Download Dias nummer 1 - FONDS professionell

ISI Far East
Things will never be the same again …
Overview
•
•
•
•
•
•
•
•
•
ISI facts
Important Far Eastern trends
Far Eastern trade
Sound businesses
Characteristics of the Far East and China
Country and industry preferences
Risks
Investment philosophy and investment process
Questions
Urbanisation in Asia
current migration
Migration from rural to urban areas a long-term trend
contributing to growth and demand for commodities
Rising income in China
- also for rural population
Rising income =
growing private consumption
Disposable income and
house price developments in China
Wages
House prices
Wage rise faster than house prices
China an agricultural country?
60
%
50
40
30
20
10
0
Agriculture
I ndustries
share of total labour force
Source: GaveKal
Too many employed on
inefficient farms
Tertiary
share of GDP
Household debt/GDP
Mortgage debt
Source: GaveKal
Other debt
Chinese savings motivations
Children's education
Retirement
Medical care
Home purchase
Childen's wedding exp.
0%
5%
10%
15%
20%
25%
Key motivations for saving
Source: HSBC
30%
35%
40%
USD/RMB
.
USA
Japan
Korea
Kina
kilde: BCA Research
The only way is …
Exports from Asia to USA declining
.
USA
Japan
Korea
Kina
Source: BCA Research
Result: less dependency on
debt-ridden US consumers
Declining debt/equity ratio but
ROE remains high
ROE
Source: CLSA
Reduced risk at lower global growth
Debt/equity
Equity yields exceed bond yields
Source: CLSA
Numerous opportunities of finding
secure equities in Far East
Far East
• Economic growth is stable and high
– likely to remain so in 10-15 years
• Rapidly rising purchasing power among private households
– new consumers appear every day
• Positive demographic development
• Swelling trade in the Far East
– reduces dependency on USA
• Positive development of various balances
– countries capable of countering recession
• Sound companies with good earnings
China
• Share markets are liquidity driven
– 90,000 new stock accounts every day
• Reduction in corporation tax
– from 33% to 25%
• Rising exchange rate
• High growth in earnings
• Listing of H shares in China
– PetroChina and China Mobile
• 2008 Olympics
Country weights
Overweights
• China, Hong Kong and Macau
• Singapore
• Malaysia
Underweights
• Korea
• Taiwan
• Thailand
Industry preferences
•
•
•
•
•
•
•
•
Real property
– private homes, office buildings and hotels
Retail sales
Financials
Infrastructure
Telecommunication
Food
Commodities
– food, metals and oil
Technology – substantial underweight
Risks
•
Measures imposed by Chinese authorities to bring booming economy to a halt
are too stringent
•
US housing market to weaken and USD to plunge
•
Growth in global economy triggers rising inflation and interest rates
•
Oil price to exceed USD 100 per bbl
Investment philosophy
Sydbank Emerging Markets & Structured Credit aims to offer customized, premium
quality investment products as well as active investment management ensuring high,
long-term performance. By investing in Emerging Markets we believe that we can
generate risk adjusted excess value based on seven fundamental elements:
1) Active management enables us to generate outperformance.
2) We access the market with a top-down approach, focussing on getting countries and
sectors right.
3) We believe that investing in long or short themes can add value to the portfolio.
4) Identification of differences between market value and fair value that are not due to
fundamental issues can contribute to outperformance.
5) We believe that ability to act fast on new information is crucial for our
outperformance.
6) We believe that teamwork and a disciplined investment process is necessary in
order to be fast-reacting.
7) We believe that cooperation with external advisors is necessary and value adding.
Investment process
PHASE 1
PHASE 2
PHASE 3
GLOBAL VIEW
COUNTRY / SECTOR
ALLOCATION
STOCK SELECTION
Global factors and themes
Interest rates
Currency
Inflation
Growth
Geopolitics
Commodities
Structural changes
Market analysis
Relative pricing
Risk aversion
Supply/demand
Portfolio risk profile and themes
Quantitative factors
Macro economy
Valuation
Geographical placement
Trading relations
Credit rating
Qualitative factors
Political stability/prospects
Reform agenda
Budget planning
Financial system
International relations
Central bank
Country / sector selection
Feedback to the process:
Investment guidelines, legislative investment rules, attribution analysis etc.
Micro research
External advisors
Valuation
Management quality
Top line growth
Earnings growth / quality
CF generation
Balance sheet strength
Investment horizon:
• Strategic/tactical
Final portfolio