Outlook and Strategy Asia/Global Funds

Transcription

1 Q4207 Outlook and Strategy Asia/Global Funds

2 Investment Theme Interest Rate Normalisation Causes Short-term Volatility for Global Bonds The strong economic data in the U.S. and eurozone will continue to support the interest rate normalisation policy implemented by central bankers, which could cause some short-term volatility for global bond markets. The momentum of the Asian local bond market has softened for two consecutive months due to weaker local currencies and rising local yields in the face of a stronger U.S. dollar and increased U.S. treasury yields. Chinese Supply-side Reform Remains a Priority The 9th National Party Congress emphasised the quality of economic growth, and therefore no near-term growth target was mentioned. The Chinese government continues to commit to supplyside reform and de-leveraging. China and South Korea stepped forward to normalise relations after the freeze caused by the deployment of the THAAD missile defence system. This should alleviate pressure on the tourism and cosmetics industries in South Korea. Japanese Economy Expected to Reach a Major Turning Point Major economic indicators in Japan suggested that the country may exit from deflation by early next year. This would be its first time in more than two decades, marking a major turning point for the economy. Shinzo Abe led the Liberal Democratic Party to another election victory. Abe s goal is to strengthen Japan in response to growing threats from North Korea and aspiring regional hegemons. Outlook and Strategy on Asia I Global Funds

3 BEA Union Investment Global Flexi Allocation Fund ( GFA ) as at 3 October 207 BEA Union Investment Global Flexi Allocation Fund seeks to achieve medium to long term capital growth and income through investing in a diversified portfolio consisting of global equity securities and/or debt securities in global markets. The fund invests in emerging markets and may be subject to higher liquidity and volatility risks. The fund invests directly in equities, REITs, ETFs and managed funds, and is thus subject to the risks generally associated with such asset classes, including but not limited to liquidity of the asset class, changes in investment sentiment, political environment, economic, business and social conditions in the global markets. The fund may invest in below investment grade or non-rated debt securities including high yield bonds, which are subject to greater credit and liquidity risks than higher-rated securities. The manager may at its discretion make distributions from income and/or capital in respect of the distributing classes of the fund. Investors should note that the distributions paid out of capital amount to a return or withdrawal of part of the unitholder s original investment or from any capital gains attributable to that original investment. Such distribution may result in an immediate reduction of the net asset value per unit. The fund may enter into futures contracts for hedging and investment purposes. Given the leverage effect embedded in futures contracts, the fund may be exposed to significant losses. Investors should not make an investment decision based solely on this material. Fund Performance % YTD Year Since Launch 206 A USD (Dis) ^ A HKD (Dis) ^ Source: Lipper, as at 3 October 207. A USD (Dis) and A HKD (Dis) were launched on 27 January 206. Performance is calculated in USD on a NAV to NAV basis. Gross income is re-invested. Past performance is not indicative of future performance. ^Since launch till 3 December of the same year. Portfolio Recap & Strategy Market Review In October, the fund was most overweight in real estate and financials, and most underweight in IT and energy. In terms of bond investment, the fund portfolio duration remained slightly underweight as the Federal Reserve started to normalise interest rates. The fund reduced its underweight in Korea due to attractive valuations and the cooling down of tensions with Pyongyang. Major Indices YTD Year MSCI World Index 6.3% 20.5% Source: Bloomberg, as at 3 October 207 Key Economic Indicators GDP (YoY) CPI (YoY) PMI Exports (YoY) 207 Jun Aug 207 Oct Aug 207 Japan.7%.4% 0.7% 0.7% % 0.4% UK.5%.5% 3.0% 2.9% % 4.9% US 2.3% 2.2% 2.2%.9% % 3.9% Source: Bloomberg, as at respective month end. Market Commentary In the U.S., retail consumption rebounded following the impact of the summer hurricanes. This led to modest upward revisions in third-quarter GDP estimates. After the U.K. economy grew more than the Bank of England had estimated, expectations began to build for a rate hike in November. In Japan, Morgan Stanley argued that improving trends in four critical economic indicators CPI, the GDP deflator, unit labour costs, and the output gap all suggest that Japan may exit from deflation by early next year. Outlook and Strategy on Asia I Global Funds 2

4 BEA Union Investment Asia Pacific Flexi Allocation Fund ( AFA ) as at 3 October 207 BEA Union Investment Asia Pacific Flexi Allocation Fund seeks to achieve long-term capital growth and income by investing in equity securities or debt securities, that are either traded in the Asia Pacific region or issued by companies incorporated in the Asia Pacific region or companies which have significant operations in or derive significant portion of revenue from the Asia Pacific region. The fund invests in emerging markets and may be subject to higher liquidity and volatility risks. The fund invests directly in REITs, equities, ETFs and interests in trusts, and is thus subject to the risks generally associated with such asset classes, including but not limited to liquidity of the asset class, changes in investment sentiment, political environment, economic, business and social conditions in the Asia Pacific region. The fund may invest in below investment grade or non-rated debt securities including high yield bonds, which are subject to greater credit and liquidity risks than higher-rated securities. *The manager may at its discretion make distributions from income and/or capital in respect of the distributing classes of the fund. Investors should note that the distributions paid out of capital amount to a return or withdrawal of part of the unitholder s original investment or from any capital gains attributable to that original investment. Such distribution may result in an immediate reduction of the net asset value per unit. In terms of currency hedged class units, adverse exchange rate fluctuations between the base currency of the fund and the class currency of the currency hedged class units may result in a decrease in return and/or loss of capital for unitholders. Over-hedged or under-hedged positions may arise and there can be no assurance that these currency hedged class units will be hedged at all times or that the manager will be successful in employing the hedge. Investors may invest in RMB (Hedged) units. It should be noted that the RMB is currently not a freely convertible currency as it is subject to foreign exchange control policies of the Chinese government. There is also no assurance that the RMB will not be subject to devaluation. Any devaluation of the RMB could adversely affect the value of investors investments. There is no guarantee that the hedging strategy will be effective and investors may still be subject to the RMB currency exchange risk. The fund may enter into futures contracts for hedging and investment purposes. Given the leverage effect embedded in futures contracts, the fund may be exposed to significant losses. Investors should not make an investment decision based solely on this material. Fund Performance % YTD Year Since Launch A USD (Acc) ^ A USD (Dis) ^ A HKD (Dis) ^ A AUD Hgd (Dis)* ^ A RMB Hgd (Dis)* ^ A NZD Hgd (Dis)* ^ *Hgd: Hedged Source: Lipper, as at 3 October 207. All classes were launched on 6 February 205. Performance is calculated in the respective class of denominated currencies on a NAV to NAV basis. Gross income is re-invested. HKD/USD based investors are exposed to foreign exchange fluctuations. Past performance is not indicative of future performance. ^ Since launch till 3 December of the same year. Portfolio Recap & Strategy Market Review The fund performed in line with the market during the month, with major contributors from its Chinese, Singaporean, and Taiwanese stock selections in the consumer, financial, and materials sectors. Major changes during the month included increasing our positions in Australia and the Philippines, while reducing our overweight in Hong Kong and Indonesia. The fund also reduced its concentrated positions by tactically adding a few alpha names. In terms of bond investment, the fund portfolio duration remained slightly underweight as the Federal Reserve started to normalise interest rates. The fund reduced its underweight in Korea due to attractive valuations and the cooling down of tensions with Pyongyang. Major Indices YTD Year MSCI AC Asia Pacific ex-japan Index 29.2% 24.3% Source: Bloomberg, as at 3 October 207 Key Economic Indicators GDP (YoY) CPI (YoY) PMI Exports (YoY) 207 Jun Aug 207 Oct Aug 207 China 6.8% 6.9%.6%.8% % 5.% Taiwan 3.% 2.% 0.5%.0% % 2.7% Australia.8%.8%.8%.9% % 6.4% Source: Bloomberg, as at respective month end. 3 Market Commentary Outlook and Strategy on Asia I Global Funds Mainland China hosted the communist party s 9th National Party Congress, reappointing General Secretary Xi Jinping for a second five-year term, with no obvious successor. The Congress emphasised the quality of economic growth over its quantity, and broke with tradition by not setting a GDP growth target. The central government also re-committed to supply-side reform and de-leveraging. South Korea and China took a step towards normalising relations after the deployment of the THAAD missile defence system caused a freeze. This should alleviate pressure on the South Korean tourism and cosmetics industries.

5 BEA Union Investment Asian Bond and Currency Fund ( ABC ) as at 3 October 207 BEA Union Investment Asian Bond and Currency Fund seeks regular interest income, capital gains and currency appreciation from an actively managed portfolio of debt securities denominated in Asian or other currencies and primarily issued by Asian government or corporate entities. The fund invests in emerging markets, which are subject to higher liquidity and volatility risks. The fund may invest in lower-rated fixed income instruments, including below investment grade and non-rated debt securities, which are subject to greater credit and liquidity risks than higher-rated securities. The manager may at its discretion make distributions from income and/or capital in respect of the distributing classes of the fund. Investors should note that the distributions paid out of capital amount to a return or withdrawal of part of the unitholder s original investment or from any capital gains attributable to that original investment. Such distribution may result in an immediate reduction of the net asset value per unit. In terms of currency hedged class units, adverse exchange rate fluctuations between the base currency of the fund and the class currency of the currency hedged class units may result in a decrease in return and/or loss of capital for unitholders. Over-hedged or under-hedged positions may arise and there can be no assurance that these currency hedged class units will be hedged at all times or that the manager will be successful in employing the hedge. Investors may invest in RMB (Hedged) units. It should be noted that the RMB is currently not a freely convertible currency as it is subject to foreign exchange control policies of the Chinese government. There is also no assurance that the RMB will not be subject to devaluation. Any devaluation of the RMB could adversely affect the value of investors investments. There is no guarantee that the hedging strategy will be effective and investors may still be subject to the RMB currency exchange risk. The fund may enter into futures contracts and currency forward contracts for hedging and investment purposes. Given the leverage effect embedded in futures and currency forward contracts, the fund may be exposed to significant losses. Investors should not make an investment decision based solely on this material. Fund Performance Morningstar Overall Rating % YTD Year 3 Years 5 Years Since Launch A USD (Acc) A USD (Dis) H HKD (Dis) A AUD Hgd (Dis) # N/A ^ N/A N/A A RMB Hgd (Dis) # N/A ^ N/A N/A # Hgd = Hedged Source: Lipper, as at 3 October 207. A USD (Acc) and A USD (Dis) were launched on 28 August H HKD (Dis) was launched on June 20. A AUD Hgd (Dis) and A RMB Hgd (Dis) were launched on 30 May 204. Performance is calculated in the respective class of denominated currencies on a NAV to NAV basis. Gross income is re-invested. HKD/USD based investors are exposed to foreign exchange fluctuations. Past performance is not indicative of future performance. ^ Since launch till 3 December of the same year. Portfolio Recap & Strategy Market Review The fund added high-yield exposure in the energy and commodities sectors as well as the Chinese consumer and retail sectors. Meanwhile, the fund trimmed some weaker credit in the Indonesian property sector from its portfolio amid weak sales contract figures. The fund reduced its position in Indonesian rupiah bonds. China s onshore and offshore bond markets remained our top pick within Asian local currency bond markets. Indicative Deposit Rate Latest Month Previous Month Dividend Yield BofA Merrill Lynch Asian Dollar High Yield Corporate Index 6.% 6.2% Source: Bloomberg. Latest month: as at 3 October 207; previous month: as at 30 tember 207 Key Economic Indicators GDP (YoY) CPI (YoY) PMI 207 Jun 207 Oct Oct China 6.8% 6.9%.9%.6% U.S. 2.3% 2.2% 2.0% 2.2% Source: Bloomberg, as at respective month end. Market Commentary The momentum of the Asian local bond market has softened for two consecutive months due to weaker local currencies and rising local yields as the U.S. dollar strengthened and U.S. Treasury yields increased. After two months of strong performances following rate cuts, Indonesian local bonds corrected in October and recorded their worst performance this year. Philippine local bonds also underperformed other markets due to the depreciation of the peso. Meanwhile, Indian local bonds outperformed during the month due to the appreciation of the rupee as a result of strong capital inflows. Despite the rising yield environment and the strong performance of the Asian high-yield bond market year-to-date, we continue to be positive on this asset class due to ) consistent inflows into the Asian high-yield bond market, 2) low correlation with rising interest rates, and 3) improving credit quality for certain high-yield issuers. Source: 207 Morningstar. All Rights Reserved. Data as of 3 October 207. The rating is for A USD (Dis). Outlook and Strategy on Asia I Global Funds 4

6 BEA Union Investment Asia Pacific Multi Income Fund ( APM ) as at 3 October 207 BEA Union Investment Asia Pacific Multi Income Fund seeks to achieve income and long-term capital growth by investing in an actively managed portfolio of debt securities, listed REITs, and other listed securities in the Asia Pacific region. The fund invests in emerging markets and may be subject to higher liquidity and volatility risks. The fund invests directly in listed REITs, equities and managed funds, and is thus subject to the risks generally associated with such asset classes, including but not limited to liquidity of the asset class, changes in investment sentiment, political environment, economic, business and social conditions in local and global marketplace. The fund may invest in lower-rated fixed income instruments, including below investment grade and non-rated debt securities, which are subject to greater credit and liquidity risks than higher-rated securities. The manager may at its discretion make distributions from income and/or capital in respect of the distributing classes of the fund. Investors should note that the distributions paid out of capital amount to a return or withdrawal of part of the unitholder s original investment or from any capital gains attributable to that original investment. Such distribution may result in an immediate reduction of the net asset value per unit. In terms of currency hedged class units, adverse exchange rate fluctuations between the base currency of the fund and the class currency of the currency hedged class units may result in a decrease in return and/or loss of capital for unitholders. Over-hedged or under-hedged positions may arise and there can be no assurance that these currency hedged class units will be hedged at all times or that the manager will be successful in employing the hedge. Investors may invest in RMB (Hedged) units. It should be noted that the RMB is currently not a freely convertible currency as it is subject to foreign exchange control policies of the Chinese government. There is also no assurance that the RMB will not be subject to devaluation. Any devaluation of the RMB could adversely affect the value of investors investments. There is no guarantee that the hedging strategy will be effective and investors may still be subject to the RMB currency exchange risk. The fund may enter into futures contracts for hedging and investment purposes. Given the leverage effect embedded in futures contracts, the fund may be exposed to significant losses. Investors should not make an investment decision based solely on this material. Fund Performance Morningstar Overall Rating % YTD Year 3 Years 5 Years Since Launch A USD (Dis) ^ A HKD (Dis) ^ A USD (Acc) ^ A AUD Hgd (Dis) # N/A ^ N/A N/A A RMB Hgd (Dis) # N/A ^ N/A N/A A NZD Hgd (Dis) # N/A N/A ^ N/A N/A # Hgd = Hedged Source: Lipper, as at 3 October 207. A USD (Dis) and A HKD (Dis) were launched on May 202, A USD (Acc) was launched on 28 tember 202. A AUD Hgd (Dis) and A RMB Hgd (Dis) were launched on 30 May 204. A NZD Hgd (Dis) was launched on 2 December 204. Performance is calculated in the respective class of denominated currencies on a NAV to NAV basis. Gross income is re-invested. HKD/ USD based investors are exposed to foreign exchange fluctuations. Past performance is not indicative of future performance. ^ Since launch till 3 December of the same year. Portfolio Recap & Strategy The fund added high-yield exposure in the energy and commodities sectors as well as the Chinese consumer and retail sectors. Meanwhile, the fund trimmed some weaker credit in the Indonesian property sector from its portfolio amid weak sales contract figures. The fund reduced its position in Indonesian rupiah bonds. China s onshore and offshore bond markets remained our top pick within Asian local currency bond markets. In terms of equity investment, the fund tactically trimmed positions in weaker performing names and rotated into higher-yielding names in Australia and Singapore. It also tactically took profits on some outperforming positions. Market Review Indicative Dividend Yield Latest Month Previous Month Dividend Yield of JACI Non-Investment Grade Index 6.6% 6.6% Dividend Yield of Hang Seng Index 3.% 3.2% Dividend Yield of Bloomberg Asia REIT Index 4.6% 4.7% Source: Bloomberg. Latest month: as at 3 October 207; previous month: as at 30 tember 207. Market Commentary Key Economic Indicators GDP (YoY) CPI (YoY) PMI Imports (YoY) Exports (YoY) 207 Jun Source: Bloomberg, as at respective month end. Aug 207 Oct Aug Aug 207 China 6.8% 6.9%.6%.8% % 3.2% 8.0% 5.% Hong Kong 3.6% 3.9%.4%.9% % 7.7% 9.4% 7.4% Singapore 4.6% 2.9% 0.4% 0.4% % 5.8% 3.8% 5.% Despite the rising yield environment and the strong performance of the Asian high-yield bond market year-to-date, we continue to be positive on this asset class due to ) consistent inflows into the Asian high-yield bond market, 2) low correlation with rising interest rates, and 3) improving credit quality for certain high-yield issuers. Source: 207 Morningstar. All Rights Reserved. Data as of 3 October 207. The rating is for A USD (Acc). 5 Outlook and Strategy on Asia I Global Funds

7 Fund Details BEA Union Investment Global Flexi Allocation Fund Unit Class A USD (Dis) A HKD (Dis) Launch Date 27 Jan Jan 206 Minimum Investment Amount Dividend Frequency Record Date Ex-Dividend Date HK$0,000 Monthly (aims to provide a monthly dividend, dividend is not guaranteed and distributions may be paid out of income and/or capital 2 ) 4 th day of every month One business day after Record Date ISIN HK HK Bloomberg BUGFAUD HK BUGFAHD HK Base Currency US$ Management Fee.50% p.a. Preliminary Charge Up to 5.00% Realisation Charge Currently waived Dealing Frequency Daily (HK business days) BEA Union Investment Asia Pacific Flexi Allocation Fund Unit Class A USD (Dis) A HKD (Dis) A AUD Hdg A NZD Hdg A RMB Hgd A USD (Acc) Launch Date 6 Feb Feb Feb Feb Feb Feb 205 Minimum Investment Amount Dividend Frequency HK$0,000 or or or Monthly (aims to provide a monthly dividend, dividend is not guaranteed and distributions may be paid out of income and/or capital 2 ) Record Date 4 th day of every month Ex-Dividend Date One business day after Record Date ISIN HK HK HK HK HK HK Bloomberg BEAPAUI HK BEAPAHI HK BEAPAUH HK BEAPANH HK BEAFARH HK BEAPAUA HK Base Currency US$ Management Fee.50% p.a. Preliminary Charge Up to 5.00% Realisation Charge Currently waived Dealing Frequency Daily (HK business days) * Hgd : Hedged If such day is not a Business Day, the Record Date will be the immediately preceding Business Day. 2 Dividend only applies to distributing classes and is not guaranteed. The manager may at its discretion make distributions from income and/or capital in respect of the distributing classes of the fund. Investors should note that the distributions paid out of capital amount to a return or withdrawal of part of the unitholder s original investment or from any capital gains attributable to that original investment. Such distribution may result in an immediate reduction of the net asset value per unit. Outlook and Strategy on Asia I Global Funds 6

8 Fund Details BEA Union Investment Asian Bond and Currency Fund Unit Class A USD (Dis) H HKD (Dis) A AUD Hdg A RMB Hgd A USD (Acc) Launch Date 28 Aug 2008 Jun May May Aug 2008 Minimum Investment Amount HK$0,000 or or Dividend Frequency Monthly (aims to provide a monthly dividend, dividend is not guaranteed and distributions may be paid out of income and/or capital 2 ) Record Date 4 th day of every month Ex-Dividend Date One business day after Record Date ISIN HK HK HK HK HK Bloomberg BEABCAI HK BEABCHD HK BEAAUHD HK BEARMHD HK BEABCAA HK Base Currency US$ Management Fee.20% p.a. (With Effect from November 207) Preliminary Charge Up to 5.00% Realisation Charge Currently waived Dealing Frequency Daily (HK business days) BEA Union Investment Asia Pacific Multi Income Fund A AUD Hgd A NZD Hgd A RMB Hgd Unit Class A USD (Dis) A HKD (Dis) A USD (Acc) Launch Date May 202 May May Dec May Minimum Investment Amount HK$0,000 or or or Dividend Frequency Monthly (aims to provide a monthly dividend, dividend is not guaranteed and distributions may be paid out of income and/or capital 2 ) Record Date 4 th day of every month Ex-Dividend Date One business day after Record Date ISIN HK HK HK HK HK HK Bloomberg BEAPMIU HK BEAPMIH HK BEAPAAH HK BEANZDH HK BEAPARH HK BEAPUAA HK Base Currency US$ Management Fee.40% p.a. (With Effect from November 207) Preliminary Charge Up to 5.00% Realisation Charge Currently waived Dealing Frequency Daily (HK business days) * Hgd : Hedged If such day is not a Business Day, the Record Date will be the immediately preceding Business Day. 2 Dividend only applies to distributing classes and is not guaranteed. The manager may at its discretion make distributions from income and/or capital in respect of the distributing classes of the fund. Investors should note that the distributions paid out of capital amount to a return or withdrawal of part of the unitholder s original investment or from any capital gains attributable to that original investment. Such distribution may result in an immediate reduction of the net asset value per unit. If you would like to subscribe other marketing materials of the funds, please feel free to register as a member of BEA Union Investment at this link: Investments in the fund(s) are subject to investment risks, including the possible loss of the principal amount invested. For full details and risk factors of the fund(s), please refer to the explanatory memorandum of the fund(s). Investors should also read the explanatory memorandum of the fund(s) for detailed information prior to any subscription. The information contained herein is only a brief introduction to the fund(s). Investors should be aware that the price of units may go down as well as up as the investments of the fund(s) are subject to market fluctuations and to the risks inherent in all investments. Past performance is not indicative of future performance. The information contained in this document is based upon information which BEA Union Investment Management Limited considers reliable and is provided on an as is basis. The fund(s) have been authorized by the Securities and Futures Commission ( SFC ) in Hong Kong. SFC authorisation is not a recommendation or endorsement of a scheme nor does it guarantee the commercial merits of a scheme or its performance. It does not mean the scheme is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors. This material and website have not been reviewed by the SFC in Hong Kong. Issuer: BEA Union Investment Management Limited Retail Hotline: (852)