the trade war between us and china. will it happen? · asean’s rising consumer wealth room to...
TRANSCRIPT
The Trade war between US and China. Will it happen?
How does it impact ASEAN?
Source: Asia.Nikkei.com
Contents
1. Trade war between China and US - will it happen?
2. How does it impact ASEAN?
3. Why invest in ASEAN ?
4. Why now?
1. The Trade war between US and China –
will it happen ?
Trump’s policy initiatives
5
Source: Citi Research, February 2017
6
Key risk is rising policy uncertainty
Source: Bloomberg, UBS, January 2017
7
Impact at country level
Source: Haver, CEIC, UBS Economics, January 2017
8
Top U.S. exports to China
Source: Panjiva, December 2016
9
US industries most affected
Source: BEAS, Haver,FactSet, UBS, February 2017
(Note: Data represents NAICS industry-level net imports as a % of industry intermediate inputs)
2. How does it impact ASEAN?
11
Real GDP growth in ASEAN
Source: OECD, 28 November 2016
FDI flows into ASEAN exceeds that into China
Source: CEIC, Nomura Strategy Research, SSI Voetnam, April, 2014
The trend of FDIs in ASEAN
13
As China is no longer competitiveASEAN’s labour costs remains more competitive
Source: BofA Merrill Lynch Global Research estimates per report dated 17 January 2014, CEIC
15
Foreign direct investment (FDI) trendsVietnam Is Becoming the 'New China' With Foreign Manufacturers
Men work with an engine at automakerFord Vietnam's factory in Vietnam'snorthern Hai Duong Province on June 27,2014. Photo: Reuters
Samsung Electronics Vietnam employees work at the company's phone production complex in Bac Ninh Province, located in northern Vietnam.
16
Foreign direct investment (FDI) trendsJapanese companies remain more keen to invest in ASEAN than China
Japanese companies have shown a big and varied appetite for Southeast Asia this year, buying control of :
Myanmar Dominant
Beer Market
Singapore Logistics Company
Indonesia food and beverage
sector
Thai consumer-
finance companies
& Shopping
malls
Malaysian property
Source: Reuters.com, October 2015
3. Why invest in ASEAN?
ASEAN’s rising consumer wealthYoung population with huge appetite to consume
19
ASEAN’s rising consumer wealthRoom to Grow – of the 150 million (622 million population) digital consumers in ASEAN, two-thirds already shop on line
Source: Bain Southeast Asia Digital Consumer Survey, November 2015
Source: Citigroup, 2013
ASEAN’s rising consumer wealthConsumption: Getting ready for e-commerce
Asia infrastructure boom
Asia Development Bank forecasts
Asia’s infrastructure investment
needs will amount to $8 trillion.
China funding its neighbours’
infrastructure projects could be
an ideal way to form stronger
transport and trade ties
Population of “One Belt, One
Road” countries, 4.4 billion
Source:The Republic of Indonesia Investor Relations Unit (IRU) : Recent Economic Development December, 2016
Indonesia infrastructure boom
Philippines infrastructure boom
Source: Ayala website, Apr il, 2014
4. Why invest now?
Why invest in ASEAN? Numbers speak louder than words
Asia has outperformed most equity markets in the last 10 years
• 25
Source: Bloomberg, 20 February 2017
26
Source: Bloomberg, February, 2017
Why invest in ASEAN? Asia offers top dividend yields %
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3
MSCI South East Asia(USD)
MSCI EM (USD) MSCI AC ASIA exJapan (USD)
MSCI The World (USD)
27
Source: Bloomberg, February, 2017
Why invest in ASEAN? Asia offers lower debt ratios
Source: Macquarie, February, 2017
Why invest in ASEAN?Earnings growth should provide momentum
• 28
29
Source: Bloomberg, January, 2017
Why invest in ASEAN? Value is emerging in ASEAN
30
Why invest in ASEAN?
Where is the value ?
• Our process is driven by being overweight country and stocks which have improving fundamentals at a reasonable price.
• We currently see value in Indonesia and Malaysia and are overweight these countries. Both are out-of consensus calls.
• Sector allocation is geared towards growth sectors such as Financials , Industrials , Consumer discretionary and E-commerce/logistic sectors in line with our bullish view on FDI, E-commerce (consumption) and Infrastrucureboom in ASEAN.
Malaysia Equity Strategy
31
• The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) rallied further by3.2% YTD led by inflows from foreign funds.
• Why Malaysia now?• Foreign investors remain underweight in Malaysia.
• YTD foreign inflows continue to trend higher.
• 4Q16 earnings season has just ended in a mixed bag, but the earnings revision ratioremains much higher than in the previous quarter, indicating very low earningsexpectations. We anticipate upgrades will continue to drive the market higher.
• GLC restructuring and e-commerce plays remain core holdings in our portfolios.
• Sector rotation remains a key strategy and we have started to rotate towards morecyclical sectors like oil and gas, banks, consumer discretionary and aviation inanticipation of a cyclical economic recovery in Malaysia.
THANK YOU!
33For Internal Circulation Only 33
Disclaimer
• We have based this document on information obtained from sourceswe believe to be reliable, and we do not make any representation orwarranty nor accept any responsibility or liability as to its accuracy,completeness or correctness. Expressions of opinion herein aresubject to change without notice.
• This document should not be construed as an offer or a solicitationof an offer to purchase or subscribe or sell CIMB-Principal AssetManagement Berhad.