not for u.s. investors · the case for investing in asia in one slide source: imf, mar 18, figures...

April 2019

China

For Qualified Investor Use Only. Not for public distribution

Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.

Not for U.S. investors

The very big picture

2

The mother of all “mean reversion” trades is underway

Asia’s share of global GDP is reverting to mean Source: Angus Madison

“Historical Statistics for the World

Economy:1-2006 AD”, DB GMR,

Jun 08

For illustrative purposes only

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 501 1001 1501 2001Year

China India Europe & North America Japan Rest of world

GD

P S

ha

re (

19

90

in

tern

atio

nal d

olla

r)

3

Urbanization is the key event in Asia

Source: McKinsey & Company “Urban world: Cities and the rise of the consuming class”, June 2012. Population Division of the United Nations; Angus Maddison via Timetrics; Global Insight; Census reports of England

& Wales; Honda in Steckel & Floud, 1997; Bairoch, 1975

1. Definition of urbanisation varies by country; pre-1950 figures for the United Kingdom are estimated

2. Historical per capita GDP series expressed in 1990 Geary-Khamis dollars, which reflect PPP

Per capita GDP and urbanization1

4

Asia is getting healthier…

Source: United Nations Population Divisions, Oct 14


Life Expectancy has shot up in countries like China since 1960

36

67

42 42

54 53

64

54

62

55

76

84

65

72

76

73

84 81

75 75

35

40

45

50

55

60

65

70

75

80

85

China HK India Indonesia Malaysia Philippines Singapore South Korea Sri Lanka Thailand

Life e

xpecta

ncy in y

ears

1960 1980 2014

5

…and wealthier…

Source: International Monetary Fund, World Economic Outlook Database, Oct 14

GDP per capita has risen sharply since 1960

76 84 55 287 267 92 143 108

7,333

1,584

3,417

11,387

2,935 3,385

5,450

0

5,000

10,000

China India Indonesia Malaysia Philippines South Korea Sri Lanka Thailand

GD

P P

er

Capital (U

S$,

curr

ent

prices)

1960 1980 2014

25,931

6

…especially in the big cities

Source: * Country GDP per capita is sourced from International Monetary Fund, World Economic Outlook Database, Oct 14. GDP per capita is based on current prices

* Largest city GDP per capita is sourced from Brookings analysis, Oxford Economics, Moody’s Analytics, and the U.S. Census Bureau, Nov 12. GDP per capita is based on current prices


Sydney watch out!

Shanghai

Mumbai Jakarta

Seoul

Kuala Lumpur

Manila

Taipei

Bangkok

Sydney

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

India Philippines Indonesia Thailand China Malaysia Taiwan S. Korea Hong Kong Singapore Australia

GD

P p

er

cap

ita i

n U

SD

Country GDP Per capita Largest City GDP Per capita

7

It is driving the growth of the middle classes Concentration of middle classes will be in Asia

Source: The Emerging Middle Class in Developing Countries, Homi Kharas, Jan 10. Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or

results may differ materially.

525 M

1,740 M

3,228 M

8

Global Share of World PPP GDP Weights in MSCI AC World Index Weights in Barclays Global Agg Index

37.6%

16.9%

5.7% 5.3%

0.7% 0.1% 0%

5%

10%

15%

20%

25%

30%

35%

40%

United S

tate

s

Jap

an

UK

Germ

any

Chin

a

India

Source: Barclays, 31 Jan 18


Source: MSCI, 31 Jan 18


18.8%

15.1%

7.7%

4.1% 3.2%

2.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Chin

a

United S

tate

s

India

Jap

an

Germ

any

UK

52.2%

7.8% 5.7%

3.7% 3.2% 1.0%

0%

10%

20%

30%

40%

50%

60%

United S

tate

s

Jap

an

UK

Chin

a

Germ

any

India

The case for investing in Asia in one slide

Source: IMF, Mar 18, figures are based on IMF 2018 estimates


Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. Individuals cannot invest directly in an index

9

China’s demographic problem

Source: UN WPP 2015

Forecasts are offered as opinion and are not reflective of potential performance. Forecasts are not

guaranteed and actual events or results may differ materially. Indexes are unmanaged and have

been provided for comparison purposes only. No fees or expenses are reflected. Individuals cannot

invest directly in an index. For illustrative purposes only

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

China’s working population

Source: United Nations, Department of Economic and Social Affairs, Population Division (2017)


0

2

4

6

8

2015

2020

2025

2030

2035

2040

2045

2050

China: number of workers per retiree

bill

ion

Forecasts

4

2

Ratio

Workers = 15-64 years, Retirees = 65 years and older

Index inclusion 2019 is the year that China arrives on the world’s financial stage

11

The SDR pre and post CNY inclusion

Source: International Monetary Fund, 31 Dec 17


Before inclusion

USD 41.9%

EUR 37.4%

JPY 9.4%

GBP 11.3%

After inclusion (1st October 2016)

USD 41.7%

EUR 30.9%

CNY 10.9%

JPY 8.3%

GBP 8.1%

12

Global bond indices have ignored China, but not for long Chinese onshore bonds are under-represented in global indices

Source: FTSE, Bloomberg, JP Morgan, 31 Dec 18

China: 0% 5% China: 0% 5.5% China: 0% 7%

FTSE WGBI

(top 10)

Barclays Global Aggregate

(top 10)

JPM GBI EM Global Diversified

(top 10)

37.0%

19.5%

8.1%

7.3%

5.6%

5.3%

4.7%

2.0% 1.7% 1.7%

United States of America USA Japan

France Italy

Germany Great Britain

Spain Belgium

Netherlands Australia

39.5%

17.2%

5.9%

5.2%

5.2%

3.6% 3.2%

2.6% 2.2% 1.7%

United States of America USA

Japan

France

Great Britain

Germany

Italy

Canada

Spain

SUPRANATIONAL

Netherlands

10.0%

10.0%

9.4%

9.0% 8.5%

8.3%

7.1%

7.1%

5.7% 5.0%

Mexico

Brazil

Indonesia

Poland

South Africa

Thailand

Colombia

Russia

Malaysia

Turkey

13

11.16%

88.84%

China

Non China

MSCI began to include A shares in May 2018 Weightings will increase again in May 2019

Source: Aberdeen Standard Investments

0.42%

17.52%

82.06%

China A

Other China

Non China2018

2013

19.81%

80.19%

China

Non China

0.71%

29.70%

69.59%

China A

Other China

Non China2018

2013

2.10%

97.90%

China

Non China

0.08%

3.52%

96.40%

China A

Other China

Non China2018

2013

Asia Pacific Emerging Markets AC World

Why China A?

15

China shares

Source: Aberdeen Standard Investments

For illustrative purposes only. These securities have been used for illustrative purposes only to demonstrate the investment management style, not as an indication of performance and should not be considered as a

solicitation or recommendation of these securities. A full list of holdings is available upon request. Your portfolio may not include these securities. This information should not be considered a recommendation to

purchase or sell any security. There is no assurance that any securities discussed herein will remain in the fund at the time you receive this report or that securities sold have not been repurchased. Securities discussed

do not represent the entire fund and in the aggregate may represent only a small percentage of the fund’s holdings.

Shares Listing Currency Country of

Incorporation

Country where company

does most business

Index inclusion Comment Chinese investors

can buy ?

China A shares Shanghai +

Shenzhen RMB China China

CSI / 300 or MSCI

China A. MSCI EM

started in June 2018

Some have dual listing

in HK H share market Y

China B shares Shanghai +

Shenzhen USD + HKD China China None

Interest has collapsed

since H share arrival Y

China H shares HK HKD China China MSCI China, MSCI EM Often dual listing with a

shares Y

HK "Red chips" HK HKD HK China MSCI China, MSCI EM May have ADR too Y

HK "P" chips HK HKD Cayman China MSCI China, MSCI EM May have ADR too Y

Singapore "S" chips Singapore SGD Various China No major N

ADR NY USD Cayman China MSCI China, MSCI EM

Usually sinle US listed,

may come back to

China as CDR

N

16

Breadth

Total market cap (in USD bn) Number of listed companies

Source: MSCI, 31 Aug 18

These securities have been used for illustrative purposes only to demonstrate the investment management style, not as an indication of performance and should not be considered as a solicitation or recommendation of

these securities. For illustrative purposes only

3,519

97 256 268

164 61

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

A’ shares B’ shares H’ shares US-listedADRs

Red Chips S’ Chips

8,227

164

806

4,160

721

6 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

A’ shares B’ shares H’ shares US-listedADRs

Red Chips S’ Chips

17

Low correlation to global markets

Source: Aberdeen Standard Investments, Bloomberg, 31 Dec 18

Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. Individuals cannot invest directly in an index


15 year Correlation, based on monthly data, USD unhedged indices MSCI China A

Onshore

MSCI China MSCI World

Index

MSCI EM

(Emerging

Markets)

MSCI EM

Asia

MSCI AC

Asia ex JP

S&P 500 FTSE 100 TOPIX

MSCI China A Onshore 1.00 0.62 0.39 0.49 0.53 0.53 0.35 0.33 0.26

MSCI China 1.00 0.70 0.86 0.89 0.88 0.62 0.66 0.49

MSCI World Index 1.00 0.85 0.82 0.83 0.97 0.90 0.72

MSCI EM (Emerging Markets)

1.00 0.97 0.98 0.76 0.72 0.64

MSCI EM Asia 1.00 0.98 0.74 0.69 0.62

MSCI AC Asia ex JP 1.00 0.78 0.75 0.64

S&P 500 1.00 0.79 0.63

FTSE 100 1.00 0.58

TOPIX 1.00

18

Stronger earnings growth

Source: Bloomberg, 31 Dec 18. Forecasts are offered as opinion and are not reflective of potential performance. Forecasts are not guaranteed and actual events or results may differ materially. Indexes are unmanaged

and have been provided for comparison purposes only. No fees or expenses are reflected. Individuals cannot invest directly in an index. For illustrative purposes only

EPS YoY growth estimates

0%

5%

10%

15%

20%

25%

30%

35%

40%

MSCI China AOnshore

MSCI China MSCI World MSCI EmergingMarkets

2017 2018 2019

P/E ratio (x) 2017 2018 2019

MSCI China A Onshore 17.6 10.8 9.6

MSCI China 15.9 11.4 10.0

MSCI World 19.5 14.3 13.3

MSCI Emerging Markets 15.1 11.3 10.5

19

2018 was a terrible year for equities, especially China A

Source: Bloomberg, 31 Dec 18. Past performance is not indicative of future results


YTD Total returns (MSCI, in USD terms)

-35% -30% -25% -20% -15% -10% -5% 0%

MSCI World

MSCI World Developed

MSCI Asia Pacific ex-Japan

MSCI Emerging Markets

MSCI China

MSCI China A Onshore

20

Sentiment in China is awful

Source: Bloomberg, 20 Jun 18. Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.

RMB depreciation

• FX reserves have been stable

• Hold domestic stocks

Tariff War

• Impact could be 0.5% of GDP growth

• Hold domestic stocks

Slowing economy

• Some slowness in autos and real estate

• Holdings are still demonstrating growth

Financial deleveraging

• Short-term pain for long-term gain

• Avoid industries and companies

that are reliant on debt

Appendices

22

Recommended reading on China

Source: Aberdeen Standard Investments, Amazon.com, Jan 16

23

Important: The above is strictly for private circulation and information purposes only and should not be considered as an offer, or solicitation, to deal in any of the investments mentioned

herein. Aberdeen Standard Investments(“ASI”) does not warrant the accuracy, adequacy or completeness of the information and materials contained in this document and expressly

disclaims liability for errors or omissions in such information and materials. Past performance is not necessarily a guide to the future. Any research or analysis used in the preparation of this

document has been procured by ASI or its affiliates for their own use and may have been acted on for their own purpose. The results thus obtained are made available only coincidentally

and the information is not guaranteed as to its accuracy. Some of the information in this document may contain projections or other forward looking statements regarding future events or

future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make his/her own

assessment of the relevance, accuracy and adequacy of the information contained in this document and make such independent investigations, as he/she may consider necessary or

appropriate for the purpose of such assessment. Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Neither

ASI nor any of its agents have given any consideration to nor have they made any investigation of the investment objectives, financial situation or particular need of the reader, any specific

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any person or group of persons acting on any information, opinion or estimate contained in this document. The information herein including any expressions of opinion or forecast have been

obtained from or is based upon sources believed by ASI to be reliable but is not guaranteed as to accuracy or completeness. The information is given without obligation and on the

understanding that any person who acts upon it or otherwise changes his position in reliance there on does so entirely at his or her own risk. ASI reserves the right to make changes and

corrections to its opinions expressed in this document at any time, without notice. Any unauthorized disclosure, use or dissemination, either whole or partial, of this document is prohibited

and this document is not to be reproduced, copied, made available to others.

Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial

instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from marketing) any kind of investment

decision and may not be relied on as such. Historical data and analysis, should not be taken as an indication or guarantee of any future performance analysis forecast or prediction. The

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(msci.com).

Disclaimer

24

Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political

and economic risks. These risks are enhanced in emerging market countries.

Before investing, investors should consider carefully the investment objective, risks, charges, and expenses of a fund. This and other important information is contained in the prospectus,

which can be obtained from a financial advisor and are also available on www.aberdeen-asset.com. Prospective investors should read the prospectus carefully before investing.

This document does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on

in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. This document does not constitute investment advice and ASI is not holding itself out as

engaging in the business of advising others as to the investing in or the buying or selling of securities. In considering the prior performance information contained herein, potential investors

should bear in mind that past performance is not necessarily indicative of future results, and there can be no assurance that the AAM will achieve comparable results.

Aberdeen Standard Investments is a brand of the investment businesses of Standard Life Aberdeen plc., its affiliates and subsidiaries. In the United States, Aberdeen Standard Investments

is the marketing name for the following affiliated, registered investment advisers: Aberdeen Standard Investments Inc., Aberdeen Asset Managers Ltd., Aberdeen Standard Investments

Australia Ltd., Aberdeen Standard Investments (Asia) Ltd., Aberdeen Capital Management LLC, Aberdeen Standard Investments ETFs Advisors LLC and Standard Life Investments

(Corporate Funds) Ltd. For Professional Use Only. Not for Public Distribution

© 2019, Aberdeen Standard Investments

ID#: US-010219-81874-1

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Disclaimer

not for u.s. investors · the case for investing in asia in one slide source: imf, mar 18, figures...

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