Presented by Stuart Parks, Head of Asian Equities Asia grows - grow with it March 2006 This...
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Transcript of Presented by Stuart Parks, Head of Asian Equities Asia grows - grow with it March 2006 This...
Presented by
Stuart Parks, Head of Asian Equities
Asia grows - grow with itMarch 2006
This presentation is aimed at professional investors and market counterparties and should not be distributed or redistributed to any other persons.
2
Table of contents
Section 01 Asian economies and market outlook
Section 02 Valuations
Section 03 Portfolio positioning
Section 04 Performance review
Section 03 Appendix: Investment process
Table of contents
This document is exclusively for use by investment professionals in Continental Europe and is not for consumer use. Data as at February 2006, unless otherwise stated.For information on fund registrations, please refer to the appropriate internet site or your local INVESCO office. This marketing document does not form part of any prospectus. Whilst great care has been taken to ensure that the information contained herein is accurate, no responsibility can be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. Opinions and forecasts are subject to change without notice. The value of investments and the income from them can go down as well as up (this may partly be the result of exchange rate fluctuations in investments which have an exposure to foreign currencies) and investors may not get back the amount invested. Past performance is not necessarily a guide to the future. The performance data shown does not take account of the commissions and costs incurred on the issue and redemption of units. There is potential for increased volatility in emerging stock markets, and only a modest proportion of investable wealth should be invested in them. Investing in funds focused on specific themes, particular areas of the market or small capitalisation companies may increase the risk associated with them due to the volatility and/or the concentrated nature of these investments. You should read the fund prospectus for specific risk factors and further information. This document is not an invitation to subscribe for shares in the fund and is by way of information only. Asset management services are provided by INVESCO in accordance with appropriate local legislation and regulations. www.invescoeurope.com
3
01
Asian Economies and market outlook
4
Source: CSFB as at 1st March 2006
Real GDP (y-y%) 2004 2005
China 10.1 9.5
Hong Kong 8.6 7.3
India 7.1 8.1
Indonesia 4.9 5.6
Korea 4.6 4.0
Malaysia 7.1 5.4
Philippines 6.0 5.1
Singapore 8.9 6.4
Taiwan 6.1 4.1
Thailand 6.2 4.4
2006F
10.1
4.7
8.5
4.3
4.4
6.5
5.1
7.0
5.0
4.7
Forecast Summery
5
Asian economies: exports and domestic demand driving growth
-8
-6
-4
-2
0
2
4
6
8
10
12
00 00 01 02 02 03 04 04 05
(% YoY)
-20
-15
-10
-5
0
5
10
15
20
25
30
35
Asian Industrial Production Asian ExportsSource: UBS, as at February 28, 2006
(% YoY)
(LHS) (RHS)
6
Asia: becoming a region of spenders
0,00
0,20
0,40
0,60
0,80
1,00
1,20
1,40
1,60
1,80
2,00
1950 1960 1970 1980 1990 2000 2010E 2020E 2030E
(bn)
25%
27%
29%
31%
33%
35%
37%
39%
41%
43%
Asia population aged 30-59 as % of total pop (RHS)
Source: CLSA, United Nations. Actual data to & estimates made at 1st April 2005
7
China: cost competitiveness
0
100
200
300
400
500
600
1990 1992 1994 1996 1998 2000 2002 2004
USD/ week
US - weekly wagesChina - weekly wages
Source: Bloomberg; China Statistical Yearbook; BNP Paribas Peregrine to 31st December 2004.
8
100
90
80
70
60
50
19851985 1990 1995 2000 2005
120
115
110
105
100
95
90
Chinese: Unit Labor Costs* (LHS) Export Prices** (RHS)
Low labour costs: Exporting deflation
Source: © BCA Research 2005*BCA calculation, rebased to Jan. 1995 = 100.**defined as U.S. import prices from China. Hong Kong re-export prices prior to December 2003.
9
Central banks are comfortable
China Bank Lending and M2 3m-moving average quarter-on-quarter seasonally adjusted annualised growth
0
5
10
15
20
25
30
35
Dez.00 J un.01 Dez.01 J un.02 Dez.02 J un.03 Dez.03 J un.04 Dez.04 J un.05 Dez.05
M2
Bank loans
Source: CLSA, as at 20th January, 2006
10
02
Valutations
11
Asian six-month forward P/E
0
5
10
15
20
25
30
35
40
Jän.95 Jän.96 Jän.97 Jän.98 Jän.99 Jän.00 Jän.01 Jän.02 Jän.03 Jän.04 Jän.05 Jän.06
Source: UBS as at 28th February 2006
12
Asian aggregate price-to-book value vs. ROE
1,0x
1,5x
2,0x
2,5x
3,0x
Jän.95 Jän.96 Jän.97 Jän.98 Jän.99 Jän.00 Jän.01 Jän.02 Jän.03 Jän.04 Jän.05 Jän.06
0%
2%
4%
6%
8%
10%
12%
14%
16%
Asian PBV (LHS)
Asian ROE (RHS)
Source: UBS as at 28th February 2006
13
2006 Asian earnings growth
Source: UBS. Data & estimates as at 1st March 2005
EPS growth 2001 2002 2003 2004 2005 2006E
Banks & Finance 18.1% 0.5% 12.7% 37.3% 13.4% 11.3%
Basic Materials -33.1% 60.4% 71.4% 82.2% 7.6% -16.1%
Consumer Cyclicals -7.5% 82.3% 1.2% 26.2.% -2.8% 17.9%
Consumer Non-cyclicals 5.3% 30.2% 10.0% 3.8% 8.0% 15.9%
Energy -12.4% 13.8% 31.1% 57.5% 23.9% 17.0%
Healthcare 66.6% 48.6% 18.5% -0.7% -7.6% 36.0%
Industrial -10.6% 23.3% 28.7% 18.7% -9.4% 35.8%
Real Estate -5.7% 8.4% 5.5% 29.2% 4.2% 17.5%
Technology -76.7% 156.4% 19.3% 116.0% -19.6% 32.0%
Telecom 16.1% 2.3% 16.6% 28.4% 14.8% 12.1%
Utilities 5.1% 24.5% -1.9% 12.8% 4.4% 9.4%
Asia ex Japan -17.0% 24.9% 20.2% 43.2% 6.4% 14.9%
14
Valuation discount to developed markets
We believe the sharp discount is unwarranted and expect Asia to continue to outperform global equities
Source: UBS estimates as at 1st March 2006
P/E P/B Yield
06 07 06 07 06 07
Asia ex Japan 12.4 10.9 1.8 1.6 3.0 3.4
World 14.3 12.9 2.3 2.1 2.4 2.6
S&P 500 14.6 13.1 2.7 2.5 1.9 2.0
Europe 13.6 12.3 2.1 1.9 3.1 3.3
15
03
Portfolio Positioning
16
Sector Feb-06 Benchmark % active
Cash 7.4 0.0 7.4
Cons. Staples 8.0 3.9 4.1
Cons. Discretionary
12.4 8.6 3.8
Industrials 13.0 11.1 1.9
Health Care 1.3 0.8 0.5
Telecomms Svs. 6.1 7.3 -1.2
Utilities 2.2 4.6 -2.4
Materials 3.6 6.2 -2.6
IT 20.3 23.6 -3.3
Financials 23.2 27.3 -4.1
Energy 2.4 6.9 -4.5
INVESCO Asian Equity Fund – Sector over/underweights
Source: INVESCO as at 28th February 2006. Benchmark: MSCI AC Asia Free ex Japan*financials weighting includes positions in conglomerates Jardine Matheson and Jardine Strategic
Active sector weights
-10% -6% -2% 2% 6% 10%
Energy
Financials
IT
Materials
Utilities
Telecomms Svs.
Health Care
Industrials
Cons. Discretionary
Cons. Staples
Cash
17
Country Feb-06Bench-mark
% active
Cash 7.4 0.0 7.4
Hong Kong 16.7 14.6 2.1
Indonesia 3.6 2.2 1.4
Thailand 3.5 2.7 0.8
Singapore 8.2 7.5 0.7
UK 0.7 0.0 0.7
Philippines 1.3 0.7 0.6
Malaysia 4.6 4.2 0.4
India 8.3 8.9 -0.6
Taiwan 16.6 20.1 -3.5
Korea 22.9 26.5 -3.6
China 6.1 12.2 -6.1
INVESCO Asian Equity Fund – Country over/underweights
Source: INVESCO as at 28th February 2006Benchmark: MSCI AC Asia Free ex Japan
Active country weights
-6,0% -4,0% -2,0% 0,0% 2,0% 4,0% 6,0% 8,0%
China
Korea
Taiwan
India
Malaysia
Philippines
UK
Singapore
Thailand
Indonesia
Hong Kong
Cash
18
Stock example: United Phosphorus – acquisitive in agrochemicals
Supportive industry backdrop
– Reduction in arable land => increased need for farm inputs
– Shift from branded/patented to generic agrochemicals
– high entry barriers, highly consolidated, distributor controlled Expanding into high margin
export markets
– organically
– acquisitions Attractive valuations
100
150
200
250
300
Dez.04 Jun.05 Dez.05
Share price (Rs)
†
Source: Bloomberg as at 26 February 2006
Purchased here
19
Stock example: Orion Corp.
Leading confectionary manufacturer in Korea with consistently rising market share, plus successful expansion into China
New lottery, management and media businesses significantly exceeding forecasts
Source: Goldman Sachs, Bloomberg as at 28 February 2006
100000
150000
200000
250000
300000
Jän.05 Jul.05 Jän.06
Share price (KRW)
†
Purchased here
20
04
Performance Review
21
Discrete year performance (%) – INVESCO Asian Equity Fund
Source: Standard & Poor’s on a mid-price, UK non taxpayer basis with gross income reinvested in US dollars. Quartile rank & sector position refer to the S&P Offshore Equity Asia ex Japan sector.As at 31st January 2006.
Past performance is not a guide to the future
1998 1999 2000 2001 2002 2003 2004 2005 2006 ytd
INVESCO Asian EquityFund (%) -3.6 87.8 -28.7 2.3 0.2 50.9 16.6 21.2 8.6
Quartile 2 1 2 1 1 1 2 2 1
Sector position 30/103 19/118 51/138 33/151 21/161 42/171 53/178 65/186 32/194
MSCI AC Asia Freeex Japan (%) -7.8 64.7 -35.2 -3.8 -8.3 47.0 17.7 23.2 7.3
The fund has a track record of outperforming the peer group and benchmark in bull and bear market conditions.
22
Fund awards
23
05
Appendix: Investment Philosophy & Process
24
Process Overview
Portfolio construction tilts• growth / defensive• large / small cap• sector• market• position size
Top Down
Bottom Up
• liquidity backdrop• country analysis• sector research
• divergence from consensus expectations• valuation• performance catalysts• potential returns
25
Liquidity Trend Analysis
Liquidity conditions are the key determinant in shaping the environment for equities
Liquidity is best gauged by changes to balance of payments conditions
Findings of liquidity trend analysis determines the portfolio bias to growth or value stocks, large vs. small caps
A projected deterioration of liquidity conditions will emphasise need for capital preservation
-10
-5
0
5
10
15
20
Okt.97 Aug.98 Jun.99 Apr.00 Feb.01 Dez.01 Okt.02 Aug.03 Jun.04 Apr.05 Feb.0640
50
60
70
80
90
100
110Asia ex China free liquidity (6mma) minus US free liquidityAsia performance relative to US (RHS)
Source: UBS to October 2005
TopTopDownDown
26
Company Research
Research aims to– gain intimate understanding of the company (strategy, track record, growth potential,
financial strength)– establish where consensus may be wrong in its assessment of the company’s
prospects
Primary research– company visits in Asia (3-4 trips per annum per fund manager)– conference calls from Henley– company meetings / conferences in London– team coverage: more than 700 company meetings per year
Secondary research– sellside analysis helps to establish where consensus is
BottomBottomUpUp
27
Portfolio Construction
If expected investment return of a stock looks attractive compared with the return outlook for the asset class, include in portfolio
If expected investment return of a stock is negative, then zero weight irrespective of benchmark weight
Size of holding in portfolio is determined by diversification, not benchmark considerations:
large cap target weight 2%, small cap target weight 1%
Risk control Bottom up: usually no more than 5% in single holding, 60-85 stocks in
the portfolio, maximum 50% in small caps
Top down: maximum double or half-weighted in core markets or sectors. Maximum 10% cash
BottomBottomUpUp
28
Wichtige rechtliche Hinweise
Dieses Dokument dient ausschließlich der Information und stellt weder eine konkrete Anlageempfehlung noch ein Angebot dar.
Die Wertentwicklung der Anteile in der Vergangenheit bietet keine Garantie für den Erfolg in der Zukunft. Der Wert von Anteilen und deren Ertrag können sowohl steigen als auch fallen. Auch Wechselkursänderungen können den Wert einer Anlage sowohl steigen als auch fallen lassen. Es besteht daher die Möglichkeit, dass Sie bei der Rückgabe Ihrer Anteile weniger als den ursprünglich angelegten Betrag zurück erhalten. Fonds, die in Schwellenländern (Emerging markets), in Unternehmen mit geringer Marktkapitalisierung oder nur in bestimmten Regionen oder Industriezweigen anlegen, können verstärkt Wertschwankungen ausgesetzt sein. Diese Fonds empfehlen sich grundsätzlich nur für Anleger, die gewillt und in der Lage sind, das mit derartigen Anlagen verbundene höhere Risiko in Kauf zu nehmen.
Sämtliche Informationen in diesem Dokument wurden von INVESCO Mitarbeitern im Rahmen ihrer Berufsausübung erstellt. Die hier dargestellten Meinungen sind, soweit nicht anders angegeben, die der Autoren zum Stand Februar 2006, die ständigen Änderungen unterworfen sind. Obwohl große Sorgfalt darauf verwendet wurde, sicherzustellen, dass die in diesem Dokument enthaltenen Informationen korrekt sind, kann ebenso wenig eine Verantwortung für Fehler oder Auslassungen irgendwelcher Art übernommen werden, noch für alle Arten von Handlungen, die auf diesen basieren
Dieses Dokument sollte stets im Zusammenhang mit dem Verkaufsprospekt des Fonds, der weitere wichtige Hinweise und Informationen enthält, gelesen werden. Zeichnungen von Anteilen werden nur auf der Grundlage des vollständigen und aktuellen Verkaufsprospektes angenommen. Verkaufsprospekte und Rechenschaftsberichte sind als Druckstücke kostenlos erhältlich bei INVESCO Asset Management Österreich GmbH, Rotenturmstraße 16-18, 1010 Wien, Tel: +43 (0)1 31620-0, Fax -20, www.invesco.at;
Members of the AMVESCAP Group