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Will the monetary cycle derail the emerging equities outperformance? May 24th, 2010 This material is solely for the attention of "professional” investors (see more details and definitions at the back). Abundant flow of funds on the EM asset class Will the monetary cycle derail GEM growth ? - 23/05/2017page 2 Stellar relative performance Relative performance of MSCI Emerging Markets vs. MSCI World 400 350 300 250 200 150 Source: Datastream, Amundi - 01/01/1988 – 17/05/2010 - USD Past performance is not a guarantee or a reliable indicator for current or future performance and returns 01/01/2010 01/01/2009 01/01/2008 01/01/2007 01/01/2006 01/01/2005 01/01/2004 01/01/2003 01/01/2002 01/01/2001 01/01/2000 01/01/1999 01/01/1998 01/01/1997 01/01/1996 01/01/1995 01/01/1994 01/01/1993 01/01/1992 01/01/1991 01/01/1990 01/01/1989 01/01/1988 100 Will the monetary cycle derail GEM growth ? - 23/05/2017page 3 avg EM 17/05/2010 17/11/2009 17/05/2009 17/11/2008 17/05/2008 17/11/2007 17/05/2007 17/11/2006 17/05/2006 17/11/2005 17/05/2005 17/11/2004 17/05/2004 17/11/2003 17/05/2003 17/11/2002 17/05/2002 17/11/2001 17/05/2001 17/11/2000 17/05/2000 17/11/1999 17/05/1999 17/11/1998 17/05/1998 17/11/1997 17/05/1997 17/11/1996 17/05/1996 17/11/1995 17/05/1995 Synchronized monetary policy this time around Central bank rates (%) 25 20 15 10 5 0 avg DEV EM:: Taiwan, Russia, Korea, Indonesia, India, China, Brazil DEV:US, EEC, Japan Will the monetary cycle derail GEM growth ? - 23/05/2017page 4 Monetary policy: tightening in EM vs on hold in DM Will the monetary cycle derail GEM growth ? - 23/05/2017page 5 Higher GDP growth differential to accelerate Growth differential between Emerging and developed countries 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% 1997 1998 1999 2000 2001 2002 2003 2004 GDP (real, %YOY) Source: Datastream, MSCI, EU, Amundi 2005 2006 Average 2007 2008 2009 2010 2011 So urce : EIU, M SCI, A mundi Will the monetary cycle derail GEM growth ? - 23/05/2017page 6 Change in real GDP forecasts Source: JP Morgan, Amundi Will the monetary cycle derail GEM growth ? - 23/05/2017page 7 Superior sovereign risk Emerging economies enjoy strong macroeconomic fundamentals compared with developed countries: Emerging Countries Key economic data Developed Countries Year % of GDP Gross Government Debt 2009 42% 94% Budget Balance 2009 2010e -4.4% -4.0% -8.2% -8.5% Gross External Debt 2009 26% 135% Current Account Balance 2009 2010e 2.9% 1.7% -1.6% -1.9% Source: MSCI, EIU, JEDH, Fitch, Amundi Will the monetary cycle derail GEM growth ? - 23/05/2017page 8 A twin deficit: a ten years story Current account (% GDP) + Budget balance (% GDP) 25 2009 20 15 worsening 10 Malaysia Taiwan 5 China Germany Israel Mexico Poland Japan Turkey Italy South Africa India 0 Brazil -5 -10 USA -15 1999 Korea Russia UK Portugal -20 Greece -25 -15 Source: EIU, Amundi -10 -5 0 5 10 15 Will the monetary cycle derail GEM growth ? - 23/05/2017page 9 Emerging markets’ relatively low leverage 350 Total of Private and Public Debt (% GDP) - 2009 300 250 200 150 100 50 General government debt Private credit Peru Indonesia Russia Mexico Colombia Argentina Turkey Philippines Chile Czech Republic Poland Egypt South Africa Brazil Morocco India Thailand Hungary Korea China Taiwan Germany France Greece Portugal Spain United States United Kingdom Japan 0 so urce : Fitch Will the monetary cycle derail GEM growth ? - 23/05/2017page 10 Source: Datastream, Amundi Données au 5 mai 2010 RUSSIA CHINA BRAZIL GREECE PORTUGAL 04/05/10 04/04/10 04/03/10 04/02/10 04/01/10 04/12/09 04/11/09 04/10/09 04/09/09 04/08/09 04/07/09 04/06/09 04/05/09 04/04/09 04/03/09 04/02/09 04/01/09 04/12/08 04/11/08 04/10/08 04/09/08 04/08/08 04/07/08 04/06/08 04/05/08 04/04/08 04/03/08 04/02/08 04/01/08 04/12/07 04/11/07 04/10/07 04/09/07 04/08/07 04/07/07 04/06/07 04/05/07 1200 A change in risk perception 1000 800 CDS 10 y 600 CDS 10y 500 DV 400 300 200 100 EM 0 SPAIN Will the monetary cycle derail GEM growth ? - 23/05/2017page 11 MSCI Emerging Markets MSCI World Jan-10 Jan-09 Jul-09 Jan-08 Jul-08 Jan-07 Jul-07 Jan-06 Jul-06 Jan-05 Jul-05 Jan-04 Jul-04 Jan-03 Jul-03 Jan-02 Jul-02 Jul-01 Jul-00 Jan-01 Jul-99 Jan-00 Jul-98 Jan-99 Jul-97 Jan-98 Jul-96 Jan-97 Jul-95 Jan-96 Jul-94 Jan-95 Jul-93 Jan-94 Jul-92 Jan-93 Jan-92 Jan-91 Jul-91 Jan-90 Jul-90 On the road to premium valuation PE next 12 months 25 23 21 19 17 15 13 11 9 7 5 Source : Ibes Will the monetary cycle derail GEM growth ? - 23/05/2017page 12 EPS growth forecasts (IBES consensus) Will the monetary cycle derail GEM growth ? - 23/05/2017page 13 EM currencies: appreciation to further Global Real Effective Emerging Markets Exchange Rates (*) 110 REER vs Trade weighted $ 105 100 95 90 Asian crisis 85 80 75 Mar 10 Sep 09 Mar 09 Sep 08 Mar 08 Sep 07 Mar 07 Sep 06 Mar 06 Sep 05 Mar 05 Sep 04 Mar 04 Sep 03 Mar 03 Sep 02 Mar 02 Sep 01 Mar 01 Sep 00 Mar 00 Sep 99 Mar 99 Sep 98 Mar 98 Sep 97 Mar 97 Sep 96 Mar 96 Sep 95 Mar 95 Sep 94 Mar 94 Sep 93 70 '(*) weighted average REER of Korea, Brazil, Mexico, China, South Africa, India, Malaysia, Israel and Russia. Source : Datastream, Amundi Will the monetary cycle derail GEM growth ? - 23/05/2017page 14 Is EM inflation really a threat ? Differential betw een Em erging and Developed Countries 5 4 3 2 1 CPI (%yoy - average) Average 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 0 so urce : EIU, M SCI, A mundi Will the monetary cycle derail GEM growth ? - 23/05/2017page 15 Monitoring inflation Will the monetary cycle derail GEM growth ? - 23/05/2017page 16 Conclusion No decoupling in a more and more globalized world Emerging Countries will suffer if and when developed economies collapse – Global imbalances still present – Impact of “Greek turmoil” (and its consequences) on European growth Nevertheless we remain strongly convinced on GEM equities on a relative basis Continuation of global economic recovery should force many investors defensively positioned to reallocate assets – Strong macroeconomic conditions and higher growth compared with developed countries: – Relative risk perception of Emerging markets should continue to improve – Current Emerging market discount not justified (but US equity market not cheap) Will the monetary cycle derail GEM growth ? - 23/05/2017page 17 Disclaimer This material is provided for information purposes only and does not constitute a recommendation, a solicitation, an offer, an advice or an invitation to purchase or sell any fund, SICAV, sub-fund, (“the Funds”) described herein and should in no case be interpreted as such. This material, which is not a contract, is based on sources that Amundi considers to be reliable. Data, opinions and estimates may be changed without notice. Amundi accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi can in no way be held responsible for any decision or investment made on the basis of information contained in this material. The information contained in this document is disclosed to you on a confidential basis and shall not be copied, reproduced, modified, translated or distributed without the prior written approval of Amundi, to any third person or entity in any country or jurisdiction which would subject Amundi or any of “the Funds”, to any registration requirements within these jurisdictions or where it might be considered as unlawful. Accordingly, this material is for distribution solely in jurisdictions where permitted and to persons who may receive it without breaching applicable legal or regulatory requirements. Not all funds, or sub-funds will be necessarily be registered or authorized in all jurisdictions or be available to all investors. Investment involves risk. Past performances and simulations based on these, do not guarantee future results, nor are they reliable indicators of futures performances. The value of an investment in the Funds, in any security or financial product may fluctuate according to market conditions and cause the value of an investment to go up or down. As a result, you may lose, as the case may be, the amount originally invested. All investors should seek the advice of their legal and/or tax counsel or their financial advisor prior to any investment decision in order to determine its suitability. It is your responsibility to read the legal documents in force in particular the current French prospectus for each fund, as approved by the AMF, and each investment should be made on the basis of such prospectus, a copy of which can be obtained upon request free of charge at the registered office of the management company. The information contained in this document is deemed accurate as at 13/01/2010. Will the monetary cycle derail GEM growth ? - 23/05/2017page 18 Disclaimer This document contains information about Amundi Funds Emerging World, (the “Sub-Fund”), a sub-fund of Amundi Funds (the“Sicav”), an undertaking for collective investment in transferable securities existing under Part I of the Luxembourg law of 20 December 2002, organised as a société d’investissement à capital variable and registered with the Luxembourg Trade and Companies Register under number B68.806. The SICAV has its registered office at 5, allée Scheffer, l-2520 Luxembourg. Amundi Funds has been authorised for public sale by the Commission de Surveillance du Secteur Financier in Luxembourg. Not all sub-funds of the SICAV (the "Sub-Funds") will necessarily be registered or authorized for sale in all jurisdictions or be available to all investors. Subscriptions in the Sub-Funds will only be accepted on the basis of the SICAV’s latest complete and simplified prospectuses, its latest annual and semi-annual reports and its articles of incorporation that may be obtained, free of charge, at the registered office of the SICAV or respectively at that of the representative agent duly authorized and agreed by the relevant authority of each relevant concerned jurisdiction. Consideration should be given to whether the risks attached to an investment in the Sub-Funds are suitable for prospective investors who should ensure that they fully understand the contents of this document. A professional advisor should be consulted to determine whether an investment in the Sub-Funds is suitable. The value of, and any income from, an investment in the Sub-Funds can decrease as well as increase. The Sub-Funds have no guaranteed performance. Further, past performance is not a guarantee or a reliable indicator for current or future performance and returns. The performance data do not take account of the commissions and costs incurred on the issue and redemption of units. This document does not constitute an offer to buy nor a solicitation to sell in any country where it might be considered as unlawful, nor does it constitute public advertising or investment advice. The information contained in this document is deemed accurate as at 02/03/2010. This material is solely for the attention of institutional, professional, qualified or sophisticated investors and distributors. It is not to be distributed to the general public, private customers or retail investors in any jurisdiction whatsoever nor to “US Persons”. Amundi, French joint stock company (“Société Anonyme”) with a registered capital of € 578 002 350 and approved by the French Securities Regulator (Autorité des Marchés Financiers-AMF) under number GP 04000036 as a portfolio management company, 90 boulevard Pasteur -75015 Paris- France – 437 574 452 RCS Paris. Moreover, any such investor should be, in the European Union, a “Professional” investor as defined in Directive 2004/39/EC dated 21 April 2004 on markets in financial instruments (“MIFID”) or as the case may be in each local regulations and, as far as the offering in Switzerland is concerned, a “Qualified Investor” within the meaning of the provisions of the Swiss Collective Investment Schemes Ordinance of 23 June 2006 (CISA), the Swiss Collective Investment Schemes Ordinance of 22 November 2006 (CISO) and the FINMA’s Circular 08/8 on Public Offering within the meaning of the legislation on Collective Investment Schemes of 20 November 2008. In no event may this material be distributed in the European Union to non “Professional” investors as defined in the MIFID or in each local regulation, or in Switzerland to investors who do not comply with the definition of “qualified investors” as defined in the applicable legislation and regulation. Will the monetary cycle derail GEM growth ? - 23/05/2017page 19