Accessing ASEAN Markets. Geoff Howie Markets Strategist, Singapore Exchange 11May 2013

Transcription

1 Accessing ASEAN Markets Geoff Howie Markets Strategist, Singapore Exchange 11May 2013

2 Investment Choices Private Investment share of GDP to moderately rise (+1.1%), while private savings rate to moderately fall (-1.8%) over next 5 years according to annual IMF Country Report*. Real Estate or Stocks? Over a ten year period ending March 2013, the average annualised return of the Urban Redevelopment Authority Property Price Index by residential type amounts to +6.4%. Over the same timeframe the average annualised return of the STI was +10.4% not including dividend distributions. IMF Article IV Report Singapore July

3 ASEAN Market Highlights In the April 2013 IMF World Economic Outlook, GDP growth of ASEAN-5 was revised upwards versus downward revisions for United States, Europe, China and India. Alongside listing a number of stocks and trusts that generate a large percentage of their revenue in ASEAN neighboring states, SGX offer a number of ETFs that provide exposure to the performance of ASEAN equity indices. While the majority of the ETFs are US Dollar denominated, the majority of the stock offerings are denominated in the Singapore Dollar (SGD). Furthermore, the strong external position of reserves at 100% of GDP means Singapore is one of three countries in the world outside Europe & UK to maintain the highest sovereign rate by Fitch, S&P and Moody s. Coinciding with increased physical trade flows between ASEAN and China, the largest IPO in Asia in the 2013 YTD has been a REIT which holds assets in Greater China and is managed by a wholly-owned subsidiary of Mapletree Investments. 2

4 ASEAN Growth Global Context 3

5 IMF 2013 Global Growth Forecast +3.3% International Monetary Fund - World Economic Outlook, April 2013, Hopes, Realities, Risks World Output downwardly revised by 0.2%, 2012 Level was 3.2%, Forecast for 2014 is 4.0%. 4

6 IMF 2013: 1.2% Advanced World Growth Forecast +1.9% -0.3% Unemployment Rate 7.5% Quantitative Easing Unemployment Rate 12.1% Outright Monetary Transactions US and Europe both downwardly revised by 0.2% in April. US growth was 2.2% in 2012, Europe was -0.6%, forward estimate is 3.0% and 1.1% for US and Europe respectively. 5

7 IMF 2013: 7.1% forecast for Developing Asia Growth +8.0% +5.7% +5.9% ASEAN Growth update was revised Upward by 0.3%, China was revised down 0.1% and India was revised downwards by 0.2%. In 2012, China growth was 7.8%, India was 4.0% and ASEAN-5 was 5.1%. Average Inflation Rate The 2015 ASEAN Economic Community (AEC) with the freer flow of capital objective is the largest integration effort attempted in the developing world. Combined ASEAN GDP & Average Inflation ( E) Average Inflation rate, average consumer prices (Annual percent change) Nominal GDP (Trillions of U.S. dollars) Estimates Nominal GDP ($US Trillion) 6

8 Common ASEAN growth drivers Strong domestic demand and consumer confidence Investment and Infrastructure requirements Growing wages and rising middle class Further subsidization reforms Low Inflation and accommodative Monetary Policy +5.9% Nominal GDP ($US Trillion) United States Asia and Pacific Europe Developing Asia 7

9 ETF Application 8

10 An original ASEAN asset CIMB FTSE ASEAN 40 ETF is a non-sip ETF that adopts a full replication strategy, that is the fund holds the physical underlying stocks. Gained 18.2% in 2012, with a five year annualised return of 11.5% as of 28 March The ETF was established as an ASEAN government initiative to position ASEAN markets as a regional asset class in Sep This Index represents 40 of the largest stocks listed across Singapore, Malaysia, Indonesia, Thailand and Philippines. Of the 40 stocks that are held by the ETF, there are 19 different sectors as represented as categorised by the ICB. 9

11 Banks-heavy FTSE ASEAN 40 Index Banks make up the largest Supersector of the FTSE ASEAN 40 Index, accounting for 12 constituents and 41.4% of the Index weighting as of April 30, Singapore's three locally-listed banks - DBS Group Holdings, Oversea-Chinese Banking Corp. and United Overseas Bank - accounted for half of Singapore's 11 stock - 36% weighting in the FTSE ASEAN 40 Index as of April 30. FTSE Index as of 30 April 2013 Num of Cons YTD Total Retn % 1Y Total Retn % 1Y Vol 5Y Total Retn 5Y p.a. Vol Div Yield % FTSE Asian Banks Index FTSE Bursa Malaysia EMAS - Banks FTSE ST Banks Index FTSE SET Banks Index

12 12 of 40 stocks listed on Singapore Exchange Name Local Exchange Symbol Exchange Location ICB Sector Name Mkt Cap (S$m) SINGAPORE TELECOM LTD Z74 Singapore Mobile Telecommunications 61,861 DBS GROUP HOLDINGS LTD D05 Singapore Banks 42,465 OVERSEA-CHINESE BANKING CORP O39 Singapore Banks 37,148 UNITED OVERSEAS BANK LTD U11 Singapore Banks 34,304 WILMAR INTERNATIONAL LTD F34 Singapore Food Producers 21,172 KEPPEL CORP LTD BN4 Singapore Oil Equip, Services & Distribution 19,149 GENTING SINGAPORE PLC G13 Singapore Travel & Leisure 18,092 JARDINE CYCLE & CARRIAGE LTD C07 Singapore General Retailers 17,163 CAPITALAND LTD C31 Singapore Real Estate Investment & Services 15,582 SINGAPORE TECH ENGINEERING S63 Singapore Aerospace & Defense 13,682 SINGAPORE AIRLINES LTD C6L Singapore Travel & Leisure 12,920 CITY DEVELOPMENTS LTD C09 Singapore Real Estate Investment & Services 10,284 11

13 11 of 40 stocks listed on Bursa Malaysia Name Local Exchange Symbol Exchange Location ICB Sector Name Mkt Cap (S$m) MALAYAN BANKING BHD 1155 Kuala Lumpur Banks 32,870 AXIATA GROUP BERHAD 6888 Kuala Lumpur Mobile Telecommunications 23,112 PUBLIC BANK BERHAD 1295 Kuala Lumpur Banks 23,102 CIMB GROUP HOLDINGS BHD 1023 Kuala Lumpur Banks 23,070 SIME DARBY BERHAD 4197 Kuala Lumpur General Industrials 22,816 PETRONAS CHEMICALS GROUP BHD 5183 Kuala Lumpur Chemicals 20,851 MAXIS BHD 6012 Kuala Lumpur Mobile Telecommunications 20,393 TENAGA NASIONAL BHD 5347 Kuala Lumpur Electricity 17,664 PETRONAS GAS BHD 6033 Kuala Lumpur Oil & Gas Producers 15,634 IOI CORPORATION BHD 1961 Kuala Lumpur Food Producers 12,814 GENTING MALAYSIA BHD 4715 Kuala Lumpur Travel & Leisure 8,412 12

14 Nine of 40 stocks listed on Indonesia Stock Exchange Name Local Exchange Symbol Exchange Location ICB Sector Name Mkt Cap (S$m) ASTRA INTERNATIONAL TBK PT ASII Indonesia Automobiles & Parts 36,932 BANK CENTRAL ASIA TBK PT BBCA Indonesia Banks 33,582 TELEKOMUNIKASI INDONESIA PER TLKM Indonesia Fixed Line Telco 29,886 BANK MANDIRI PERSERO TBK PT BMRI Indonesia Banks 29,416 BANK RAKYAT INDONESIA PERSER BBRI Indonesia Banks 28,912 UNILEVER INDONESIA TBK PT UNVR Indonesia Personal Goods 24,604 PERUSAHAAN GAS NEGARA PERSER PGAS Indonesia Gas, Water & Multiutilities 18,890 GUDANG GARAM TBK PT GGRM Indonesia Tobacco 12,482 UNITED TRACTORS TBK PT UNTR Indonesia Industrial Engineering 8,484 13

15 Six of 40 stocks listed on Stock Exchange of Thailand Name Local Exchange Symbol Exchange Location ICB Sector Name Mkt Cap (S$m) ADVANCED INFO SERVICE PCL ADVANC Bangkok Mobile Telecommunications 33,149 SIAM COMMERCIAL BANK PUB CO SCB Bangkok Banks 26,290 PTT EXPLOR & PROD PUBLIC CO PTTEP Bangkok Oil & Gas Producers 25,697 SIAM CEMENT PUBLIC CO LTD SCC Bangkok Construction & Materials 24,354 KASIKORNBANK PCL KBANK Bangkok Banks 21,088 BANGKOK BANK PUBLIC CO LTD BBL Bangkok Banks 17,696 14

16 Two of 40 stocks listed on Stock Exchange of Thailand Name Local Exchange Symbol Exchange Location ICB Sector Name Mkt Cap (S$m) SM INVESTMENTS CORP SM Philippines General Retailers 22,320 PHILIPPINE LONG DISTANCE TEL TEL Philippines Mobile Telecommunications 20,357 15

17 Core Satellite Strategy Portfolio Managers that wish to combine the benefits of a passive portfolio with their expertise or experience in specific sectors or market genre can adopt the Core Satellite strategy. Core Satellite Portfolio Management is comprised of: a core portfolio, generally in the form of a passive investment that provides a comparable performance to an investment benchmark such as a stock market index or commodity price. a satellite portfolio, generally in the form of active investments in stocks and securities that provide portfolio alpha. in this context investment alpha refers to the return of these active investments, adjusted for their associated trading risks. 16

18 Two Year Raw Beta of FTSE ASEAN 40 Constituents MAXIS BHD ADVANCED INFO SERVICE-NVDR TELEKOMUNIKASI INDONESIA PER PUBLIC BANK BHD-FOREIGN MKT UNILEVER INDONESIA TBK PT SINGAPORE TELECOM LTD SINGAPORE TECH ENGINEERING SIME DARBY BERHAD MALAYAN BANKING BHD TENAGA NASIONAL BHD PETRONAS GAS BHD BANK CENTRAL ASIA TBK PT SINGAPORE AIRLINES LTD OVERSEA-CHINESE BANKING CORP PTT EXPLOR & PROD PCL-NVDR WILMAR INTERNATIONAL LTD AXIATA GROUP BERHAD UNITED OVERSEAS BANK LTD DBS GROUP HOLDINGS LTD DIGI.COM BHD IOI CORPORATION BHD PERUSAHAAN GAS NEGARA PERSER KASIKORNBANK PCL-NVDR SIAM CEMENT PCL-NVDR PHILIPPINE LONG DISTANCE TEL BANGKOK BANK PUBLIC CO-NVDR PTT PCL-NVDR SIAM COMMERCIAL BANK P-NVDR ASTRA INTERNATIONAL TBK PT GENTING SINGAPORE PLC CIMB GROUP HOLDINGS BHD CITY DEVELOPMENTS LTD BANK RAKYAT INDONESIA PERSER KEPPEL CORP LTD MISC BHD CAPITALAND LTD BANK MANDIRI PERSERO TBK PT GENTING BHD NOBLE GROUP LTD Source: Bloomberg Jan

19 Most liquid ASEAN ETFs after STI ETF in 2012 The DB x-trackers MSCI Thailand TRN Index ETF (LG7) tracks the MSCI Thailand TRN Index, appreciated by 34.88% in The underlying index consist of 21 constituents, with a large weighting to the financials and energy sector of Thailand. The DB x-trackers FTSE Vietnam ETF (HD9) tracks the FTSE Vietnam TRN Index, appreciated 20.11% in The underlying index consists of 23 constituents, heavily weighted towards the financial sector of Vietnam. The DB x-trackers MSCI Indonesia TRN Index ETF (KJ) tracks the MSCI TRN Indonesia Index, appreciated 2.78% in The underlying index consists of 25 constituents, with a large weighting to the financial and consumer discretionary sector of Indonesia. 18

20 Core Satellite: SPDR GOLD SHARES Together, five countries of Developing Asia, India, China, Thailand, Vietnam and Indonesia accounted for half of the world s gold bar and gold coin investments in SPDR GOLD SHARES trade the same way ordinary stocks do. SPDR Gold Shares represents an ownership interest in a Trust, the sole assets of which are gold bullion, and, from time to time, a portion of cash. SPDR Gold Shares are intended to lower a large number of the barriers preventing investors from using gold as an asset allocation and trading tool. Barriers include the logistics of buying, storing and insuring gold. In addition, lower minimum notional value relative to other gold markets make SPDR GOLD SHARES (exchange code O87), accessible to most investors. The CIMB FTSE ASEAN 40 ETF is cash-based with a management fee of 0.65%. 19

21 Education Portfolio Combinations up to 2 May 2013 ETF Portfolio YTD Total Total Return Return 2011 Total Return 2010 Total Return SPDR STI ETF (1000) +6.86% % % % CIMB FTSE ASEAN 40 (200 & SGD adj) +9.19% % -3.57% % SPDR Gold Shares ETF (20 & SGD adj) % -8.60% % % Combined Portfolio Return +0.56% +7.91% +2.32% % STI, ASEAN & Gold: , annualised return +10.2% Note this is purely and education example on diversification application with ETFs. Past performances do not guarantee future results. SPDR STI ETF & SPDE Gold Shares are SIPs 20

22 Relevant Stocks and Trusts 21

23 Stocks & Trusts that generate ASEAN revenue According to Bloomberg, there are 24 Mainboard stocks listed on SGX that maintain a market capitalisation above S$50 million and have specifically reported that more than 80% of their revenue was generated in one or more neighboring ASEAN states. This is based on their most recent financial year report and the table below details the revenue that was reported to be generated in ASEAN economies other than Singapore. Stock/Trust SGX Code Market Cap S$M ASEAN (Excl SG) GEO Seg Rev % 12 M Price Chng % to 11 April 13 PARKSON RETAIL O9E 1, % TOTAL ACCESS-FRN B2W 9, % FIRST RESOURCES EB5 2, % BUMITAMA AGRI LT P8Z 1, % GALLANT VENTURE 5IG 1, % LIPPO MALLS D5IU 1, % YOMA STRATEGIC Z % KENCANA AGRI F9M % RH PETROGAS LTD T % INTERRA RESOURCE 5GI % GLOBAL PALM RESO K6J % LION ASIAPAC LTD L % CONSCIENCE FOOD L1D % HEALTH MGMT INTL % THAI BEVERAGE Y92 15, % JB FOODS LTD Q0W % KHONG GUAN FLOUR K % SINARMAS LAND LT A26 1, % FIRST REIT AW9U % JARDINE CYCLE & C07 18, % RIVERSTONE HLDGS AP % STRAITS TRADING S20 1, % SEROJA INVESTMEN IW % INDOFOOD AGRI RE 5JS 1, % 22

24 ASEAN and China Interconnectiveness China & ASEAN are two of just three regions to see GDP double over 8 years. Both have different structural challenges. Rebalancing focus is raising Consumption in China, while focus is on raising investment in ASEAN. ACTFA is planned to grow to US$500 billion by 2015 making ASEAN China s largest trading partner by value. US$ Billion China-ASEAN Trade Value YOY change (%) Source: China Daily 23

25 FTSE China Top Index There are a number of businesses in Singapore with revenue or assets ties to China total returns: FTSE ST China Top Index +17.1% FTSE China A50 Index +14.6% The FTSE ST China Top Index (China Top) represents the top 20 stocks within the FTSE ST All Share Index by full market capitalisation that either: Derive at least half of their sales revenue from Mainland China; or Have at least half of their operational assets located in Mainland China. Stock SGX Code Mkt Cap ($m) YTD Total Return (%) 2012 Total Return (%) Dvd Ind Yld HONGKONG LAND HOLDINGS H % 2.30 LTD* WILMAR INTERNATIONAL LTD F % 1.52 HUTCHISON PORT HOLDINGS TR-U* NS8U % 8.45 KEPPEL LAND LTD K % 2.93 YANGZIJIANG SHIPBUILDING BS % 5.26 YANLORD LAND GROUP LTD Z % 1.32 BIOSENSORS INTERNATIONAL GRO B % NA COSCO CORP SINGAPORE LTD F % 2.30 CAPITARETAIL CHINA TRUST AU8U % 1.75 HYFLUX LTD %

26 Possible capital market implications into 2020 Growing infrastructure requirements and cross border trade growth with ASEAN has coincided with GDP growth in recent years. On the Infrastructure side, according to the Asia Development Bank (ADB), there are 15 projects under the Master Plan of ASEAN Connectivity, of which six involve physical infrastructure. ADB have estimated that ASEAN needs US$600 bn between 2010 and 2020 to build power, transport, water and sanitation and telecommunications infrastructure. Conventional methods to raise funds include government funding, foreign direct investment, public and private partnerships and capital markets. REITs or Business Trusts can pay distributions to investors out of operating cash flows and can thus be an appropriate structure for an organisation with high initial capital expenditures with stable operating cash flows. The Business Trust structure is more suited for businesses with stable growth and cash flow, such as infrastructure and utilities businesses, vehicle leases and charters. 25

27 Recent Business Trust Highlights In 2012, the number of Business Trusts listed on SGX grew 30% with the listing of Ascendas Hospitality Business Trust, Far East Hospitality Business Trust and Religare Health Trust. The combined full market capitalisation of the 13 Business Trusts listed on SGX currently amounts to S$18.6 billion. According to the MAS s OPERA database, two Business Trusts, Global Telecommunications Infrastructure Trust and Croesus Retail Trust have lodged listing prospectuses. A Business Trust is an alternative structure of a commercial operation which might otherwise be legally incorporated as company. Typically, a Business Trust holds and manages assets for the Trust beneficiaries. These assets can be related to property, infrastructure, utilities and shipping. 26

28 Objectives of the ASEAN Trading Link Mr Arjun Goswami (Head of Regional Cooperation of the Southeast Asia Department of ADB) on regional infrastructure noted last year that "in the medium- to longer-term, improved infrastructure would contribute to lowered costs of doing business, increased market accessibility and enhanced competitiveness." Current Members of the Trading Link: Bursa Malaysia Stock Exchange of Thailand Singapore Exchange Similarly through cross border trading, the ASEAN trading link enhances accessibility of ASEAN assets, reduces entry costs for emerging brokers and promotes the ASEAN asset class. 27

29 How diverse are Singapore Stocks and Sectors? Utilities RE D & H RE D & H Utilities Utilities Telco Oil & Gas Healthcare Telco RE D & H % 41.90% 33.75% 65.22% % % % 64.60% 4.99% 56.04% Technology REITs Healthcare RE D & H Oil & Gas Cons Services Technology Industrials Healthcare Financial 84.76% 30.84% 30.53% 54.54% 78.03% % % 25.58% 3.70% 36.84% Cons Goods Cons Services Oil & Gas REITs Basic Materials STI Healthcare Cons Services REITs REITS 62.07% 23.37% 28.52% 41.45% 57.12% % % 17.63% % 36.67% Telco Healthcare Telco Financial Industrials Financial Cons Goods Oil & Gas STI Industrials 55% 22.46% 20.53% 38.04% 39.55% % % 11.14% % 27.34% Oil & Gas Telco Industrials Cons Goods Cons Goods RE D & H RE D & H REITs Oil & Gas Oil & Gas 54.76% 22.35% 17.95% 36.25% 22.12% % 89.94% 10.62% % 23.79% Industrials STI Financial Cons Services Telco REITs Utilities STI Industrials STI 53.01% 15.58% 14.99% 31.36% 21.61% % 81.38% 10.09% % 19.68% Basic Materials Financial STI STI STI Technology Industrials Cons Goods Cons Services Utilities 46.41% 14.68% 14.04% 27.97% 18.74% % 76.35% 9.80% % 14.99% Healthcare Cons Goods REITs Telco Cons Services Industrials Financial Technology Cons Goods Telco 41.54% 12.32% 13.11% 25.09% 14.30% % 75.09% 9.56% % 8.55% REITs Industrials Cons Services Basic Materials RE D & H Healthcare REITs RE D & H Financial Technology 34.65% 10.35% 10.10% 24.99% 13.97% % 69.35% 6.36% % 4.44% STI Basic Materials Cons Goods Industrials Financial Cons Goods STI Utilities RE D & H Cons Services 32.81% 2.48% 9.29% 19.20% 9.61% % 64.49% 4.62% % 4.43% RE D & H Oil & Gas Utilities Healthcare Healthcare Utilities Basic Basic Basic Financial Materials Materials Materials 27.51% 0.32% 2.22% 16.79% 9.43% % 58.85% 2.38% % 2.18% Financial Technology Technology Technology Technology Oil & Gas Cons Services Telco Technology Healthcare 27.28% % -0.47% 10.01% 1.63% % 58.35% 0.01% % -4.13% Basic Basic Basic Cons Services Utilities Oil & Gas REITs Telco Utilities Cons Goods Materials Materials Materials 18.75% % % 2.75% -2.59% % 21.87% -3.87% % % P E R F O R M A N C E F T S E S T S E C T O R I N D I C E S

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