PARVEST EQUITY ASIA EX-JAPAN SMALL CAP MONTHLY REPORT - FOR PROFESSIONAL INVESTORS 31/08/2017 PERFORMANCE OVERVIEW Performance at the end of August 2017 August Last 3M YTD Last Last Last Last Since (Gross of fees - %) 12M 24M* 36M* 60M* inc.,** Parv est Equity Asia Ex -Japan Small Cap 0.06 2.67 18.68 9.50 12.63 4.90 8.89 5.89 MSCI AC Asia Ex-Japan Small caps (NR) 1.26 4.66 20.80 13.60 11.97 1.71 6.41 7.09 Excess return -1.20-1.98-2.12-4.09 0.66 3.19 2.47-1.20 Performance History (%) - Full year 2016 2015 2014 2013 2012 Parv est Equity Asia Ex -Japan Small Cap 0.76-1.04 16.87-1.92 22.85 MSCI AC Asia Ex-Japan Small caps (NR) 1.77-8.75 4.66 2.83 22.26 Excess return -1.01 7.71 12.22-4.75 0.59 Performance History (%) - August to August 2016-17 2015-16 2014-15 2013-14 2012-13 Parv est Equity Asia Ex -Japan Small Cap 9.50 15.84-8.97 31.95 0.47 MSCI AC Asia Ex-Japan Small caps (NR) 13.60 10.36-16.06 21.24 6.96 Excess Return -4.09 5.48 7.09 10.71-6.49 Risk indicators (annualised) Last Last Last Last Last Since 36W 52W 24M 36M 60M inc.,** Fund volatility (%) 8.61 12.15 13.56 13.44 13.21 23.52 MSCI AC Asia Ex-Japan Small caps (NR) 8.27 9.85 14.04 15.11 13.36 23.00 Tracking error (%) 4.57 5.63 6.04 6.22 5.87 6.31 Information ratio -0.46-0.73 0.11 0.51 0.42-0.19 All figures gross of fees (in USD) * annualised performance **first NAV date: 31/05/1991 annualised Past performance or achievements are not indicative of current or future performance. Source: BNP Paribas Asset Management. Prior to 25 November 2016, the performance references that of BNP Paribas B Fund I Equity Asia ex-japan (offered in Belgium only) which was transferred into a sub-fund of the PARVEST Luxembourg SICAV, creating PARVEST Equity Asia ex-japan. On 1 January 2017, PARVEST Equity Asia ex-japan was renamed to PARVEST Equity Asia ex-japan Small Cap. Please refer to the prospectus for further information. KEY SELLING POINTS Stable, experienced and local team: 9 investment professionals on the ground. Leveraging on BNPP AM s single-country investment resources across Asia. Unique investment approach: applying a proprietary bottom-up research model focused on market demand and supply factors to analyse developing structural market trends. Their approach is well-suited to zero in on small cap gems in a very large and diverse investment universe. An opportunity to invest early in Asia-based emerging franchises and to benefit from sustainable outperformance over the long term.
Monthly Report Parvest Equity Asia ex-japan Small Cap August 2017-2 MARKET REVIEW Over the year-to-date (YTD) period, the MSCI AC Asia ex-japan Small Cap index has jumped by 20.8% (as of 31 August 2017). The stellar outperformance of Asian equities YTD is mainly attributable to the weaker US dollar, stable Chinese GDP growth and an earnings upgrade cycle in Asia. In August, Asian equities seem to take a breather, with the index only up by 1.3%, while they continued to outstrip equities in the US, Europe and globally. Positive earnings momentum continued in Asia ex-japan with another good reporting season. The Chinese equities markets topped the list of outperformers in Asia, followed by Thailand, Hong Kong, Taiwan and Malaysia equities. South Korea equities were the laggard following the recent tensions with North Korea. On the currency front, most Asian currencies showed a mixed August, but was still outperforming against the USD YTD. Australian equities retraced their gains in August. Q2 2017 GDP growth rose by +1.8% YoY, in line with consensus forecasts. Despite earlier weather-related disruptions, domestic demand accelerated. August PMI accelerated to 59.8, with very elevated new orders and restocking. The current account deficit widened in Q2 2017 to 2.2% of GDP, above consensus expectations. Q2 2017 business indicators report printed a modest pull-back in corporate profits growth, with company profits falling by -4.5% QoQ. The Reserve Bank of Australia (RBA) left the cash rate unchanged at 1.50%. Both Chinese onshore and offshore equities topped the outperforming markets list, given the strong earnings momentum, mainly in China internet and financials names. China will hold its 19th Party Congress on 18 October, which will involve a leadership reshuffle in the Politburo and its Standing Committee. The NBS manufacturing PMI rose to 51.7 in August from 51.4 in July. Meanwhile, the August Caixin Manufacturing PMI rose to 51.6. Retail sales rose by 10.4% YoY in China in July, after 11.0% in June. China s currency reserves rose further, to USD 3,081 billion in July. China's central bank declared initial coin offerings (ICOs) illegal, seizing on controversial fundraisers as the Beijing regulator looks to rein in related risks while controlling external fund flows. Indian equities retraced some gains in August. July imports grew by 15.4% YoY against 19.0% YoY in June, while July exports growth decelerated to 3.9% YoY from 4.4% YoY in June. The trade deficit narrowed to USD 11.5 billion in July from USD 13.0 billion previously. India's manufacturing PMI expanded to 51.2 in August, up from 47.9 in July. Headline CPI inflation rose by 2.4% YoY in July, up from 1.5% YoY in June, mainly on the back of higher food prices. Elsewhere in the region, Indonesian equities stepped back in August. The trade balance was in deficit for the first time since December 2015, at -USD 0.27 billion. Exports were outpaced by imports on the back of the normalisation impact post-public holidays. August CPI moderated to 3.82%. Bank Indonesia cut its 7-day reverse repo rate by 25bp to 4.5%. The MSCI Taiwan delivered gains. In August, the manufacturing sector was supported by stronger demand for electronic products. The Nikkei Taiwan Manufacturing PMI rose to 54.3 in August from 53.6 in July. Hong Kong s equity market also extended its gains. Q2 2017 GDP growth came in at 3.8% YoY, mainly driven by better private consumption and investment, while exports were softer due to a high base effect. July retail sales growth jumped by 4.6% YoY after a 0.5% YoY rise in June. In South Korea, the CPI accelerated by 2.6% YoY in August, mainly on the back of higher food prices. Thailand s economy continued to expand, with Q2 2017 GDP growth hitting 3.7% YoY vs. 3.3% YoY in Q1 2017. REGIONAL AND KEY GLOBAL TOTAL RETURN INDICES (IN USD) China CSI500 (onshore) MSCI Thailand MSCI China A (onshore) MSCI China (offshore) MSCI EM MSCI Hong Kong MSCI Taiwan MSCI AC Asia ex-japan MSCI AC Asia ex-japan Small Cap MSCI Malaysia MSCI AC Asia Pacific ex-japan MSCI AC Asia Pacific MSCI US MSCI AC World MSCI Europe MSCI Japan MSCI Australia MSCI Indonesia MSCI Singapore MSCI India MSCI Philippines -0.1% -0.2% -0.5% -0.7% -0.8% -2.4% MSCI South Korea -2.5% 2.2% 1.7% 1.5% 1.3% 1.3% 1.1% 1.0% 0.6% 0.3% 0.1% 8.7% 4.7% 4.3% 4.2% 0.1% 4.5% 11.7% 12.1% 15.7% 13.4% 19.4% 17.9% 15.3% 27.3% 21.1% 18.9% 28.3% 26.8% 31.1% 20.8% 24.8% 28.8% 28.2% 29.6% 41.7% -10% 0% 10% 20% 30% 40% 50% YTD 2017 Aug 2017 Source: Bloomberg, MSCI, BNP Paribas Asset Management, as of 31 August 2017
Monthly Report Parvest Equity Asia ex-japan Small Cap August 2017-3 FUND PERFORMANCE PERFORMANCE (gross of fees) MANAGEMENT EFFECTS Fund Benchmark Excess Allocation Selection Residual Effect REFERENCE BENCHMARK MSCI AC Asia ex -Japan Small Cap, NR 0.06% 1.26% -1.20% -0.85% -0.39% 0.03% REPORT CURRENCY USD LARGEST CONTRIBUTORS TO EXCESS RETURN LARGEST DETRACTORS FROM EXCESS RETURN Country Performance Country Performance 51Job Inc - ADR Sporton International Basso Industry SITC International China Traditional Chinese CHINA TAIWAN TAIWAN HONG KONG HONG KONG 20.6% 10.4% 13.2% 14.0% Dominos Pizza Enterprise Shriram City Union Finance LG Household&Health Superalloy Industry Piramal Enterprises AUSTRALIA INDIA KOREA TAIWAN INDIA -18.9% -10.2% -6.7% -18.3% -7.8% Source: MSCI, BNP Paribas Asset Management, as of 31 August 2017. Largest contributors of the month: Our picks in China and Hong Kong delivered strong excess returns. Our overweight in 51Job contributed the most to excess returns, given that its share price rallied by +20.6% after reporting strong Q2 2017 results. Revenue and earnings of provider of integrated human resource services in China were strong, driven by earlier and better recovery of business process outsourcing revenue. With the impact of the demonetisation policy change behind it, earnings momentum has been strong. At the sector level, pick in industrials produced gains. Largest detractors of the month: Stock selection effect in India and South Korea coupled with our overweight in Australia dragged performance down. At the sector level, stock selection in the consumer discretionary and financials sectors offset some positive returns. Shriram City Union Finance detracted from excess return, given that it continues to come under the short term overhang of the proposed merger with IDFC Bank However, we are positive on this company which benefits from favourable demographics, resilient structural demand and low penetration. We see benign competition from banks, as micro-finance businesses have the proper distribution network and rural lending expertise which banks lack KEY PORTFOLIO ACTIVITY (there were no major changes made in the portfolio during the month) SECURITY PURCHASES SECURITY SALES Country Country Source: BNP Paribas Asset Management, as of 31 August 2017. OUTLOOK & POSITIONING A number of Asian equities markets have performed impressively well so far this year, although they seemed to take a breather recently. China s stable economic growth, an improvement in local and external fundamentals as well as a better earnings outlook have remained in place year-to-date, although it may not be so strongly felt in the latter half of the year. After a few months of slowdown, the positive earnings momentum continued in the Asia ex-japan region with China gathering most of the strength, which should be supportive to equities. While real GDP growth for Asia is expected to remain relatively flat year-on-year, Asia continues to deliver higher GDP growth compared with other regions. Most Asian currencies except the Chinese renminbi and the Philippines peso have appreciated against the US dollar so far this year. This is a positive indicator as it took place against the backdrop of three interest rate hikes by the US Federal Reserve over the span of six months. It reinforces our view that Asian economies have become far more resilient against external shocks. This is partly the result of the reduction of imbalances across Asia through structural reforms that have helped to prop up long-term capital and productivity. Asian small caps are a distinct asset class offering access to an entirely different segment of the Asian equity market compared to large caps. The MSCI AC Asia ex-japan Small Cap index is well-diversified, and comprises approximately 1700 stocks that have zero overlap with the MSCI AC Asia ex-japan index constituents. Some may be surprised to learn that since 2000, the volatility of listed Asia ex-japan small caps has been lower than that of both Asian large caps and US and European listed small caps. In a sense, it can be argued that Asian smaller companies are more defensive than Asian larger caps. The strategy is focused on emerging franchises, targeting companies which have the highest potential to deliver above-average earnings growth over the long-term. The portfolio is well-diversified across markets and sectors. Within the Asian small cap universe, we have a strong preference for companies that operate in market segments with low penetration and/or industries with strong pricing power (and/or proven track record as an innovation leader). And with many companies under-analysed and under-owned, Asian small caps provide experienced stock pickers with an opportunity to generate alpha as fundamentals are not always fully reflected in share prices. MSCI AC Asia ex-japan Small Cap index is trading at a 12.7x price-to-earnings and a 1.4x price-to-book multiple based on fiscal year 2018 Bloomberg consensus earnings estimates an undemanding valuation relative to key global markets.
Monthly Report Parvest Equity Asia ex-japan Small Cap August 2017-4 ADDITIONAL INFORMATION Sector allocation as of 31/08/2017 (in %) Country allocation as of 31/08/2017 (in %) Professional Services Insurance Cons. Services Autos Pharma. Div. Financials Banks Household Goods Food & Beverage Telecom Consumer Goods Tranportation Food & Staples Health Care Media Tech. Software Materials Retailing Energy Utilities Semiconductors Capital Goods Tech. Hardware Real Estate -0.3% -0.4% -0.9% -1.3% -1.6% -1.9% -2.7% -3.0% -4.5% -9.9% -6.7% 7.3% 4.0% 3.8% 2.3% 2.3% 1.9% 1.6% 1.5% 1.2% 0.9% 0.7% 0.7% 0.3% -15% -10% -5% 0% 5% 10% 15% MSCI AC Asia Ex-Japan Small Cap Net Returns Parvest Equity Asia ex-japan Small Cap Active weight India Australia Indonesia Philippines New Zealand China Pakistan Malaysia Thailand Hong Kong Singapore Taiwan Korea -8.4% -3.6% -3.8% -5.5% -5.7% -0.6% -0.9% -1.4% 2.5% 1.8% 0.6% 7.4% -15% -5% 5% 15% 25% 35% Active weight MSCI AC Asia Ex-Japan Small Cap Net Returns Parvest Equity Asia ex-japan Small Cap Top 10 Holdings as of 31/08/2017 (in %) SPORTON INTERNATIONAL DOMINOS PIZZA ENTERPRISE GRUH FINANCE 51JOB INC BASSO INDUSTRY SHRIRAM CITY UNION LG HOUSEHOLD & HEALTH SITC INTERNATIONAL SAMSUNG FIRE & MARINE INSURANCE ACONEX Portfolio Weight 3.61% 3.07% 2.52% 2.49% 2.37% 2.30% 2.17% 2.11% 1.96% 1.95% Source: MSCI, BNP Paribas Asset Management, as of 31 August 2017 For more information, please contact: Hue LU Senior Investment Specialist Asia Pacific & Greater China Equities Hue.Lu@asia.bnpparibas.com +852 2533 2221 Jessica TEA Investment Specialist Asia Pacific & Greater China Equities Jessica.tea@asia.bnpparibas.com +852 2533 2204
Monthly Report Parvest Equity Asia ex-japan Small Cap August 2017-5 PERFORMANCE DETAILS ISIN Codes: USD Classic Capitalisation: LU1342916134, USD Classic Distribution: LU1342916217, EUR Classic Capitalisation: LU1458426209, EUR Institutional: LU1458427355, USD Institutional: LU1458427272 Total AUM as of 31/08/2017: USD 48.30 mln Cash holding : 5.04% USD-BASED RETURNS (NET OF FEES) Performance at the end of August 2017 August Last 3M YTD Last Last Last Last Since Classic Share (Net of fees - %) 12M 24M* 36M* 60M* inc.,** Parv est Equity Asia Ex -Japan Small Cap -0.13 2.10 16.99 7.28 10.43 2.88 6.81 4.28 M SCI AC Asia Ex-Japan Small caps (NR) 1.26 4.66 20.80 13.60 11.97 1.71 6.41 7.09 Ex cess return -1.39-2.56-3.81-6.32-1.54 1.17 0.40-2.82 Performance History (%) - Full year 2016 2015 2014 2013 2012 Parv est Equity Asia Ex -Japan Small Cap -1.12-2.90 14.68-3.77 20.57 M SCI AC Asia Ex-Japan Small caps (NR) 1.77-8.75 4.66 2.83 22.26 Ex cess return -2.89 5.85 10.02-6.60-1.69 Performance History (%) - August to August 2016-17 2015-16 2014-15 2013-14 2012-13 Parv est Equity Asia Ex -Japan Small Cap 7.28 13.67-10.69 29.48-1.41 M SCI AC Asia Ex-Japan Small caps (NR) 13.60 10.36-16.06 21.24 6.96 Ex cess Return -6.32 3.31 5.37 8.24-8.37 Risk indicators (annualised) Last Last Last Last Last Since 36W 52W 24M 36M 60M inc.,** Fund v olatility (%) 8.61 12.15 13.56 13.44 13.21 23.49 M SCI AC Asia Ex-Japan Small caps (NR) 8.27 9.85 14.04 15.11 13.36 23.00 Tracking error (%) 4.57 5.63 6.04 6.22 5.87 6.29 Information ratio -0.83-1.12-0.26 0.19 0.07-0.45 All figures net of fees (in USD) * annualised performance **first NAV date: 31/05/1991 annualised Ongoing charges: Past performance or achievements are not indicative of current or future performance. Source: BNP Paribas Asset Management. Parvest Equity Asia ex-japan Small Cap is a Sub-fund of the Parvest UCITS V Compliant SICAV registered under Luxembourg law. The Fund referred to in this monthly report is part of a BNP PAM GIPS ( ) compliant composite whose full performance is available on request. The investments in Parvest Equity Asia ex- Japan Small Cap are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay.
Monthly Report Parvest Equity Asia ex-japan Small Cap August 2017-6 DISCLAIMER This material is issued and has been prepared by BNP PARIBAS ASSET MANAGEMENT Asia Limited (the Company ), with its registered office at 30/F, Three Exchange Square, 8 Connaught Place, Central, Hong Kong. This material has not been reviewed by the Hong Kong Securities and Futures Commission. This material is produced for information purposes only and does not constitute: 1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. This material makes reference to certain financial instruments authorised and regulated in their jurisdiction(s) of incorporation. No action has been taken which would permit the public offering of the financial instrument(s) in any other jurisdiction, except as indicated in the most recent prospectus, offering document or any other information material, as applicable of the relevant financial instrument(s) where such action would be required, in particular, in the United States, to US persons (as such term is defined in Regulation S of the United States Securities Act of 1933). Prior to any subscription in a country in which such financial instrument(s) is/are registered, investors should verify any legal constraints or restrictions there may be in connection with the subscription, purchase, possession or sale of the financial instrument(s). Investors considering subscribing to the financial instrument(s) should read carefully the most recent prospectus, offering document or other information material for further details including the risk factors and consult the financial instrument(s ) most recent financial reports. These documents are available from your local BNPP AM correspondents, if any, or from the entities marketing the Financial Instrument(s). Opinions included in this material constitute the judgement of the Company at the time specified and may be subject to change without notice. The Company is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor s investment portfolio. Investments involve risks. Given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to financial instruments may have a significant effect on the results presented in this material. Past performance is not a guide to future performance and the value of the investments in financial instrument(s) may go down as well as up. Investors may not get back the amount they originally invested. The performance data, as applicable, reflected in this material, do not take into account the commissions, costs incurred on the issue and redemption and taxes.