Macro Environment. By China Asset Management (Hong Kong) Limited

Transcription

1 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. Macro Environment January 2015 By China Asset Management (Hong Kong) Limited 1

2 This material is only intended for the internal use of the distributor(s) for information and training purposes, or for the use of Professional Investor (defined under the Securities and Futures Ordinance), and should not be distributed to any other end investors.. Macro Environment China s economy is entering into a new normal GDP growth is expected to stabilize at around 7% in this year. (%) 16 China s GDP YoY Growth* *Source: Bloomberg, as of September 30, January 2015 By China Asset Management (Hong Kong) Limited 2

3 This material is only intended for the internal use of the distributor(s) for information and training purposes, or for the use of Professional Investor (defined under the Securities and Futures Ordinance), and should not be distributed to any other end investors.. Macro Environment Inflation is Not a Big Concern in 2015 Price pressures will be remained under control in the second half of the year (%) 7.00 Consumer Price Index YoY Growth* (%) Producer Price Index YoY Growth* / / / / / / / / / / /01 *Source: Bloomberg, as of January 2015 January 2015 By China Asset Management (Hong Kong) Limited 3

4 This material is only intended for the internal use of the distributor(s) for information and training purposes, or for the use of Professional Investor (defined under the Securities and Futures Ordinance), and should not be distributed to any other end investors.. Macro Environment Yield Trend PBOC cut interest rates in last November the first time since % China Government 5yr Bond Yield* 4.40% 4.20% 4.00% 3.80% 3.60% 3.40% 3.20% *Source: Bloomberg, as of January 2015 January 2015 By China Asset Management (Hong Kong) Limited 4

5 This material is only intended for the internal use of the distributor(s) for information and training purposes, or for the use of Professional Investor (defined under the Securities and Futures Ordinance), and should not be distributed to any other end investors.. Macro Environment Tight Liquidity is Unlikely to Happen Again China s monetary policy will remain neutrally loose. But when liquidity is tight, it is expected the central bank will inject liquidity to the market (%) Interbank 7-day Repo Rate* / / / / /2014 *Source: Bloomberg, as of December 31, 2014 January 2015 By China Asset Management (Hong Kong) Limited 5

6 This material is only intended for the internal use of the distributor(s) for information and training purposes, or for the use of Professional Investor (defined under the Securities and Futures Ordinance), and should not be distributed to any other end investors.. Macro Environment RMB stabilizing Initiatives including RMB internationalization indicates more confidence for currency normalization. Major international currencies such as USD and EUR are at risk of losing investors confidence. RMB might emerge as an important alternative for store of value. (USD/CNY) USD/CNY Fixing* Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 *Source: Bloomberg, as of January 2015 January 2015 By China Asset Management (Hong Kong) Limited 6

7 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Shares as an Asset Class January 2015 By China Asset Management (Hong Kong) Limited 7

8 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Share as an Asset Class A comparison of China A share with global stock markets * * Market Cap to GDP (2013) * Turnover to market cap (2013) * *Source: Federation of World January 2015 By China Asset Management (Hong Kong) Limited 8

9 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Shares as an Asset Class Economic and Market Outlook Valuation Still at the lower end of historical level Re-rating opportunities seen in H-shares 1-year Forward P/E* Hang Seng China AH Premium index* MSCI China CSI *Source: Bloomberg, as of end of Dec 2014 January 2015 By China Asset Management (Hong Kong) Limited 9

10 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Share as an Asset Class Capital Market Develop at a Rapid Speed A-Shares has grown into one of the top 3 largest markets by total market capitalization; By the end of November 2014, A-Shares surpassed Japanese stocks and became the 2 nd largest market Yet to recover from 2008 financial crisis Momentum picked up strongly since 2Q14 triggered by economic stabilization and stimulus policies USD Trillion Market Capitalization* 120% 100% 80% 60% Performance of Major Global Indices* S&P 500 Stoxx 50 HSI CSI % 15 20% 10 0% % - US A-Shares Japan HK UK France -40% *Source: Bloomberg, as of November 28, 2014 January 2015 By China Asset Management (Hong Kong) Limited 10

11 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. Why China A-Share as an Asset Class? The Most Important Equity Market of the China Economy China Equity Markets at a glance*: Share Class Cap (USD million) Estimated Float Market Cap (USD million) Share Class Cap as % of 2013 GDP Estimated Float Market Cap as % of 2013 GDP A-shares 6,076,337 2,764, % 30.10% B-shares 27,706 22, % 0.30% H-shares 785, , % 5.70% Red Chips 709, , % 2.80% ADRs (primary listing) 405,053 81, % 0.90% Singapore 19, % 0.10% *Source: Factset, Goldman Sachs Research, January 2015 January 2015 By China Asset Management (Hong Kong) Limited 11

12 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Shares as an Asset Class Market Liberalization - QFII & RQFII Pilot Program Dec 2014: Development of total RQFII Quota Dec 2011: RMB 20 Bil* Apr 2012: RMB 70 Bil* Nov 2012: RMB 270 Bil* Oct 2013: RMB 400 Bil* RMB 690 Bil* HK: RMB 270 Bil* Others: RMB 420 Bil* USD Bil 70,000 60,000 50,000 Aproved RQFII Quota Aproved QFII Quota 40,000 30,000 20,000 10, (Sep) Development of total QFII Quota Dec 2002: USD 20 Bil* Dec 2007: USD 30 Bil* Apr 2012: USD 80 Bil* Jul 2013 Dec 2014: USD 150 Bil* *Source: SAFE and CSRC, data as of Dec, 2014 January 2015 By China Asset Management (Hong Kong) Limited 12

13 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Shares as an Asset Class Market Liberalization - Increasing International Participation Increase in foreign fund inflows More balanced investor structure: Currently dominated by domestic legal person institutions and individuals Globalized investment style driven by sophisticated foreign investors Turnover Profile* Shareholder Profile* Individuals Industrial Capital 100% 90% 80% 70% 60% 11% 11% 11% 13% 13% 15% 4% 4% 4% 2% 3% 4% Individuals Murual Mutual funds 12% 4% 1% 2% 50% 40% 30% 20% 86% 85% 85% 85% 84% 81% Insurance QFII 81% 10% 0% Ohters Other *Source: Wind, CICC Research January 2015 By China Asset Management (Hong Kong) Limited 13

14 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Shares as an Asset Class Market Liberalization - Limitations of SH-HK Connect Northbound : Investment Universe Eligible A-Shares SSE180, SSE380 Index constituents, A shares of companies listed on both SSE and SEHK Quota Aggregate Quota Daily Quota Used Quota RMB 300 Bil RMB 13 Bil RMB 82 Bil* Trading Rules Currency Day trades Block trades RMB Not allowed Not allowed Source: Bloomberg, as of Jan 15, 2015 January 2015 By China Asset Management (Hong Kong) Limited 14

15 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Shares as an Asset Class China A-Share Inclusion Illustrative Index Inclusion Roadmap of China A Shares*: * *Source: MSCI. Data as of October 18, 2013 based on the pro forma results of November 2013 SAIR January 2015 By China Asset Management (Hong Kong) Limited 15

16 Opportunities and Concerns January 2015 By China Asset Management (Hong Kong) Limited 16

17 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. Old Economy vs New Economy -Enormous Potential for New Economies Old economy sectors currently account for much higher proportions of total market cap in A-share/HK markets than compared to other major markets 100% 90% 80% 70% 60% 50% 40% 30% 20% Consumer Discretionary Consumer Staples Health Care Information Technology Telecommunication Services Utilities Financials Energy Materials Industrials 10% 0% CSI 300 Index Heng Seng Index S&P 500 Index KOSPI Index NKY Index Source: Bloomberg, as of December, 2014 January 2015 By China Asset Management (Hong Kong) Limited 17

18 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. Thematic Outlook -SOE Reform Mixed ownership structure: Opening up monopoly industries to private and foreign capital Enhance corporate governance and management incentive Improve profitability and shareholder return Industrial Enterprises: Estimated ROE Comparison* Financials Oil & Gas Telecom SOE Reform Power Military *Source: CEIC, CLSA Past performance is not indicative of future performance. January 2015 By China Asset Management (Hong Kong) Limited 18

19 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. Thematic Outlook One Belt, One Road Last year President Xi announced the plan for the Silk Road Economic Belt (One Belt) and the 21st Century Maritime Silk Road (One Road) The initiative clarifies the going out direction of China and foreign investment is expected to reach USD 1.25 trillion* in 10 years. In short-term, it will address the over-capacity in manufacturing sector and the excess foreign reserve, while in long term it will ensure China can sustain its high economic growth rate in the next 10 years Illustration of the One Belt, One Road *Source: Goldman Sachs Global Investment Research, Gao Hua Securities Research, as of Dec 2014 January

20 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. Thematic Outlook E-commerce E-commerce GMV is expected to reach Rmb2,585 bn* in 2014, or 9.7%* of retail sales. It is expected to grow to 13.4%* of total retail sales in E-commerce users are estimated to reach 368 mn* in With leading companies' mobile GMV approaching 50%**, mobile will surpass PC to become the default starting point of purchase. Total Online Sales and Penetration Rate* Mobile E-commerce GMV ** RMB Bil 4,000 Online Shopping in China 14% 3,500 3,000 2,500 2,000 1,500 1, Online Shopping Penetration 12% 10% 8% 6% 4% 2% 0% *Source: Alibaba Group Holding Limited; Online shopping penetration rate is online shopping as % of total consumption **i-research, CS January 2015 By China Asset Management (Hong Kong) Limited 20

21 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. Thematic Outlook Financials The interest rate cut in November 2014 signaled that we have entered into a rate-cut cycle Positive on rate sensitive sub-sectors especially insurance and brokerage 12 (%) China Benchmark Interest Rates* 25 (%) China Required Deposit Reserve Ratio for Major Banks* 1-year benchmark lending rate 10 1-year benchmark deposit rate Source: Bloomberg, as of Dec 2014 January 2015 By China Asset Management (Hong Kong) Limited 21

22 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. Appendix January 2015 By China Asset Management (Hong Kong) Limited 22

23 This material is only intended for the internal use of the distributors of the Fund, and should not be distributed to any end investors. China A-Shares as an Asset Class Market Liberalization - Shanghai-Hong Kong Stock Connect Implications: Valuation convergence between A- Shares and H-Shares Increase in foreign fund inflows and more balanced investor structure Globalized investment style driven by sophisticated foreign investors January 2015 By China Asset Management (Hong Kong) Limited 23

24 This material is only intended for the internal use of the distributor(s) for information and training purposes, or for the use of Professional Investor (defined under the Securities and Futures Ordinance), and should not be distributed to any other end investors.. China A-Shares as an Asset Class Market Liberalization - QFII & RQFII Pilot Program RQFII QFII Eligible applicants Financial institutions which fulfill qualification requirements of CSRC and domestic regulators Commercial banks, securities companies, fund management companies, insurance companies and other financial institutions Currency RMB (No onshore FX conversion required) USD (Onshore FX conversion required) Quota limit RMB 270 billion (Hong Kong) USD 150 billion Lock-up period Open ended fund: Not applicable Non open ended fund: 1 Year Open ended fund: 3 months Non open ended fund: 1 Year Injection and repatriation Investment restrictions quota allocation Investment Scope Open Ended Fund: Daily Non open ended fund: Monthly No restrictions, at RQFII s discretion Open Ended Fund: Weekly Non open ended fund: Monthly At least 50% investment quota has to invest in onshore equities (A shares) At most 20% investment quota can be invested in cash and cash equivalents Including equities, bonds, funds, warrants, IPOs, bond issuance and index futures Source: CSRC, SAFE, HSBC, Citibank January 2015 By China Asset Management (Hong Kong) Limited 24

25 Breaching the Wall: Access to Onshore China Market Vectors ChinaAMC A-Share ETF Market Vectors ChinaAMC SME-ChiNext ETF

26 Market Vectors ChinaAMC A-Share ETF (PEK)

27 Market Vectors ChinaAMC A-Share ETF (PEK) The Market Vectors ChinaAMC A-Share ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the CSI 300 Index (CSIR0300). The Index is a diversified index that consists of the 300 largest and most liquid A-share stocks listed on the Shenzen or Shanghai Stock Exchange. Fund Characteristics As of 12/31/2014 Fund Ticker PEK Intraday NAV Ticker PEK.IV Index Ticker CSIR0300 Commencement Date 10/13/2010 Gross Expense Ratio 1.14% Net Expense Ratio % Exchange NYSE Arca 100% China A-Share Exposure The first U.S.-listed ETF that provides exposure to the China A-Share market A-Share Growth Driven by Domestic Consumption Domestic consumption growth in China is currently the largest in the world Broad and Comprehensive Underlying Index The CSI 300 Index represents approximately 61% of the total market capitalization of China's two stock exchanges as of December 31, 2014 Source: Van Eck Global. Data as of 12/31/2014. See disclaimers at front of presentation. 1 Expenses are capped contractually until 5/1/2015. Cap excludes certain expenses, such as interest. 27

28 Index Methodology: CSI 300 CSI 300 Index (CSIR0300) The Index comprises: A diversified group of small-, mid- and large-capitalization companies typically supported by the local Chinese economy; as the first equity index launched by the two exchanges together, the CSI 300 Index aims to reflect the price fluctuation and performance of the China A-Share market. Companies eligible for inclusion in Index: All companies are ranked by Average Daily Trading Volume for the past year The bottom 50% of companies in the ranking are considered ineligible and removed The remaining companies are ranked by weighted average market capitalization The 300 companies with the highest average daily market capitalization are selected for inclusion Index Provider: China Securities Index Co., Ltd. Source: China Securities Index Co., Ltd. Data as of 12/31/2014. See disclaimers at front of presentation. Index descriptions are found in the Appendix. 28

29 Portfolio Snapshot: PEK Characteristics 1 As of 12/31/2014 Number of Securities 303 Currency USD ($) Price/Earnings Ratio Price/Book Ratio 2.27 Avg. Weighted Market Cap ($M) 35,729.4 Sector Weightings As of 12/31/2014 Financials 43.7% Industrials 14.6% Consumer Discretionary 9.7% Materials 6.9% Consumer Staples 5.4% Health Care 4.8% Information Technology 4.4% Utilities 3.7% Energy 3.5% Unclassified 2.6% Telecommunications Services 0.7% Source: Van Eck Global. Data as of 12/31/ Averages are market weighted. Price/Book Ratio is the price of a security divided by the book value per share of the security. Price/Earnings Ratio is the price of a security divided by the last twelve months earnings per share of the security. The Market Capitalization of an individual, publicly traded company is calculated by multiplying the company s stock price by the total number of its shares outstanding. See disclaimers at front of presentation. 29

30 Top 10 Holdings: PEK Top Holdings (As of 12/31/14) As of 12/31/2014 Ticker Weight (%) Ping An Insurance Group Co of China Ltd CH 4.17% China Minsheng Banking Corp Ltd CH 3.43% China Merchants Bank Co Ltd CH 3.20% CITIC Securities Co Ltd/China CH 3.12% Haitong Securities Co Ltd CH 2.27% Industrial Bank Co Ltd CH 2.20% Shanghai Pudong Development Bank CH 2.05% China Vanke Co Ltd CH 1.57% China State Construction Engineering Co CH 1.28% Bank of Communications Co Ltd CH 1.24% Source: Van Eck Global. Data as of 12/31/2014. See disclaimers at front of presentation These are not recommendations to buy or sell any security.. 30

31 Fund Performance: PEK Performance History (%) As of 12/31/2014 Fund Ticker 1M 3M YTD 1YR 3YR 5 YR LIFE Share Price NAV Expense Ratio 1 Gross Net Index Source: Van Eck Global. Data as of 12/31/ Expenses are capped contractually until 05/1/2015. Cap excludes certain expenses, such as interest. Returns are average annualized total returns, except those for periods of less than one year, which are cumulative. Index returns have been converted to USD. Performance data quoted represents past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect temporary contractual fee waivers and/or expense reimbursements. Had the ETF incurred all expenses and fees, investment returns would have been reduced. Investment returns and ETF share values will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. ETF returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. The "Net Asset Value" (NAV) of a Market Vectors Exchange -Traded Fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF 's intraday trading value. Market Vectors ETF investors should not expect to buy or sell shares at NAV. All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index s performance is not illustrative of the Fund s performance. Indices are not securities in which investments can be made. See disclaimers at front of presentation. 31

32 Market Vectors ChinaAMC SME-ChiNext ETF (CNXT)

33 Market Vectors ChinaAMC SME-ChiNext ETF (CNXT) The Market Vectors ChinaAMC A-Share ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the SME-ChiNext 100 Index (SZ399611). The Index is a diversified index that consists of the 100 largest and most liquid stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange. Fund Characteristics As of 12/31/2014 Fund Ticker CNXT Intraday NAV Ticker CNXT.IV Index Ticker SZ Commencement Date 7/23/2014 Gross Expense Ratio 0.68% Net Expense Ratio % Exchange NYSE Arca Primarily Offers Exposure to Privately Owned Smalland Medium-Sized Enterprises (SMEs) Privately-owned small- and medium-sized enterprises have driven the majority of recent technological innovation and economic growth in China 2 Consumer-Driven, "New Economy" Sector Focus New Economy sectors such as information technology, consumer discretionary and staples, and health care, are well-represented in the Fund's underlying index Source: Van Eck Global. Data as of 12/31/2014. See disclaimers at front of presentation. 1 Expenses are capped contractually until 5/1/2015. Cap excludes certain expenses, such as interest. 2 As of January Source: World Trade Organization. Historically High ROE May Support Growth Potential Since 2011, the Fund s underlying index has had historically high return on equity (ROE) compared to some China A-share small-cap benchmarks, which may support growth 33

34 Index Methodology: SME-ChiNext 100 SME-ChiNext 100 Index (SZ399611) The Index comprises: The 100 largest and most liquid stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange. Companies eligible for inclusion in Index: Must meet listing requirements for inclusion on the SME Board and the ChiNext Board of the Shenzhen Stock Exchange Among other requirements, the SME Board requires issuers to be profitable during the three years prior to its listing with a minimum aggregate net profit of RMB 30 million, whereas a firm is eligible to be listed on ChiNext if it was profitable during the two years previous to an IPO with a minimum aggregate net profit of RMB 10 million Those determined by the Index Provider to reflect the state and structure of the underlying market Index Provider: Shenzhen Securities Information Co, Ltd. Source: Shenzhen Securities Information Co., Ltd. Data as of 12/31/2014. See disclaimers at front of presentation. Index descriptions are found in the Appendix. 34

35 Portfolio Snapshot: CNXT Characteristics As of 12/31/2014 Number of Securities 98 Currency USD ($) Price/Earnings Ratio Price/Book Ratio 4.23 Avg. Weighted Market Cap ($M) 4,614.8 Sector Weightings As of 12/31/2014 Information Technology 27.6% Industrials 17.8% Consumer Discretionary 17.2% Health Care 13.3% Materials 8.8% Consumer Staples 7.3% Financials 6.2% Energy 1.3% Telecommunication Services 0.4% Source: Van Eck Global. Data as of 12/31/ Averages are market weighted. Price/Book Ratio is the price of a security divided by the book value per share of the security. Price/Earnings Ratio is the price of a security divided by the last twelve months earnings per share of the security. The Market Capitalization of an individual, publicly traded company is calculated by multiplying the company s stock price by the total number of its shares outstanding. See disclaimers at front of presentation 35

36 Top 10 Holdings: CNXT Top Holdings (As of 12/31/14) As of 12/31/2014 Ticker Weight Suning Commerce Group Co. Ltd. Class A CH 4.16% Hangzhou Hikvision Digital Technology Co., Ltd Class A CH 3.06% East Money Information Co., Ltd Class A CH 2.54% Xinjiang Goldwind Science & Technology Co., Ltd. Class A CH 2.53% Jiangsu Yanghe Brewery Joint-Stock Co., Ltd. Class A CH 2.37% Huayi Brothers Media Corporation Class A CH 2.37% Jiangsu Kangde Xin Composite Material Co., Ltd. Class A CH 2.34% Beijing OriginWater Technology Co., Ltd. Class A CH 2.20% Siasun Robot & Automation Co., Ltd. Class A CH 2.16% Goertek Inc. Class A CH 1.96% Source: Van Eck Global. Data as of 12/31/2014. See disclaimers at front of presentation. These are not recommendations to buy or sell any security. 36

37 Fund Performance: CNXT Performance History (%) As of 12/31/2014 Fund Ticker 1M 3M YTD 1YR 3YR 5 YR LIFE Share Price NAV Expense Ratio 1 Gross Net Index Source: Van Eck Global. Data as of 12/31/ Expenses are capped contractually until 05/31/2015. Cap excludes certain expenses, such as interest. Returns are average annualized total returns, except those for periods of less than one year, which are cumulative. Index returns have been converted to USD. Performance data quoted represents past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect temporary contractual fee waivers and/or expense reimbursements. Had the ETF incurred all expenses and fees, investment returns would have been reduced. Investment returns and ETF share values will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. ETF returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. The "Net Asset Value" (NAV) of a Market Vectors Exchange-Traded Fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF 's intraday trading value. Market Vectors ETF investors should not expect to buy or sell shares at NAV. All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index s performance is not illustrative of the Fund s performance. Indices are not securities in which investments can be made. See disclaimers at front of presentation. 37