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Main Drivers for China Stock Market Jan. 2010 1. Driver 1: Liquidity 2. Driver 2: Valuation 3. Driver 3: Market sentiment 4. Driver 4: Corporate events 5. An Example 6. BNY Mellon China JV Main Drivers for China Stock Market 30.00 10.00 (30.00) (20.00) (10.00) 0.00 3 300 10.00 20.00 30.00 40.00 -100 (30.00) (20.00) (10.00) 0.00 50 -50 0 4 20.00 30.00 (30.00) (20.00) (10.00) 0.00 5 20.00 40.00 (40.00) (30.00) (20.00) (10.00) 0.00 6 (20.00) (10.00) 0.00 15 45 10 20 25 30 35 40 0 5 7
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Main Drivers for China Stock Market
Bin HU, Ph.D. CFA
Head of BNY Mellon Asset Management, China
CEO Designate of BNY Mellon Western FMC(proposed)
Jan. 2010
1. Driver 1: Liquidity2. Driver 2: Valuation3. Driver 3: Market sentiment4. Driver 4: Corporate events5. An Example6. BNY Mellon China JV
Main Drivers for China Stock Market
1.1 Main Driver: Liquidity
3
(30.00)
(20.00)
(10.00)
0.00
10.00
20.00
30.00
40.00
CSI300_RTN Liquidity Variable
1. 2 Liquidity – New Loan
4
-100
-50
0
50
100
150
200
250
300
(30.00)
(20.00)
(10.00)
0.00
10.00
20.00
30.00
40.00
CSI300_RTN NEWLOANADJYOY
2 Main Driver: Valuation
5
(30.00)
(20.00)
(10.00)
0.00
10.00
20.00
30.00
40.00
CSI300_RTN Valuation Variable
3.1 Main Driver: Sentiment
6
(40.00)
(30.00)
(20.00)
(10.00)
0.00
10.00
20.00
30.00
40.00
50.00 CSI300_RTN Sentiment Variable
3. 2 Sentiment – Mutual fund cash position
7
0
5
10
15
20
25
30
35
40
45
(30.00)
(20.00)
(10.00)
0.00
10.00
20.00
30.00
40.00
CSI300_RTN MFCASH(-1)
T0: Announcement day
4 Corporate event: Asset injection/Second rights offering
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
T+1 T+2 T+3 T+4 T+5 T+6 T+7 T+14 T+21 T+28
Av
era
ge E
xcess R
etu
rn
Performance after SRO Announcement
Materials30%
Manufacturing14%Real Estate
24%Banking
5%
Equippments6%
Bio-health care6%
Consumer Discretionary
4%
Others11%
SRO Industry Breakdown
From 1/2008 to 10/2009, the amount of A share
SRO accumulated to 255.8 billion RMB
8
Macro Analysis:
1.Gov’s 4 trillion yuanincentive program
2.Well positioned to leverage the positive FAI (Fixed Assets Investment) trend
Sector Position:
Leading firm in engineering machinery sector in China
Event Analysis:
1. Asset injection opportunity from shareholder
2. Management team promises to lock up its stake
Ratio Analysis:
1.Historic lower valuation ratios
2. Sustainable margin growth drivers
Bought at 14.00 yuan on Dec 31, 2008
Sold at 31.00 yuan on Nov 13, 2009
Return: 171%
Excess Return to CSI 300 Index: 78%
Excess Return to Industry: 34%
5 An example
Sany Heavy Industry (SH. 600031) (Engineering Machinery)
Performance
9
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
200.0%
2008-1
2-3
1
2009-0
1-1
4
2009-0
2-0
2
2009-0
2-1
2
2009-0
2-2
4
2009-0
3-0
6
2009-0
3-1
8
2009-0
3-3
0
2009-0
4-1
0
2009-0
4-2
2
2009-0
5-0
5
2009-0
5-1
5
2009-0
5-2
7
2009-0
6-1
0
2009-0
6-2
2
2009-0
7-0
2
2009-0
7-1
4
2009-0
7-2
4
2009-0
8-0
5
2009-0
8-1
7
2009-0
8-2
7
2009-0
9-0
8
2009-0
9-1
8
2009-0
9-3
0
2009-1
0-2
0
2009-1
0-3
0
2009-1
1-1
1
CSI 300 Index Construction Machinary Index Sany
6.1 BNY Mellon China JV
51% WS 49%Bronze, Silver, Gold
M - Mellon
Entrepreneurship, Success,
Teamwork, Integrity
W - WS/Winner
What do we do?
Who are we?
What does this mean?
BNY Mellon
• First bank at US, first stock listed at NYSE
• Only institution with credit rating upgraded during financial crisis (S&P)
• US’s only AAA bank (Moody’s)
• Locations in 34 countries
• Leading global asset management firms with AUM around a trillion US dollars
10
6.2 Investment Team
11
Quantitative Research
Bin Hu, CFA, Ph.D., CEO (13 yrs experience)
• 10 yrs with BNY Mellon Asset Management
• PM, Coefficient Global, Standish (San Francisco)
• Senior Quant Analyst/VP, Standish (Boston)
Haida Ni, Quantitative Analyst (4 yrs experience)
• Quant/Risk Analyst, Morgan Stanley, Citigroup (NYC)
• Masters in Statistics, RIT
Jack He, Risk Management (10 yrs experience )
• Risk Management, Maple Securities and Hess (NYC)
• Masters, MIT
Zheng Ning, Junior Data Analyst (1yr experience)
• Programmer, East China Software Testing Center
• Master of Computer Science, USTC, China
Fundamental Research
Yibo Zhao, CFA, QFII PM (7 yrs experience)
• Investment Manager, Martin Currie (Shanghai)
• Senior Analyst, First Trust Fund (Shanghai)
David Xue, Analyst (5 yrs experience)
• HSBC Global Investment Bank (HK)
• PhD in Finance, Kellogg School, Northwestern Univ.
Yan Luo, Analyst (3 yrs experience)
• Blackrock China JV (Shanghai)
• MBA, MIT
Haibo Zhang, CFA, Analyst (6 yrs experience)
• Research Analyst, MorningStar (Shenzhen)
• MBA, Vanderbilt Univ.
12
6.3 Where are we? SWFC
