Disruption in Asia Select 2018

Transcription

1 Disruption in Asia Select 2018 Matthew Dobbs, Fund Manager June 2018 Marketing material for professional investors or advisers only. This material is not suitable for retail clients.

2 Chinese retail giant building one-ton delivery drones Tencent Weichat/Weixin over 1 billion monthly users Alibaba Money Market Fund US$230bn bigger than J.P.MorganChase US Government Bond Fund HDFC Bank 14 million PayZapp users half do not have a bank account Go-Jek 100,000,000 transactions per month (4 th quarter 2017) Source: Company information is sourced from the respective company website. Stocks shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. 1

3 Young(ish) men in chinos Pony Ma, CEO of Tencent Jack Ma, Executive Chairman, Alibaba Robin Li, CEO of Baidu 2

4 18 th century fishwives Apr 10, 2018 at 5:55 pm ET Facebook Is an 'Only in America' Story... Right? America-focused lawmakers and globally minded Facebook CEO Mark Zuckerberg don't always see eye-to-eye on the world order When Sen. Dan Sullivan (R., Alaska) said Facebook's meteoric rise from a startup in a dorm room seemed like an "Only in America" story, Mr. Zuckerberg demurred "You couldn't do this in China, right?" Sen. Sullivan asked "Well, senator, there are some very strong Chinese internet companies," Mr. Zuckerberg responded The moment, which Sen. Sullivan said was meant to be a complimentary levity, was lost in translation "Come on, I'm trying to help you," Sen. Sullivan said. "Give me a break; you're in front of a bunch of senators. The answer is yes Lawmakers and the audience laughed Source: April 10,

5 The power of disruption How the value of companies has changed over last 10 years Company MV 2006 (US$bn) MV 2016 (US$bn) % Change Number of employees Sears ,000 JCPenney ,000 Nordstrom ,500 Kohl s ,000 Macy s ,000 Best Buy ,000 Target ,000 Walmart ,100,000 Amazon , ,000 Past performance is not a guide to future performance and may not be repeated. Source: visualcapitalist.com. Yahoo Finance (peak value in 2006), Google Finance (values for December 30, 2016). Securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. 4

6 Demographics - but not as we know it Who are the millennials? Source: Macquarie Research, July

7 US millennials generally still act like their parents Source: CLSA

8 Young Chinese share very little common experience with their parents Source: CLSA

9 Hope Developed Markets middle and lower-middle income families have not benefitted from global growth over the past two decades 1 Global survey results 2 Next year will be better Economic prosperity will improve Happy or unhappy Average of all three vs >55s China India Indonesia Thailand South Korea Hong Kong = United States Germany Japan UK Source: 1 November WIN/GALLUP Annual Global Survey

10 India - the young are in charge Millennials in India are rich compared to their parents and grandparents Index % of working millennials are already the chief wage earners in the family As incomes rise, product/brand loyalty may decrease across categories Total Working Millennials Philippines Malaysia Indonesia China India Thailand S. Korea UK Singapore Australia France USA ,001 25,000 25,001 35,000 More than 35,000 Indexed Millennial Gross Income Gross income of older population (100) Yes No Never Just once or twice A few times Source: Morgan Stanley. April

11 China s young online shoppers are leaving the US in their trail China and USA online retail sales % China online shopper by age 45% 40% 35% 30% 25% 20% 15% 10% 5% % 19 to to to or above USA online retail sales as % of total retail sales China online retail sales as % of total retail sales China online shopper by age 2015 Source: CLSA, Euromonitor, iresearch, US Department of Commerce, October

12 Astonishing pace of change Would you be interested in an automated driving function in 90% of everyday situations? USA China < > 56 (Age range) Yes No 0 < > 56 (Age range) Yes No Source: CB Insights, Roland Berger, September

13 Build - and they will come Regional internet penetration Internet users, millions 1000 Internet penetration 100% % % % % 0 East Asia South Asia Africa West Europe North America East Europe Southeast Europe South America Middle East Central America Oceania Central Asia 0% Internet Users (M) Internet penetration (%), rhs Source: ITU, InternetWorldStates, UN, US Census Bureau, wearesocial.com, Macquarie Research, July Regions shown are for illustrative purposes only and are not a recommendation to buy or sell. 12

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15 Brains vs. brawn R&D spending as a % of GDP 1 Number of patents filed 2 Share of global patents filed Korea 2.3% 3.3% 3.7% Japan 3.0% 3.4% 3.4% Taiwan 2.0% 2.8% 3.1% US 2.8% 2.8% 2.8% Germany 2.5% 2.6% 2.8% France 2.2% 2.0% 2.3% Singapore 1.5% 2.3% 2.2% Australia 1.6% 2.2% 2.2% China 0.9% 1.5% 2.0% Canada 1.9% 1.8% 1.9% UK 1.8% 1.9% 1.8% Spain 0.9% 1.4% 1.3% Italy 1.1% 1.2% 1.3% Russia 1.1% 1.0% 1.3% Brazil 1.0% 1.1% 1.2% India 0.8% 0.9% 0.9% Hong Kong 0.5% 0.7% 0.8% South Africa 0.8% 0.9% 1.0% Turkey 0.5% 0.7% 0.9% Malaysia 0.5% 0.7% 0.8% Mexico 0.4% 0.4% 0.5% Thailand 0.3% 0.3% 0.3% Egypt 0.2% 0.2% 0.1% Philippines 0.1% 0.1% 0.1% Indonesia 0.1% 0.1% 0.1% (Thousands) Dec 85 Dec 88 Dec 91 Dec 94 Dec 97 Americas Japan Eastern Europe Middle East and Africa Dec 00 Dec 03 Dec 06 Dec 09 APAC ex. Japan EU LATAM Dec 12 (%) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Dec 85 Dec 88 Dec 91 Dec 94 Americas Japan Eastern Europe Middle East and Africa Dec 97 Dec 00 Dec 03 Dec 06 Dec 09 APAC ex. Japan EU LATAM Dec 12 Source: 1 World Bank, OECD, Macquarie Research, April Patsnap, February Regions shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. 14

16 Who needs Trump? Increasing numbers of Chinese students returning home 1 Increasing numbers of Chinese students returning home 2 440, , , , , , , , , , Chinese students returning home Source: 1 Thomson Reuters Datastream 2 Global Times, CLSA, May 21,

17 We re after you 2017 investing: China catches up to the US in VC funding United States $74B invested +5,300 deals 17% YoY Europe $18B invested +2,400 deals 40% YoY China $71B invested +2,800 deals 50% YoY Source: CLSA Research, PWC CB Insights Money Tree Report Q4, May 21,

18 The challenge to California Artificial Intelligence Research (%) Chinese Authors of Research as % of Total Citations for Chinese Research as % of total Source: Best of AI Journals and Conferences. Keith Woolcock 5 th Column 17

19 Asia s growing role in the world markets China s unicorns Company Valuation, US$bn Headquarters Industry Ant Financial 75 Hangzhou Internet Finance Didi Chuxing 54 Beijing Auto & Transportation Xiaomi Inc 46 Beijing Industrial & Manufacturing Aliyun 39 Hangzhou Cloud Services Meituan-Dianping 30 Beijing Ecommerce Contemporary Amperex Technology (CATL) 20 Ningde New energy vehicles Jinri Toutiao 20 Beijing New media Cainiao Network 20 Hangzhou Logistics Lufax 18.5 Shanghai Internet Finance Jiedaibao 10.7 Beijing Internet Finance Source: CLSA. April Securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. 18

20 You may be hearing more about them Eric Jing, CEO of Ant Financial Cheng Wei, CEO of Didi Chuxing Lei Jun, CEO of xiaomi inc 19

21 Grey chaps in suits Wang Qishan Liu He 20

22 Stimulus definitely on the wane in China Banks' claim on NBFI*, RMB trn Credit growth vs nominal GDP* growth 40% 30% 20% 10% 0% Banks' claim on NBFI Growth rate, yoy, RHS Gap Total credit growth Nominal GDP growth Source: TS Lombard. February *Non Bank Financial Institutions (NBFI), Gross Domestic Product (GDP) Countries mentioned are for illustrative purposes only and are not a recommendation to buy or sell. 21

23 What might support the Chinese economy? China working age population China real wages versus productivity 20% 15% 10% 5% 0% -5% -10% Projected 14% 13% 12% 11% 10% 9% 8% 7% 6% -15% % Working age population (15-59), 5y% chg China productivity growth (%, yoy) China real wage growth (%, yoy) Source: Credit Suisse, January Countries mentioned are for illustrative purposes only and are not a recommendation to buy or sell. The forecast should be regarded as illustrative of trends. Actual figures will differ from forecasts. Please refer to the important information slide at the end of this presentation. 22

24 Summary The new phase Attractive stage in capital cycle The new era Disruption/Demographics/Inno vation Risks Global growth, China s tricky adjustment, US strategic thrust Perhaps the active stock picker has a future Source: Schroders 23

25 Thank you

26 Disclaimer For professional investors and advisers only. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested Schroders has expressed its own views and these may change. The data contained in this document has been sourced by Schroders and should be independently verified before further publication or use. This presentation is intended to be for information purposes only and it is not intended as promotional material in any respect The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Unit Trusts Limited (Schroders) does not warrant its completeness or accuracy. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any changes to our assumptions or forecasts. Forecasts and assumptions may be affected by external economic or other factors Issued in June 2018 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No England. Authorised and regulated by the Financial Conduct Authority. ASI