Asia Market Outlook: Expecting the Unexpected

Transcription

1 March 2017 Asia Market Outlook: Expecting the Unexpected Affin Hwang Asset Management Berhad ( T) 1

2 Table of contents Where are we today? Market Outlook 2017: Asia Why Affin Hwang Absolute Return Fund II? How the Fund derives returns for you? Affin Hwang Investment Strategy 2

3 Where are we today? 3

4 2016 in Review: Bouts of Confusion and Shock FOR PROFESSIONAL INTERMEDIARIES ONLY. NOT FOR PUBLIC DISSEMINATION World Equities +8.5% US Treasury +1.0% US Dollar +3.6% Jan Feb China equity rout, oil slumped to $26, BoJ negative interest rate, Bank CoCo fear Mar - Apr EM / Asia relief rally, rate hike prospect postponed Jun Brexit blow Aug - Sep BoE reintroduced QE, negative yielding bonds swelled to $13.4 trillion, DoJ claim against Deutsche Bank Asia Equities +5.4% Nov - Dec Trump s victory, bond yield spikes, OPEC output cut, Dow closed above 19,000 points, Fed raised 25 bps rate Source: Bloomberg, as at 31 Dec 2016, in USD terms and on total return basis. 4

5 2017 investment landscape is broadly shaped by: FOR PROFESSIONAL INTERMEDIARIES ONLY. NOT FOR PUBLIC DISSEMINATION Undercurrent #1: From Globalisation to De-globalisation Undercurrent #2: From Monetary Easing to Fiscal Boost Undercurrent #3: From Deflation to Reflation 5

6 After Brexit and US election, more political events to come: The rush for the exit in Eurozone? 1Q 2017 UK to trigger Article 50 Mar 2017 Netherlands general elections Sep 2017 German parliamentary elections Dec 2016 Italian constitutional referendum Apr May 2017 French presidential elections 6

7 Years of ultra-loose monetary policies are losing its effectiveness Central banks recognise the limitations of monetary easing US Federal Reserve European Central Bank Bank of Japan Source: Bloomberg, Fed, ECB, BoJ, as at Dec

8 Trumponomics Details are scarce Trade Tax Fiscal Stimulus Source: Bloomberg, as at Dec

9 Market Outlook 2017: Asia Equity 9

10 YTD Indices Performance (Local Currency) FOR PROFESSIONAL INTERMEDIARIES ONLY. NOT FOR PUBLIC DISSEMINATION FTSE Bursa Malaysia Small Cap Index MSCI Asia ex Japan MSCI Emerging Markets Hong Kong - Hang Seng Index MSCI AC Asia ex Japan Small Cap Singapore - Straits Times Index MSCI Asia ex Japan Infrastructure Taiwan - Stock Exchange Weighted Index Gold India - S&P BSE India Sensex MSCI AC World Index FTSE ASEAN40 US - S&P 500 Philippines - Composite Index FTSE Bursa Malaysia KLCI Index Shanghai Shenzhen CSI 300 Index Korea - Stock Exchange KOSPI Index MSCI Europe Australia - ASX200 Index Japan - TOPIX UK - FTSE 100 Index Thailand - Stock Exchange of Thailand Blomberg Asia REIT Index Japan - Nikkei 225 Index Indonesia - Jakarta Composite Index CRUDE OIL Asia / EM is the top performer so far this year Source: Bloomberg, 15 February

11 What is in store for Asian investors in 2017? FOR PROFESSIONAL INTERMEDIARIES ONLY. NOT FOR PUBLIC DISSEMINATION Upside surprise on macro data Rebound in pricing power positive to corporate earnings Valuation and sentiment suggest equity is attractive Fundamental improvement to drive the valuation multiple expansion Impact from US trade protectionism USD factors vs Asia performance 11

12 Asia macro data has been surprising on the upside FOR PROFESSIONAL INTERMEDIARIES ONLY. NOT FOR PUBLIC DISSEMINATION Citi Economic Surprise Index - Asia Pacific 80 US Election Jan-2014 Jun-2014 Nov-2014 Apr-2015 Sep-2015 Feb-2016 Jul-2016 Dec-2016 The Citi Economic Surprise Indices measure data surprises relative to market expectations. A positive reading means that data releases have been stronger than expected and a negative reading means that data releases have been worse than expected. Source: Bloomberg, 17 Feb

13 China s measures to cut overcapacity yielded positive results so far The return of pricing power for the industrials, boosting the earnings growth Regain pricing power It allows the factories to consider to raise price as industrial restocking. Positive to profit margin recovery Source: CEIC, J.P. Morgan estimates, Sep 2016 Resume the trend of earnings growth Corporate earnings have grown 16% in 9M16, underpinned by industrial policy and commodity price rebound. Source: WIND, Deutsche Bank Strategy Research, 15 Dec

14 Broad based earnings revision continues to spread over, reversing the the earnings downtrend since Source: Deutsche Bank, as at 9 February

15 Infrastructure story is taking shape in Asia: Asian governments ramp up infrastructure spending FOR PROFESSIONAL INTERMEDIARIES ONLY. NOT FOR PUBLIC DISSEMINATION Malaysia High contract flow and construction activity to sustain growth momentum Philippines High hopes for the new administration s pledge on infrastructure spending Indonesia Subsidy savings and tax amnesty revenues to support infrastructure funding Source: Bloomberg, as at 20 January

16 Asia equity valuation is way below the long term historical averages Investors may need to take risk to monetise the cheapness of Asia equities The aggregate valuation measure consists of historical PE, prospective PE, Price/Book, Dividend Yield and an Earnings yield/bond yield indicator. Source: CEIC, UBS, 17 February 2017; 16

17 Bearish sentiment towards Asia eased, reverting to long term neutral levels Historically, panic levels imply potential upside returns over 12-month horizon Source: BofA Merrill Lynch Global Research, Factset, 20 February

18 Trump s trade protectionism is a risk to Asia supply chain US China trade dispute could send ripple effects to Asia economy Source: JP Morgan, December

19 USD strength inversely correlated to EM / Asian equity performance Source: Citi Research, 19 December

20 What is our take for 2017? Learn to adapt the changing global political landscape Taking cues from UST bond yields and USD strength Expect market cycles to be shorter and sharper 20

21 Affin Hwang AM Investment Strategy FOR PROFESSIONAL INTERMEDIARIES ONLY. NOT FOR PUBLIC DISSEMINATION Tactical positions Intend to uncover short term tactical opportunities Secular Growth This allocation will be invested into stocks with long term secular growth prospects Dividend Yield This position seeks to invest into dividend yielding stocks, potentially providing steady income for investors. 21

22 Three Key Themes Reflation Domestic Asia Oversold α Banks Consumer Dividend yielders Insurers Tourism REITs Industrials Infrastructure Exporters Commodity 22

23 Disclaimer This presentation has been prepared by Affin Hwang Asset Management Berhad (hereinafter referred to as Affin Hwang AM ) specific for its use, a specific target audience, and for discussion purposes only. All information contained within this presentation belongs to Affin Hwang AM and may not be copied, distributed or otherwise disseminated in whole or in part without written consent of Affin Hwang AM. The information contained in this presentation may include, but is not limited to opinions, analysis, forecasts, projections and expectations (collectively referred to as Opinions ). Such information has been obtained from various sources including those in the public domain, are merely expressions of belief. Although this presentation has been prepared on the basis of information and/or Opinions that are believed to be correct at the time the presentation was prepared, Affin Hwang AM makes no expressed or implied warranty as to the accuracy and completeness of any such information and/or Opinions. As with any forms of financial products, the financial product mentioned herein (if any) carries with it various risks. Although attempts have been made to disclose all possible risks involved, the financial product may still be subject to inherent risk that may arise beyond our reasonable contemplation. The financial product may be wholly unsuited for you, if you are adverse to the risk arising out of and/or in connection with the financial product. Affin Hwang AM is not acting as an advisor or agent to any person to whom this presentation is directed. Such persons must make their own independent assessments of the contents of this presentation, should not treat such content as advice relating to legal, accounting, taxation or investment matters and should consult their own advisers. Affin Hwang AM and its affiliates may act as a principal and agent in any transaction contemplated by this presentation, or any other transaction connected with any such transaction, and may as a result earn brokerage, commission or other income. Nothing in this presentation is intended to be, or should be construed as an offer to buy or sell, or invitation to subscribe for, any securities. Neither Affin Hwang AM nor any of its directors, employees or representatives are to have any liability (including liability to any person by reason of negligence or negligent misstatement) from any statement, opinion, information or matter (expressed or implied) arising out of, contained in or derived from or any omission from this presentation, except liability under statute that cannot be excluded. 23