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Re-emerging Asia

Re-emerging Asia. Jonathan Schiessl November 2010. Ashburton Investment Models. 1. Back to basics…. China. India. US. EU. Growth/return. Years taken to double. The (re) emerging Asian giants. So why should we invest in economies like China & India?.

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Re-emerging Asia

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  1. Re-emerging Asia Jonathan Schiessl November 2010

  2. Ashburton Investment Models 1. Back to basics…

  3. China India US EU Growth/return Years taken to double The (re)emerging Asian giants So why should we invest in economies like China & India? First & foremost, it's all aboutthe oft forgotten power ofcompounding.And for compounding to work we needtime. We can use compounding to estimate the time it takes to double your return, by using the rule of 72 - 8% 8.5% 2% 1.5% 9 8.5 36 48 …..and who said decoupling was impossible?

  4. Decoupling World Industrial Production comparisons Asian IP vs World IP and World trade Asia IP vs Developed and Developing markets Source: BNP Paribas, CPB

  5. Ashburton Investment Models 2. And what about valuations…

  6. So lets look at valuations MSCI China – 12 month forward PE vs EPS 30.0 5.0 4.5 EPS (RHS) 25.0 4.0 3.5 20.0 PE (x) 3.0 HK$ per share 15.0 2.5 2.0 PE (LHS) 10.0 1.5 5.0 1.0 Jul-07 Jul-08 Jul-09 Jul-06 Jul-05 Jul-10 Jan-07 Jan-08 Jan-09 Jan-06 Jan-05 Jan-10 Source: FactSet; BNP Paribas

  7. So lets look at valuations MSCI India – 12 month forward PE vs EPS 25.0 50.0 23.0 45.0 EPS (RHS) 21.0 40.0 19.0 35.0 PE (LHS) 17.0 INR per share PE (x) 15.0 30.0 13.0 25.0 11.0 20.0 9.0 15.0 7.0 5.0 10.0 Jul-07 Jul-08 Jul-09 Jul-06 Jul-05 Jul-10 Jan-07 Jan-08 Jan-09 Jan-05 Jan-06 Jan-10 Source: FactSet; BNP Paribas

  8. Ashburton Investment Models 3. Are indices reflecting these changes?

  9. Index composition still living in the past Estimated world nominal GDP 2010 (Oct 2010) Composition of MCSI AC World Index (Oct 2010) Source: IMF, MSCI

  10. Index composition still living in the past Sectoral composition (%) of MSCI China & MSCI India as at 20 October 2010 MSCI China MSCI India Consumer Staples 6.35 6.06 Consumer Discretionary 6.02 4.76 Energy 16.71 13.42 Financials 36.9 28.48 Healthcare 0.91 3.69 Industrials 7.87 10.24 Technology 5.3 16.66 Materials 5.72 10.61 Telecoms 12.33 0.66 Utilities 1.88 5.42 Source: MSCI

  11. Sectors - the relative game China consumer goods vs. MSCI China - a love-in Source: Bloomberg

  12. Sectors - the relative game China industrial goods vs. MSCI China - forgotten love Source: Bloomberg

  13. Chinese industrials Creating a future for “Made in China” • The move to high end manufacturing is a consequence of demographics, the environment and Hu Jintao’s push for a ‘harmonious society’ • The government has decreed several newly emerging strategic industries that will receive active support: • Aviation • Satellites • Rail transport • Offshore engineering • Smart equipment manufacturing • We believe China will ultimately “own” this space…

  14. Ashburton Investment Models 4. So how is Ashburton positioning itself?

  15. 25 20 15 10 5 0 Chindia Main hot spots (% NAV) CASH OTHER INDUSTRIAL ADVANCEMENT FINANCIAL INTERMEDIATION AGRI & SOFT COMMODITIES HARD & SOFT INFRASTRUCTURE REAL ESTATE TECHNOLOGY CLEAN & GREEN CONSUMER & LIFESTYLE Source: Ashburton

  16. 35 Fund MSCI 30 25 20 15 10 5 0 BMS CST CGD COM CYC EGY FIN HCE TEC UTS CASH Current positioning – Chindia Equity Fund Country breakdown Sector breakdown Source: Ashburton

  17. Performance update Tom Zambon November 2010

  18. Performance - as at end October 2010 Source: Lipper

  19. Return Volatility 0 4 8 12 16 Performance Replica Asset Management Fund Returns vs risk Replica Sterling asset Management Fund and MSCI World Index since 1992 Ashburton's Replica Sterling Asset Management Fund MSCI World Source: Lipper as at 30 Sept 2010

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