Undiscovered global leaders in Asia Emily Whiting, Investment Specialist, EMAP Equities PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Not your father s Emerging Markets What is behind Trump s protectionist agenda in emerging markets 1. Low cost wages in Mexico 2. Made in China 2025 3. Currency manipulation 4. Bad trade deals Image source: Shutterstock 1 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
1% in MSCI Emerging Markets Index is misleading China A-share inclusion in the MSCI EM Index First inclusion step: May 2018 Second inclusion step: Aug 2018 (5% inclusion factor for 234 A-shares) China Weight 30.2% China 29.5 China A 0.7 By 2025* (10\0% inclusion factor for 234 A-shares) China Weight 39.3% China 25.6 China A 13.7 China A-shares will drive Emerging Markets in the future Source: MSCI Consultation on China A-Shares Potential Inclusion, June 2017. Citi Research. *Based on free float market-cap of 234 A-share stocks to be included, and a 30% upper limit of foreign ownership. EM = Emerging Markets 2 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
China A-shares: large, liquid, inefficient and lowly correlated 3,467 A-shares USD67bn Daily Traded Value In 2017 2.1% Foreign ownership 0.19 *Correlation to MSCI Europe Source: J.P. Morgan Asset Management, Bloomberg. Data as of as of 31 December 2017 Source: Bloomberg. *Correlations of Weekly Returns in USD (31 March 2008 to 30 March 2018) Indices do not include fees or operating expenses and are not available for actual investment. 3 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
You re probably already thinking about Market cap Home appliances Whirlpool Beverages Diageo Dairy products Danone USD 12bn USD 90bn USD 57bn Midea Group Kweichou Moutai Inner Mongolia Yili USD 60bn USD 146bn USD 32bn Source: Bloomberg, Company Accounts, J.P. Morgan Asset Management. Data as of 31 December 2017. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. The use of their logos is in no way an endorsement of those companies by J.P. Morgan Asset Management nor is it intended to indicate an endorsement of J.P. Morgan Asset Management by those companies. 4 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
but the opportunities lie in the next wave Consumption upgrade n Leisure, travel & entertainment Healthcare n Chinese healthcare Consumption Upgrade Healthcare Technology Technology n Artificial intelligence and voice recognition Image source: Shutterstock 5 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
iflytek: a leading voice recognition and artificial intelligence solution provider Technology Image source: Shutterstock, The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 6 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
The rise of Generation - Z Consumption Upgrade In 2014, Gen Z ers consumed 35% of online video, by 2020, what % will they consume? 1. 48% 2. 67% 3. 82% Source: iresearch, Bank of America Merrill Lynch (BofAML) Equity Research. Data as of May 2018. Image source: Shutterstock. 7 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Increasing spending power of Gen-Z in China s online entertainment market Consumption Upgrade Generation Z s market share contribution (%) 80 2014 2020E 70 60 62 67 66 56 50 46 46 40 35 30 20 22 10 0 Online entertainment Online video Mobile games Live broadcasting Source: iresearch, BofAML Equity Research. Data as of end May 2018 8 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
AfreecaTV: riding the e-sports wave Consumption Upgrade Image source: Shutterstock, The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 9 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Huazhu Group: will this be the world s biggest hotel company? Consumption Upgrade Image source: Shutterstock, The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 10 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Shenzhou: opportunities exist outside the new economy Consumption Upgrade Image source: Shutterstoc. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. k 11 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Wuxi Bio: following the molecule to become a global leader Healthcare Image source: Shutterstock. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 12 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Finding global leaders before they list How many start-ups have reached unicorn status in China since 2013? 1. 9 2. 12 3. 60 4. 127 Source:. Unicorns Abroad: The creation of billion-dollar start-ups is shifting out of the US, October 2017; Image source: Shutterstock 13 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Finding global leaders before they list How many start-ups have reached unicorn status in China since 2013? 1. 9 2. 12 3. 60 4. 127 Source: Unicorns Abroad: The creation of billion-dollar start-ups is shifting out of the US, October 2017. Image source: Shutterstock 14 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Who are these unicorns? Top 10 Unicorns, February 2018 Company Latest Valuation Company Latest Valuation Ant Financial $150 billion Apr-18 SpaceX $21 billion Jul-17 Uber $68 billion Jun-16 WeWork $20 billion Jul-17 Didi Chuxing $56 billion Dec-17 Palantir $20 billion Oct-15 Airbnb $31 billion Mar-17 Spotify $19 billion Dec-17 Meituan-Dianping $30 billion Oct-17 Lufax $18 billion Jan-16 Source: Unicorns Abroad: The Creation Of Billion-Dollar Startups Is Shifting Out Of The US (link) October 2017. Image source: Shutterstock. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 15 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
FinTech unicorns Insert Chris Birney video 16 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Where are all the unicorns in India? Key players along with key investors n Walmart n Microsoft n Tiger Global n Tencent n SoftBank n Alibaba n SAIF Partners n n SoftBank Tencent Sources: Company data, Economic Times. VC Circle. Inc42.com. Crunchbase. Company data. Morgan Stanley Research. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. The use of their logos is in no way an endorsement of those companies by J.P. Morgan Asset Management nor is it intended to indicate an endorsement of J.P. Morgan Asset Management by those companies. 17 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
Deep fundamental research is key to unearthing new opportunities 97 8 21 investment professionals locations languages $150m *research budget across equities 17 analysts covering China A shares Source: J.P. Morgan Asset Management as of 31 August 2018. *as of 30 th June 2018 18 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
51Job: Insert Dong video 19 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
JPM Asia Growth Fund High conviction, concentrated Quality growth tilt Top quartile over 1 and 3 years All-cap exposure PM team based in Asia Mark Davids Joanna Kwok @ JPM for 21 years @ JPM for 16 years Tapping into the consumer of tomorrow Strong risk adjusted returns Past performance is not a reliable indicator of current and future results. 20 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
In summary n The investment universe is rapidly evolving n You need to think forward and be ahead of the curve n to do that you need deep fundamental research 21 PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION
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