Embed Size (px)
Citation preview
JPMorgan Chinese Investment Trust:
Annual General Meeting
January 2016
1
Top reasons to be concerned about China
Source: Shutterstock.com. J.P. Morgan Asset Management, as of 8th January 2016,
The opinions and views expressed here are those held by the author at the time of publication, which are subject to change and are not to be taken as or construed as investment advice.
Growth slowdown?
China reforms - are they working?
What’s happening with the RMB?
Why is the equity market so volatile?
Is China a value trap?
2
Growth: Will there be a hard landing?
Source: www.dreamstime.com
3
China: Growth is indeed slowing but monetary policy is supportive 30
GTM – UK | Page 30
Source: FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. Guide to the Markets - UK. Data as of 31 December 2015.
%
Q315:
6.9%
-6
-3
0
3
6
9
12
15
18
21
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
Consumption
Investment
Net exports
GDP growth
Real GDP growth Change year on year
4
Reform in China: old vs new China
GTM – UK | Page 31
Source: FactSet, National Bureau of Statistics of China, J.P Morgan Asset Management. Guide to the Markets - UK. Data as of 31 December 2015.
Manufacturing and services components of GDP 12-month moving average, % of nominal GDP
Services
Manufacturing
5
Money, money, money
Source: Asiaone.com
6
RMB: Delinking from the USD 32
GTM – UK | Page 32
Source: BIS, FactSet, J.P. Morgan Asset Management. Guide to the Markets - UK. Data as of 31 December 2015.
USD/RMB
Trade-weighted RMB
Chinese renminbi Trade-weighted RMB indexed to 100 in 2010
7
Feeling lucky?
Source: Thestar.com
8
Significant volatility in onshore Chinese equities
GTM – UK | Page 49
Source: (Left) CEIC, FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management. (Top right) Central Bank of the Republic of China,
J.P. Morgan Asset Management. (Bottom right) Bloomberg, J.P. Morgan Asset Management. Guide to the Markets - UK. Data as of 31 December 2015.
9
On a positive note, we are seeing a bottoming in the property sector 31
GTM – Asia | Page 9
Source: CEIC, FactSet, National Bureau of Statistics of China, J.P. Morgan Asset Management.
*First 11 months of the year.
Guide to the Markets – Asia 1Q 2016.
Data reflect most recently available as of 31st December 2015
0
5
10
15
20
25
-1%
0%
1%
2%
'11 '12 '13 '14 '15
Month-over-month % change Number of months
Property price
2nd tier cities
1st tier cities
Top 100 cities property prices and housing inventory
10
Hope springs eternal
Source: Shutterstock.com
11
Valuations are indeed cheap
PE = Price to Earnings Ratio
PB = Price to Book Ratio
Indices do not include fees or operating expenses and are not available for actual investment.
Past performance is not indicative of future performance.
MSCI Golden Dragon Trailing PB MSCI Golden Dragon 12-Month Forward PE
Source: Thomson Reuters Datastream, FactSet, 31st December 2015
Source: Thomson Reuters Datastream, FactSet, 31st December 2015
x x
11.4
Avg 12.7
+1sd 14.6
-1sd 10.8
6
8
10
12
14
16
18
20
04 05 06 07 08 09 10 11 12 13 14 15
1.4
Avg 1.8
+1sd 2.2
-1sd 1.5
1.0
1.5
2.0
2.5
3.0
3.5
04 05 06 07 08 09 10 11 12 13 14 15
12
Conclusion:
Source: J.P. Morgan Asset Management. As at 18 Jan 2016.
The opinions and views expressed here are those held by the author at the time of publication, which are subject to change and are not to be taken as or construed as investment advice.
Minimal economic fallout coming from A-share market reversal. The damage is primarily to governmental
credibility.
Policy direction largely unchanged but execution is key
RMB depreciation should be slow and targeted at the dollar, with credibility at risk and massive reserves to
intervene.
Near term sentiment may remain volatile as the deleveraging process continue.
Despite headwinds, we continue to focus on secular growth opportunities in the “new economy” sectors:
internet, healthcare, consumption.
13
Why stock picking is necessary
New China = Information Technology, Consumer, Healthcare
Old China = Energy, Materials, Industrials
Source: Factset, Morgan Stanley Research, J.P. Morgan Asset Management. Data as of 8th January 2016
12.9%
15.5%
8.9%
8%
10%
12%
14%
16%
18%
20%
09 10 11 12 13 14 15 16
MSCI China
New China
Old China
198
207
104
60
80
100
120
140
160
180
200
220
240
07 08 09 10 11 12 13 14 15
MSCI China
New China
Old China
Year end 2007 was rebased to 100
New China trailing EPS has been rising while Old China
has stagnated
New China ROE has been trending higher along with
China economy transformation
14
Investment themes in the ‘new normal’: Consumption Upgrades
Source: Company information, EntGroup. Data available as of 31st December 2015
Increasing spending on digital entertainment
404.9
1,193.8
457.3
222.1
0 200 400 600 800 1,0001,2001,400
Other China Non-ConventionalTheatres
IMAX
China Film Giant Screen
China Industry Average
Average Box Office Per Screen (USD thousand)
15%
22%
14%
7%
9%
5%
7%
9%
11%
13%
15%
17%
19%
21%
23%
Domestictourismrevenue
LCC totalrevenue
LCCpenetration
Total trips TotalChinesetourists
2015E-2020E Compound Annual Growth Rate
Domestic tourism revenue growth lead by rising LCC
penetration
LCC = Low Cost Carrier
Source: CNTA, J.P. Morgan Asset Management, Morgan Stanley Research. Data
available as of 31st December 2015
15
Investment themes in the ‘new normal’: Internet
Source: CNNIC, J.P. Morgan Asset Management. Data available as of 31st December 2015
Rising Mobile Internet Penetration in China
46%
61%
66% 66% 66%
69% 72%
30%
40%
50%
60%
70%
80%
90%
100%
0
100
200
300
400
500
600
700
Jun-09 Dec-10 Jun-12 Dec-13 Jun-15
Total mobile internet user (mn)
Mobile internet user as % of total internet users
75%
79% 81%
83% 86%
89%
16
Stock example: Tencent
O2O = Online to Offline
Source: J.P. Morgan Asset Management estimate, data as of 31st December 2015, Tencent website
Extensive online platform to digitize commerce and capitalize on services and consumption growth
Economics:
Key business areas of gaming, advertising and
payments
Duration:
Growing demand in an under-penetrated market
Governance:
Disciplined capital allocation
Weixin Red Pocket
17
JPMorgan Chinese Investment Trust
18
Performance
Fund launch date = 19 Oct 1993.
^ Dividends reinvested after deduction of withholding tax. Prior to 1 Jun 2002, MSCI Provisional Golden Dragon Index (NDR). Prior to 1 Oct 2001, Customised benchmark (Calculated by J.P. Morgan
Asset Management and comprised 40% HSI, 40% Taiwan Weighted and 20% BNP Paribas China Price). Prior to 1 Oct 1998, BNP Paribas China Price.
* Arithmetic excess return presented.
Source: J.P. Morgan Asset Management. Performance data has been calculated on NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP. Please
note Benchmark Indices do not operating expenses and are not available for actual investment. Past performance is not a guide to the future.
JPMorgan Chinese Investment Trust as of 31 Dec 2015
Three months Six months One year Three years Five years Since launch
JPMorgan Chinese Investment Trust plc +10.1 -10.5 +0.1 +8.8 +3.8 +4.0
MSCI Golden Dragon Index (NDR)^ +6.6 -11.2 -2.1 +5.5 +2.4 +2.8
Excess return* +3.5 +0.7 +2.2 +3.3 +1.4 +1.2
2009 2010 2011 2012 2013 2014 2015
JPMorgan Chinese Investment Trust plc +48.3 +20.4 -22.9 +21.2 +13.7 +13.1 +0.1
MSCI Golden Dragon Index (NDR)^ +48.4 +16.8 -18.1 +16.8 +4.9 +14.4 -2.1
Excess return* -0.1 +3.6 -4.8 +4.3 +8.8 -1.3 +2.2
Annualised performance (%)
Calendar year performance (%)
Market value
JPMorgan Chinese Investment Trust GBP 149.8m
19
Performance
Fund launch date = 19 Oct 1993.
^ Dividends reinvested after deduction of withholding tax. Prior to 1 Jun 2002, MSCI Provisional Golden Dragon Index (NDR). Prior to 1 Oct 2001, Customised benchmark (Calculated by J.P. Morgan
Asset Management and comprised 40% HSI, 40% Taiwan Weighted and 20% BNP Paribas China Price). Prior to 1 Oct 1998, BNP Paribas China Price.
* Arithmetic excess return presented.
Source: J.P. Morgan Asset Management. Performance data has been calculated on NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP. Please
note Benchmark Indices do not operating expenses and are not available for actual investment. Past performance is not a guide to the future.
JPMorgan Chinese Investment Trust as of 31 Dec 2015
2009 2010 2011 2012 2013 2014 2015
JPMorgan Chinese Investment Trust plc (Share Price) +61.5 +16.8 -30.1 +24.6 +11.6 +11.4 -4.7
JPMorgan Chinese Investment Trust plc (NAV) +48.3 +20.4 -22.9 +21.2 +13.7 +13.1 +0.1
MSCI Golden Dragon Index (NDR)^ +48.4 +16.8 -18.1 +16.8 +4.9 +14.4 -2.1
Rolling 12 Months at Year Ends (%)
Market value
JPMorgan Chinese Investment Trust GBP 149.8m
20
Performance summary:
Source: J.P. Morgan Asset Management. As at 18 Jan 2016.
The opinions and views expressed here are those held by the author at the time of publication, which are subject to change and are not to be taken as or construed as investment advice.
Contributors:
Overweights in China Vanke and Ping An Insurance; Underweights in large-cap banks
Overweights in “new” China names: Tencent, Sinobiopharmaceuticals, Car Inc
Strong stock selection in Taiwan smartphone components
Detractors:
Holdings in casinos
Underweighting China Mobile
Stock specific financials
21
Portfolio
weight (%) 73.5 9.3 18.4 28.6 15.3 1.3 0.6 3.8 15.3 15.7 -8.4
Relative to benchmark (%)
Overweighting “New China”: Healthcare, Consumer, Internet
Source: J.P. Morgan Asset Management. As at 31 Dec 2015.
Individual figures may not add up exactly to the total due to rounding.
The Fund is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.
JPMorgan Chinese Investment Trust as of 31 Dec 2015
Active and absolute sector positions
Active and absolute country positions
Portfolio
Weight (%) 6.0 10.5 41.1 13.9 4.2 13.7 9.3 5.1 27.7 8.5 5.2 1.0 3.4 0.0 -8.4
Relative to benchmark (%)
4.7 4.0 2.9
-0.7
0.0
3.7
0.0
1.4 1.4 1.3
-1.3 -1.6 -1.6 -2.9
-8.4 -10.0
-5.0
0.0
5.0
10.0
HealthCare
ConsumerDiscretionary
Financials Banks DiversifiedFinancials
Insurance RealEstate
Energy InformationTechnology
Industrials Telecoms ConsumerStaples
Utilities Materials Cash
Benchmark MSCI Golden Dragon Index (NDR)
20.1 9.3 7.3 4.2 3.6 1.0 0.6
-2.2 -7.0 -8.6 -8.4
-25.0
-15.0
-5.0
5.0
15.0
25.0
China A Shares P Chip H Shares Red Chip B Shares TWD Bonds China Others Hong Kong Taiwan Cash
22
Propose changes to the benchmark
Current policy Proposed changes
Benchmark MSCI Golden Dragon MSCI China
Country Constraints
China A-shares: 20% max Active weight per country: +/- 25% relative
to index
China A-shares: 50% max Taiwan and Hong Kong (off-benchmark stocks):
30% max
Gearing 15% max 20% max
Number of Stocks 40 - 90 45 - 65
... To better reflect the investment opportunities available in the market place
23
Happy New Year!
Source: Shutterstock
Monkey years: 1920, 1932, 1944, 1956, 1968, 1980, 1992, 2004, 2016, 2028…
24
Appendix
25
Top 5 overweights
Fund
weight (%)
Relative
position (%)
Tencent Holdings Ltd. 9.4 3.4
China Vanke Co., Ltd 3.6 3.4
Ping An Insurance (Group) Company of
China, Ltd. 4.9 3.2
China Construction Bank Corporation 6.1 2.7
China Telecom Corp. Ltd. 2.9 2.5
Top 10 holdings
Fund
weight (%)
Tencent Holdings Ltd. 9.4
China Construction Bank Corporation 6.1
Taiwan Semiconductor Manufacturing Co., Ltd. 5.5
AIA Group Limited 5.5
Ping An Insurance (Group) Company of China, Ltd. 4.9
China Vanke Co., Ltd 3.6
Hong Kong Exchanges & Clearing Ltd. 3.1
China Telecom Corp. Ltd. 2.9
China Merchants Bank Co., Ltd. 2.8
CNOOC Limited 2.8
Portfolio positions
Source: J.P. Morgan Asset Management, as at 31 Dec 2015.
The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.
The holdings represent the current holdings of the fund. However, it cannot be assumed that these types of investments will be available to or will be selected by the fund in the future.
JPMorgan Chinese Investment Trust as of 31 Dec 2015
Top 5 underweights
Fund
weight (%)
Relative
position (%)
Industrial and Commercial Bank of China
Limited 0.0 -2.6
CK Hutchison Holdings Ltd 0.0 -2.1
Bank of China Limited 0.0 -2.1
Hon Hai Precision Industry Co., Ltd. 0.0 -2.1
China Mobile Limited 2.4 -1.7
Benchmark MSCI Golden Dragon Index (NDR)
26
Portfolio Fund Benchmark
Number of Holdings 61 288
Top 10 Holdings (% of Fund/Benchmark) 46.4 35.1
Top 20 Holdings (% of Fund/Benchmark) 66.4 47.4
Top 30 Holdings (% of Fund/Benchmark) 80.3 54.6
12-Month Forward Price to Earnings (x) 11.5 11.1
3-5 Year Earnings Per Share Growth (%) 13.0 9.7
Dividend Yield (%) 2.3 3.2
Return on Equity (%) 19.2 15.7
Return on Assets (%) 9.1 7.7
Active Share (%) 70.1
Portfolio characteristics
Source: FactSet, J.P. Morgan Asset Management. As at 31 Dec 2015
The Fund is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.
JPMorgan Chinese Investment Trust as of 31 Dec 2015
Market capitalisation (USD)
25.2
7.2
25.9
28.2
11.7
7.9
2.3
22.0
10.9
33.9
16.6
9.1 7.3
0.2
0%
5%
10%
15%
20%
25%
30%
35%
40%
> 100 bn 50 bn -100 bn
10 bn -50 bn
5 bn -10 bn
3 bn -5 bn
1 bn -3 bn
< 1 bn
Fund Benchmark
Benchmark MSCI Golden Dragon Index (NDR)
27
J.P. Morgan Asset Management
FOR PROFESSIONAL CLIENTS ONLY. NOT FOR PUBLIC DISTRIBUTION
This is a promotional document and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto.
Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan
Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan
Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P.
Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed
as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in
accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on
the value, price or income of the product(s) or underlying overseas investments. Both past performance and yield may not be a reliable guide to future performance. There is no
guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment product(s), there can be no
assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co and its affiliates
worldwide. You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes.
You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with
the EMEA Privacy Policy which can be accessed through the following website http://www.jpmorgan.com/pages/privacy. Investment is subject to documentation (Investment Trust
Profiles, Key Features and Terms and Conditions), copies of which can be obtained free of charge from JPMorgan Asset Management Marketing Limited. Issued by JPMorgan
Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 288553. Registered address: 25
Bank St, Canary Wharf, London E14 5JP. Approval code: 4d03c02a8003096d
