View
872
Download
1
Category
Tags:
Preview:
Citation preview
Baring Asset Management (Asia) Limited19th Floor, Edinburgh Tower
15 Queen’s Road Central, Hong KongTel: (852) 2841 1411Fax: (852) 2868 4110
www.barings.com
The Asia Pacific Fund, Inc. Market Outlook and Investment Strategy
Franki Chung and Henry ChanDecember 2007
2
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Table of Contents
Page
Section 1: Performance and Portfolio Review 2 - 19
Section 2: Asian Investment Outlook 20 - 47
Section 1:
Performance andPortfolio Review
4
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Performance Summary Highlights3 month period to November 30, 2007
Fund’s NAV returns: +11.5% in USD terms (+57.3% inc. dividends over 12 month period to 11/30/07)
Fund’s share price returns: +9% in USD terms (+50.3% inc. dividends over 12 month period to 11/30/07)
Fund’s ranking in Micropal survey: 3rd quartile for 3 month period and Top 15% for 12 month periods to Nov 2007
Strong long-term track record maintained
5
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
The Asia Pacific Fund, Inc. Long-Term Performance (Cumulative NAV Returns over 1, 3, 5 and 10 year periods to November 30, 2007)
Strong long-term track record maintained
Micropal Ranking + 30/212 23/177 26/153 5/89
57.3
159.0
291.7
373.5
45.0
129.8
255.1
215.7
0
50
100
150
200
250
300
350
400
1 Yr to 11/30/2007 3 Yrs to11/30/2007
5 Yrs to11/30/2007
10 Yrs to11/30/2007
(% )
Portfolio *
MSCI AC F/E (Free) x J ap Gross
Fund performance are bid to bid, net of fees, gross income, US$. For risks associated with investment securities in emerging and less developed markets, please refer to the Offering Document for details. Transactions in derivatives, warrants and forward contracts and other fund derivatives
instruments may be used for the purpose of meeting the investment objective of the Fund. The Net Asset Value of the Fund may have a high volatility due to these instruments and techniques being included in its scheme property and may involve a greater degree of risk. Past performance is not an
indication of future performance.
Data source - © 2007 Morningstar, Inc. (See Important Information)
6
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
The Asia Pacific Fund, Inc.Short-Term Performance (NAV Returns over 3 month period to November 30, 2007)
Micropal Ranking + 194/220 100/220 42/220 130/219 30/211
In line with referenced Benchmark, but slightly below Micropal Peer Average over 3 month period
-11.5
10.114.4
11.5
57.3
-9.3
11.7 11.4
45.0
10.0
-20
-10
0
10
20
30
40
50
60
70
11/30/2007 10/31/2007 9/30/2007 3 mths to11/30/2007
1 year
Portfolio *
MSCI AC F/E (Free) x Jap Gross
Fund performance are bid to bid, net of fees, gross income, US$. For risks associated with investment securities in emerging and less developed markets, please refer to the Offering Document for details. Transactions in derivatives, warrants and forward contracts and other fund derivatives
instruments may be used for the purpose of meeting the investment objective of the Fund. The Net Asset Value of the Fund may have a high volatility due to these instruments and techniques being included in its scheme property and may involve a greater degree of risk. Past performance is not an
indication of future performance.
Data source - © 2007 Morningstar, Inc. (See Important Information)
7
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Performance Attribution Analysis - Summary(3 month period to November 30, 2007)
Positive Contributors:
Asset Allocation
Stock Selection
Negative Contributor:
Sector Allocation
8
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Performance Analysis - Details Asset and Sector Allocation (3 month period to Nov 30, ’07)
Positive Asset Allocation :
Overweight China
Negative Sector Allocation :
Underweight Telecoms and Real Estate
Overweight Materials
9
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Performance AnalysisStock Selection – Highlights of largest positive contributors (3 month period to November 30, 2007)
Stock Event
Zijin Mining Group(listed in HK)(2.1% of NAV)
China’s leading gold producer, with some copper interests (stock price rose by 64.5%)
Hengan Intl(listed in HK) (1.9% of NAV)
China’s leading provider of personal hygiene tissue-based products (inc. sanitary napkins and baby diapers) (stock price rose by 42.4%)
Inco Intl Nickel Indo (listed in Indonesia) (0.8% of NAV)
Indonesia’s largest listed nickel producer (61% owned by CVRD Inco) (stock price rose by 91.8%)
HDFC(listed in India)(1.3% of NAV)
India’s leading provider of housing finance; company is extremely well-managed, with sustainable growth in sales and profits (stock price rose by 45.4%)
10
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Price Momentum Factor peaked in October, after a 12 month strong out-performance
Market Index
Cumulative Factor Returns, last 18 months
(as at November 30, 2007)
Asia Pacific Fund VaR Factor Exposures, last 18 months
(as at November 30, 2007)
Source: Baring Asset Management
We continued to reduce the Fund’s exposure to stocks with high price momentum
Value Growth Size Momentum Value Growth Size Momentum
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
May 2006
Aug 2006
Nov 2006
Feb 2007
May 2007
Aug 2007
Nov 2007
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
May 2006
Aug 2006
Nov 2006
Feb 2007
May 2007
Aug 2007
Nov 2007
11
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Local Currency exchange rate (US$/Local rate)(3 month period to November 30, 2007)
08/31/2007 11/30/2007 Change %*
North AsiaNew Taiwan Dollar 33.00 32.26 +2.3Chinese Renminbi 7.55 7.40 +2.0South Korean Won 938 921 +1.9Hong Kong Dollar 7.80 7.79 +0.1
ASEANPhilippine Peso 46.54 42.78 +8.8Singaporean Dollar 1.52 1.45 +5.3Malaysian Ringgit 3.50 3.36 +4.1Thai Baht 34.31 33.85 +1.4Indonesian Rupiah 9,390 9,370 +0.2
Indian Rupee 40.88 39.63 +3.2
*: + denotes an appreciation of the local currency vs the USD (and vice-versa)Source: Factset
Strong Asian currencies’ performance vs the USD
12
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asian Stock Markets: Country Performance(3 month period to November 30, 2007)
Gross return in USDCountry - Index (%)
North AsiaMSCI Hong Kong Free +23.3MSCI China Free +20.9MSCI Korea Free +4.1MSCI Taiwan Free -0.8ASEANMSCI Indonesia Free +31.0MSCI Malaysia Free +14.4MSCI Philippines Free +12.1MSCI Thailand Free +9.1MSCI Singapore Free +7.9
MSCI India Free +33.9
MSCI AC Far East Free Ex Japan Gross +11.4Source: Factset
‘Growth’ markets of India, Indonesia and HK-China led, while ‘Technology-dominated’ markets of Korea/Taiwan lagged
13
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asian Stock Markets: Sectoral Performance (3 month period to November 30, 2007)
Source: Factset
Gross return in USD(%)
Energy and Telecoms led, while Technology and Health Care lagged
MSCI Energy +38.6MSCI Telecommunication Services +23.1MSCI Real Estate +21.9MSCI Consumer Staples +14.7MSCI Financials +12.9MSCI Industrials +11.3MSCI Consumer Discretionary +7.4MSCI Utilities +5.3MSCI Materials +4.5MSCI Health Care +0.3MSCI Information Technology -0.6
14
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
The Asia Pacific Fund, Inc.Country Allocation (as at November 30, 2007)
08/31/2007 11/30/2007 SignificantCountry (%) (%) Change *
North Asia 80.6 78.4 Hong Kong/China 44.0 43.0 South Korea 20.5 20.9Taiwan 16.1 14.5
ASEAN 16.0 16.8 Singapore 11.8 11.9Indonesia 2.1 3.4 Malaysia 1.8 0.6 Philippines 0.3 0.4Thailand 0.0 0.7
India 1.2 1.5
Cash 2.2 3.3
Reduced China and Malaysia in order to fund other markets and Cash
* Only 1% change or more is highlighted by arrow moves
Source: Factset
15
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
The Asia Pacific Fund, Inc.Country Allocation vs Asian universe including India (as at November 30, 2007)
Source: Factset
Asia Pacific MSCI All CountryFund Asia x-Japan Difference
Country (%) (%)
North Asia 78.4 73.1 5.2Hong Kong/China 43.0 36.8 6.1South Korea 20.9 21.3 -0.4Taiwan 14.5 15.0 -0.5
ASEAN 16.8 15.3 1.5Singapore 11.9 6.6 5.3Indonesia 3.4 2.5 0.8Philippines 0.4 0.8 -0.4Thailand 0.7 2.0 -1.3Malaysia 0.6 3.5 -3.0
India 1.5 11.2 -9.7
Pakistan 0.0 0.3 -0.3
Cash 3.3 0.0 3.3
16
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
The Asia Pacific Fund, Inc.Sector Allocation (as at November 30, 2007)
Industrials, Technology and Cons. Disc. reduced; Financials, Cons. Staples and Telecoms raised
08/31/2007 11/30/2007 SignificantSector (%) (%) Change *
Financials 23.0 25.0 Information Technology 19.3 16.0 Industrials 18.2 15.7 Materials 12.3 13.0Consumer Discretionary 8.4 6.6 Energy 6.2 8.4 Consumer Staples 3.4 4.9 Telecom Services 3.0 5.2 Health Care 0.0 0.0Utilities 0.5 0.0Chinese ‘A-share’ ETF 3.4 1.8 Cash 2.2 3.3
* Only 1% change or more is highlighted by arrow movesSource: Factset
17
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Highlights of Portfolio Activity(3 month period to November 30, 2007)
HK/China Took profits in ‘Cyclical Growth’:
Consumer (Lifestyle Intl), Materials (Zijin Mining, Alum Corp of China), Industrials (Zhuzhou Times, Nine Dragons, Guangshen Railways) and A-share ETF
Added to ‘Defensive Growth’ (China Mobile, ICBC Bank, Henderson Land & Devpt)
Taiwan Added to Undervalued Property plays/ Materials (Asia Cement)
Switched Technology stocks (sold Siliconware Precision and Firich Enterprise, bought Advanced Semicon and Asustek)
(Cont.)
18
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Highlights of Portfolio Activity(3 month period to November 30, 2007)
ASEAN Reduced Malaysia
Added to Indonesia, Singapore and Thailand
Korea Added to ‘Special Situations’ (Samsung
Corp, Korea Invt, KT&G) and Materials (Posco)
Reduced exposure to YTD winners (Samsung Heavy) or under-performing stocks (Hynix Semi, Woori Investment)
19
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Portfolio Characteristics(as at November 30, 2007)
Asia Pacific Fund
P/E using FY1 Est (X) 26.5
P/E using FY2 Est (X) 20.9
Dividend Yield (%) 1.5
EPS FY1/FY0 growth (%) +50.3
EPS FY2/FY1 growth (%) +26.3
Hist 3 Yr EPS Growth (%) +43.6
Hist 3 Yr Sales Growth (%) +31.2
Growth and quality bias maintained
Source : FactSet
20
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
The Asia Pacific Fund, Inc.Premium/Discount Graph
Source: Bloomberg (12/2007)
‘Range bound’ trend, with discount trading between 7.5% to 12.5%
Section 2:
Global and Asian Investment Outlook
22
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asia’s Long-Term Outlook:We retain our positive stance
Sustainable growth, boosted by rising domestic demand
Improving corporate returns and healthy balance sheets
Undervalued currencies, fairly-valued equity markets
Secular re-rating of Asian assets expected to continue
23
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Barings’ Global Economic forecasts for 2008
OECD G7 economies expected to grow at a slower rate, caused by weaker US consumption and much reduced new bank lending
But prospects for US recession still unlikely (less than 40% probability)
US Federal Reserve expected to continue to ease, but extent and speed dependent on inflation trend
Asian economies will likely feel some negative impact through weaker exports, but are expected to continue to grow solidly
Net, net, a more challenging global economic backdrop
24
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Barings’ Asian Economic forecasts for 2008
Continuing growth in domestic demand expected to remain the key driver of growth in Asia
China and India expected to continue to grow solidly, helping to boost intra-regional trade
Other Asian economies likely to grow at trend rate, some helped by favourable recent electoral outcomes
Asian central banks’ policy direction expected to remain mixed (ie, HK to cut, China to raise)
Asian currencies likely to continue to strengthen vs the USD
Key risks include rising inflation and tighter-than-expected monetary policy
Net, net, still a favourable economic backdropfor equity investors in the region
25
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Current Concerns in Equity Markets
Global and regional inflation rates to continue to rise, forcing central banks to tighten more aggressively (or to cut rates by less) than currently expected
Fear of a US and global recession developing, causing risk aversion to reign in the short-term
Current high earnings expectations to cause disappointment
We are monitoring the above risks closely
26
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Global Risk Aversion Dominates:Another buying opportunity in Asian equities ?
Source: Credit Suisse (12/2007)
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07
Euphoria
Panic
It has paid to buy a strong growth story (such as Asia) in times of rising global risk aversion
Risk index
27
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Significant Outflows in Aug/Nov ‘07 in EM Asia:Precursor to US recession …. or .… high risk aversion ?
Source: Morgan Stanley (12/2007)
(US$bn)
Recent ‘panic selling’ probably caused by rising global risk aversion
(18.3)
2.6
(15.2)
(20)
(18)
(16)
(14)
(12)
(10)
(8)
(6)
(4)
(2)
-
2
4
6
8
10Ja
n-0
3
Jul-
03
Jan
-04
Jul-
04
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Monthly Net Foreign Buying in EM Asia
28
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asia vs OECD World: Some signs of decoupling …..
Source: Morgan Stanley (12/2007)
(6)
(4)
(2)
0
2
4
6
8
Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07
-2
0
2
4
6
8
10
12
14
16
18
OECD G7 LEI (Left)
Asia LEI (Right)
% % YoY
-60
-50
-40
-30
-20
-10
0
10
20
30
Jan-88
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%Analyst Revision - MSCI A/P, % (Left)
OECD LEI (Right)
…. at both the economic and earnings levels
% YoY % YoY
29
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asian Economic De-Coupling from OECD:Korean exports example
Source: Morgan Stanley (12/2007)
Less to the US, more to the region and other EM/European nations
Contribution to Korea’s Export Growth, %(%)
-5
0
5
10
15
20
25
30
35C
hin
a
AS
EA
N
Mid
dle
East
Lata
m
Em
erg
ing
Eu
rop
e
EU
US
Jap
an
2002-2006
YTD 2007
30
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asian Exports: How important are they, REALLY ?Headline: yes ….. but value-added: not so much !
Source: UBS (12/2007)
Asian export sector’s value added contribution to the region’s GDP appears to be less than 5%
0%
5%
10%
15%
20%
25%
30%
35%
Hon
g K
on
g
Mala
ysi
a
Vie
tnam
Sin
gap
ore
Taiw
an
Th
aila
nd
Ch
ina
Ph
ilip
pin
es
Kore
a
Paki
stan
Ind
ia
Estimated value-added share Headline Exports
Export share of GDP (%)
31
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
So, can Asia withstand a G3 recession?Theoretically yes, but practically …… ?
Source: BNP Paribas (12/2007)
If Asian’s current strong domestic demand continues, its correlation with the US economy
should diminish over time
0
8
(16)
(8)
0
8
16
24
32
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
16
24
32
Real total domestic demand Real exports US real imports(y-y %)
weaker correlation as
Asian domestic demand
(+8.3% y-y) is stronger
stronger correlation
as Asian domestic
demand (+4.1% y-y)
is weaker
32
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Food: Important for Asia’s headline CPI
Source: BNP Paribas (12/2007)
A key risk factor to watch
Food as a % of CPI
0
10
20
30
40
50
60C
hina
Hon
g K
ong
Tai
wan
Kor
ea
Sin
gapo
re
Mal
aysi
a
Tha
iland
Indo
nesi
a
Phi
lippi
nes
(% share)
33
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asia & China’s Core vs Headline Inflation:Headline: worrying …… Core: tame
Source: Morgan Stanley (12/2007)
Asia ex-Japan
0%
1%
2%
3%
4%
5%
6%
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
CPI
Core CPI
China
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
CPI
Non-Food CPI
Will Asian central banks act on headline orcore inflation trends ?
(%)(%)
Asia ex-Japan China
34
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Property Prices’ Past 10 Year Trend:US peaked, but Asia is still catching up ……
Source: UBS (12/2007)
More upside expected in Asia
(%)
-40
-20
0
20
40
60
80
100
120
US Korea Thailand Taiwan Sing HK
35
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
HK Housing Affordability: Fine
Source: UBS (12/2007)
Plenty of room for the value of an average property to rise
Index
10
30
50
70
90
110Ja
n-9
3
Jan
-94
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Jan
-05
Jan
-06
Jan
-07
Affordability Ratio
36
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
HK Housing Sector: Strong demand, limited supply
Source: UBS (12/2007)
Unlike the US, more favourable supply/demand characteristics
Units
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,0001
97
2
19
77
19
82
19
87
19
92
19
97
20
02
20
07
E
Total Private Residential Completion (unit)
Forecast adjusted down in Nov 07
37
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
HK Banking system: Borrow, please !
Source: UBS (12/2007)
Banks are seriously cashed-up !
(%) $HK bn
Net deposit (RHS)
0%
50%
100%
150%
200%1
98
9
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
-2,800
-1,400
-
1,400
2,800
Total LDR (LHS)
38
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asian Equities vs. Asian Bonds: Equities still cheaper
Source: Morgan Stanley (12/2007)
Rising investor’s confidence neededto close the gap
(%) APXJ
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0A
pr-
95
Oct
-96
Apr-
98
Oct
-99
Apr-
01
Oct
-02
Apr-
04
Oct
-05
Apr-
07
-
100
200
300
400
500
600
700
10Y Bond Yield - Fwd Earnings Yield (%) (LHS)Avg. -1 Std dev (LHS)
Avg. +1 Std dev (LHS)MSCI_ Price_USD AP ex JP (RHS)
39
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asia Interest Rates: Still low
Source: Morgan Stanley (12/2007)
Low nominal and real Asian interest rates are expected to remain supportive for equity markets
(%)
-
2
4
6
8
10
12
14
16
Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06
LIBOR 3M
Asia Interbk 3M
Core Asia Interbk 3M
40
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
EPS Growth (in % terms)
15x ? ….....… 25x ? ......... or higher ?
2006 2007e 2008f 2009f CAGR 06-09e
Asset 1 +17.8 +27.7 +21.4 +16.3 +20.7%
Asset 2 +30.2 +11.9 +20.6 +27.1 +22.3%
In a world of Downgrades, what are you prepared to pay for this EPS Growth series?
Source: Morgan Stanley (12/2007)
41
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Asia Trades at a Premium to the US: Deservedly so ?
Source: Morgan Stanley (12/2007)
The re-pricing of Asian vs US assets is likely to continue to favour Asia
(P/E) 12M Fwd PE
7
9
11
13
15
17
19
21
23
25
27
Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06
Fed Easing Fwd PE- AP ex JP S&P 500
42
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Profit Outlook:US vs Asia
US: down revisions
Asia Pacific Ex-Japan: up revisions
Source : JP Morgan (12/2007)
Asia uptrend pausing, US downtrend worsening
EPS index(2007: starting at 100 on base date of February ‘06)
95
98
101
104
107
110
113
116
Feb 06 Sep 06 Apr 07 Nov 07
2007
2008
95
100
105
110
115
120
125
130
Feb 06 Sep 06 Apr 07 Nov 07
2007
2008
43
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Profit Outlook: Asia’s out-performers
China Singapore
Source : JP Morgan (12/2007)
A pause in the upward earnings surprise trend ?
EPS index(2007: starting at 100 on base date February ‘06)
95
105
115
125
135
145
155
Feb 06 Sep 06 Apr 07 Nov 07
2007
2008
96
104
112
120
128
136
Feb 06 Sep 06 Apr 07 Nov 07
2007
2008
44
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Profit Outlook:Selective in ASEAN
Indonesia Thailand
Source : JP Morgan (12/2007)
Mixed trends in ASEAN
EPS index(2007: starting at 100 on base date February ‘06)
95
105
115
125
135
Feb 06 Sep 06 Apr 07 Nov 07
2007
2008
82
86
90
94
98
102
106
110
Feb 06 Sep 06 Apr 07 Nov 07
2007
2008
45
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Profit Outlook :Asia’s recovery plays
Source : JP Morgan (12/2007)
Selective growth opportunities in Korea and Taiwan
Taiwan Korea
EPS index(2007: starting at 100 on base date February ‘06)
90
93
96
99
102
105
108
111
114
Feb 06 Sep 06 Apr 07 Nov 07
2007
2008
80
85
90
95
100
105
110
115
Feb 06 Sep 06 Apr 07 Nov 07
2007
2008
46
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Earnings Growth vs Valuations:What the consensus expects in Asia and the World
More sustainable and consistent earnings growth expected in Asia/EM,
yet valuations of latter still not expensive
Source: Goldman Sachs, IBES (12/2007)
World
P/E (E) EPS Growth (%) Div. Yield ROE (%)
2007 E 2008 E 2007 E 2008 E 2009 E 2007 E 2007 E
15.9 13.9 9.9 14.6 11.0 2.4 16.2
US 17.4 15.0 1.7 16.1 12.4 1.9 16.9
Emerging Markets
16.4 14.0 23.6 17.1 11.7 2.3 18.0
ASIA 18.1 15.4 21.0 17.2 15.9 2.3 16.2
47
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Key Investment Themes for Asia in 2008
Assuming no US recession and no inflation blow-out in the region, Asian markets are expected to achieve a sixth year of positive return in 2008
The more sustainable the high earnings growth trend, the more expensive the market is likely to become (i.e., India, China)
Favourable electoral outcomes in Korea, Taiwan and Thailand can turn these under-performing markets around dramatically
48
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
The Fund’s Key Sectoral Investment themes
Consumption, infrastructure and financials themes
Other regional asset reflation plays
Re-construction of Asia – engineering, construction, building materials, capital goods
Improved supply side discipline of “cyclical” sectors – energy, materials (and technology ?)
Consumption, Asset Reflationand Infrastructure/Construction
49
(S:\Investment Management\Accounts\Tango\Presentations\0801-BM.ppt)
Important Information
This document is provided as a service to professional investors/advisers. It is issued in the United Kingdom by Baring Asset Management Limited and/or by its investment adviser affiliates in other jurisdictions. The affiliate serving as the Asia Pacific Fund’s investment adviser is Baring Asset Management (Asia) Limited. In the United Kingdom this document is issued only to persons falling within a permitted category under (i) the FSA’s rules made under section 238(5) of the Financial Services and Markets Act 2000 and (ii) the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001.
This is not an offer nor a solicitation to buy or sell any investment referred to in this document. Baring Asset Management group companies, their affiliates and/or their directors, officers and employees may own or have positions in any investment mentioned herein or any investment related thereto and from time to time add to or dispose of any such investment. This document may include forward-looking statements, which are based upon our current opinions, expectations and projections as of the date on the cover hereof. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. The value of any investments and any income generated may go down as well as up and is not guaranteed. Past performance will not necessarily be repeated. Changes in rates of exchange may have an adverse effect on the value, price or income of an investment. There are additional risks associated with investments (made directly or through investment vehicles which invest) in emerging or developing markets. Compensation arrangements under the Financial Services and Markets Act 2000 of the United Kingdom will not be available.
Private investors in the Company referred to herein should obtain their own independent financial advise before making investments. This document must not be relied on for purposes of any investment decisions. Before investing in the Company, we recommend that all relevant documents, such as reports and accounts and prospectus should be read, which specify the particular risks associated with investment in the Company, together with any specific restrictions applying and the basis of dealing. The Company may not be available for investment in all jurisdictions. There may also be prohibitions or restrictions on distribution of this document and other material relating to the Company and accordingly recipients of any such documents are advised to inform themselves about and to observe any such restrictions.
Research Material
Baring Asset Management only produces research for its own internal use. Where details of research are provided in this document it is provided as an example of research undertaken by Baring Asset Management and must not be used, or relied upon, for the purposes of any investment decisions. The information and opinions expressed herein may change at anytime.
For data sourced from Morningstar: © 2007 Morningstar, Inc. all rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Complied (Boston): January 2, 2008
Recommended