock markets not cheap when questionable banks and commodity stocks are removed
18
Source: Datastream, MSCI, CLSA, 19 April 2017
Avg, 13.4
+1SD, 15.0
-1SD, 11.8
+2SD, 16.5
-2SD, 10.3
7
9
11
13
15
17
19
Dec
99
Dec
00
Dec
01
Dec
02
Dec
03
Dec
04
Dec
05
Dec
06
Dec
07
Dec
08
Dec
09
Dec
10
Dec
11
Dec
12
Dec
13
Dec
14
Dec
15
Dec
16
12m fwd PE (x)
Avg, 1.8
+1SD, 2.1
-1SD, 1.5
+2SD, 2.4
-2SD, 1.2 1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
Dec
99
Dec
00
Dec
01
Dec
02
Dec
03
Dec
04
Dec
05
Dec
06
Dec
07
Dec
08
Dec
09
Dec
10
Dec
11
Dec
12
Dec
13
Dec
14
Dec
15
Dec
16
12m trl PB (x)
Valuations - Schroders bottom up indicator More limited upside to analysts’ Fair Value estimates across our coverage
19
Source: Schroders, March 2017
Regional challenges - structural issues facing emerging markets Do Asian countries have the right “soft skills” for the New Economy?
20
1Source: World Bank Ease of Doing Business 2014. 2Source: Fraser Institute 2012. 3Source: Transparency International 2014. 4Source: United Nations Development Programme 2014. Countries shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.
Country Ease of Doing Business1
(189 Countries) Economic Freedom2
(152 Countries) Corruption Perception3
(174 Countries) Human Development4
(187 Countries)
Singapore 1 1 7 9
New Zealand 2 3 2 7
Australia 10 8 11 2
Hong Kong 3 2 17 15
Taiwan 19 18 35 –
South Korea 5 33 43 15
Malaysia 18 74 50 62
Thailand 26 102 85 89
China 90 115 100 91
Philippines 95 51 85 117
Indonesia 114 80 107 108
India 142 110 85 135
Japan 29 23 15 17
US 7 12 17 5
United Kingdom 8 12 14 14
France 31 58 26 20
Germany 14 28 12 6
8x
12x
16x
20x
24x
4x
12x
20x
28x
36x
8x
12x
16x
20x
24x
0x
5x
10x
15x
20x
25x
30x
Stock Exchange of Thailand (SET) Index – P/E Ratio
ASEAN – Are premium valuations justified?
21
Source: Bloomberg, April 2017. Countries shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell
Current = 16.9x
Philippines SE Composite Index – P/E Ratio
Current = 20.2x
Jakarta SE Composite Index – P/E Ratio FTSE Bursa Malaysia KLCI – P/E Ratio
Current = 24.5x Current =
17.2x
What do we like: Healthcare Aging demographics and rising income drives higher health care expenditure
22
Note 1: US and Hong Kong are excluded from the above chart as they are outliers Source: Resmed 1 Comorbidity is the presence of one or more additional diseases or disorders occurring with (that is concomitant or concurrent with) a primary disease or disorder, in the countable sense of the term, a comorbidity (plural comorbidities) is each additional disorder or disease.
Healthcare spending increases as the population ages
Sleep apnea is highly prevalent in chronic diseases, but remains a huge, underpenetrated market
The Sleep Heart Health Study found that 26% of adults have sleep apnea
Prevalence of sleep apnea in comorbidities1 Healthcare expenditure (% of GDP)
2
3
4
5
6
7
8
9
10
11
12
5 10 15 20 25 30 35 40 45 50 55 60
Old Age Dependency Ratio (%)
Indonesia
Malaysia
India Thailand
Singapore China
Mexico Turkey
Brazil
Korea
Russia
Japan Italy
Germany
Greece
France
UK Spain
Higher old-age dependency ratio means
more healthcare expenditure
As of 2012
83%
77%
76%
59%
49%
48%
37%
30%
Drug-resistant hypertension
Obesity
Congestive heart failure
Pacemakers
Atrial fibrillation
Diabetes
All hypertension
Coronary artery disease
What do we like: Disruption innovators Advanced driver-assistance systems (ADAS)
23
Source: Boston Consulting Group, McKinsey & Co. As of 1 Feb 2016.
Consumer and regulatory interest is driving demand for ADAS over the next decade
The market for ADAS is expected to grow strongly through 2020
Global revenue projections for advanced driver-assistance systems
Societal harm from motor vehicle crashes
400
600
800
Current ADAS penetration 100% ADAS penetration
Equivalent to 6% of real GDP
28% savings is equivalent to ~2.5x federal spending
on education
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2015 2016E 2018E 2020E
Strategy Analytics TechNavio
$ billion $ billion
Compounded annual growth rate: 29%
Compounded annual growth rate: 16%
US and EU regulatory timeline for safety techy recommendations/mandates
A global growth industry – Big Brother is watching more and more..
Exciting growth potential from new product areas
What do we like: technological leadership Hikvision – global leader in surveillance equipment and vision technology
24
Source: Company data
Hik product offerings: front-end cameras, data transfer and storage, data analytics systems and control platform
What do we like: technological leadership Largan Precision – dominant lens manufacturer
25
Source: IDC, eMarketer, United Nations, Statista, CLSA
Global smartphone shipments are expected to grow over the next few years as penetration rises
Continued spec upgrade and increasing dual cam adoption to underpin handset lens demand
Global smartphone shipments and penetration, 2009 – 2018E Smartphone market share, by camera resolution
0
20
40
60
80
Mar 15 Jun 15 Sep 15 Dec 15 Mar-16 Jun-16 Sep-16
Number of dual cam smartphones on the market
0
5
10
15
20
25
30
35
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2009
2010
2011
2012
2013
2014
2015
2016
E
2017
E
2018
E
Global smartphone shipments (million units)Global smartphone penetration (%, rhs)
0%
20%
40%
60%
80%
100%
Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 1520+ megapixels 16-19 megapixels 12-15 megapixels8-11 megapixels 5-7 megapixels Under 5 megapixels
0
20
40
60
80
100
120
140
Railways investment in 2009-2014 Railways investment in 2015-2019
Indian smartphone penetration on verge of rapid growth Impact of data flows on global GDP growth may be larger than that of either migration or FDI
India - rising telecom and infrastructure investment will significantly raise economic potential
26
Source: Indian Railways, Macquarie Research, March 2016
Indian transport network suffers from chronic underinvestment
Railways investments of US$130b planned for the next 5 years
Source: McKinsey Global Institute, JP Morgan, April 2016 Source: CLSA, IDC, Cybermedia Research, April 2016
0%
5%
10%
15%
20%
25%
30%
35%
050
100150200250300350400
FY14 FY15 FY16CL FY17CL FY18CL4G smartphone population Non-4G smartphone population
(m) (% mobile subscribers)
203550658095
110125
194
9
195
5
196
1
196
7
197
3
197
9
198
5
199
1
199
7
200
3
200
9
201
5
China India
(‘000 kms)
Source: India Ministry of Railways (Railway Board), China Railway Corporation, China National Railway Administration, Morgan Stanley, April 2016
Railway route length
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
0
5
10
15
20
25
30
35
40
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Techtronics – leading edge battery technology
What do we like : world class exporters
Source: Bloomberg, April 2017 For illustrative purpose only, it does not represent any recommendation to invest or disinvest in the above-mentioned securities
Share price (HKD)
.
27
Merida & Giant – leading global brands and manufacturing expertise
Branded global growth plays – beneficiaries of a weaker RMB
Revenue NT$m
Giant Manufacturing
Merida Industry
Sectors where caution warranted Areas we intrinsically like
Conclusions – How to invest longer term?
Source: Schroders; google.com; Chosun Daily.
– Strong Free Cash Flow e.g. Taiwan Exporters
– Lowest cost producers e.g. HK/China/Taiwan Exporters
– Flexible cost base e.g. HK/China Exporters
– Secular growth – Innovators
e.g. Taiwan Tech, Indian private sector banks, Chinese internet
– Sustainable yield e.g. Developed Market Telecoms
– Value products e.g. HK Industrials
– Automation e.g. Taiwan/China Industrials
– Healthcare e.g. China
– ASEAN Consumption e.g. (Not at current levels)
– Commodities
– Asset Heavy-Capital Intensive
– Asian Banks and Financials
– High Gearing
– Monopolies
– Weak Cash Flow
– State Owned Enterprises
– Sticky Cost Bases/Excess Regulation
– Hierarchical companies (Chaebols)
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Risk Factors
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Asian Total Return Investment Company plc:
Investors in the emerging markets and Asia should be aware that this involves a high degree of risk and should be seen as long term in nature.
Less developed markets are generally less well regulated than the UK, they may be less liquid and may have less reliable arrangements for trading and settlement of the underlying holdings.
The Company holds investments denominated in currencies other than sterling, investors should note that exchange rates may cause the value of these investments, and the income from them, to rise or fall.
The Company invests in smaller companies that may be less liquid than in larger companies and price swings may therefore be greater than investment companies that invest in larger companies.
The Company may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so.
Investments such as warrants, participation certificates, guaranteed bonds, etc. will expose the fund to the risk of the issuer of these instruments defaulting on paying the capital back to the fund.
The Company can use derivatives to protect the capital value of the portfolio and reduce volatility, or for efficient portfolio management.
Important Information
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Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.
The most up to date Key Features Documents, available at www.schroders.co.uk/investor or on request. For further explanation of any financial terms, visit www.schroders.co.uk/glossary. For investment advice, speak to your Financial Adviser. If you don't already have an Adviser, you can find one at www.unbiased.co.uk or www.vouchedfor.co.uk.
This presentation is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and opinions contained herein are those of Robin Parbrook, Head of Asia ex Japan Equities, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.
Issued in April 2017 by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority
Asian Total Return Investment Company plc:
Contact Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA. schroders.com