Perpetual Limited · ASX:PPT
Perpetual — M1022 Adv Briefing Mar 11 MS eco
15 slides from Perpetual's investor presentation, March 2011
Slide 1: The State of the Union
The State of the Union Matt Sherwood, Head of Investment Markets Research
Slide 2: Investors may be scarred by US shares
Investors may be scarred by US shares Decade average return: US sharemarket 350% 316% 300% 257% 250% 227% 200% 177% 150% 140% 100% 71% 54% 50% 34% 24% 17% 17% 13% 8% 13% 0% 0% -7% -13% -22% -24% -50% -37% -42% -100% 1800s 1820s 1840s 1860s 1880s 1900s 1920s 1940s 1960s 1980s 2000s Source: Citigroup,
Slide 3: … but the US recovery is strong and sustainable
… but the US recovery is strong and sustainable US economic growth and inflation (%) 20% 3.0% 16% 2.4% Core inflation (%, RHS) 12% 1.8% 8% Market consensus 1.2% 4% 0.6% 0% 0.0% Economic Growth (%, LHS) -4% -0.6% -8% -1.2% 2006 2007 2008 2009 2010 2011 2012 Source: US Department of Labor, US Bureau o
Slide 4: … and the labour market recovery is imminent
… and the labour market recovery is imminent Combined ISM employment series and private payrolls’ growth 600 65 400 60 Private labour market growth (LHS) 55 200 50 0 45 -200 40 -400 Combined ISM surveys on hiring intentions (RHS) 35 -600 30 -800 25 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2
Slide 5: Macro-dynamics – a good environment for US shares
Macro-dynamics – a good environment for US shares US economic and earnings growth (3-year %pa) 15% 50% 40% Economic 10% growth Earnings 30% (LHS) growth (RHS) 20% 5% 10% 0% 0% -10% -20% -5% -30% -10% -40% 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 Source: Datastream as at 31 De
Slide 6: Why isn't Chinese growth slowing?
Why isn’t Chinese growth slowing? Chinese economic growth and policy settings 22% 20% Reserves requirement 16% 18% 12% Real borrowing rate (RHS) 8% 14% 4% 0% 10% -4% Economic growth (LHS) -8% 6% -12% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: DataStream as at 28 February 2011.
Slide 7: The key risk is rising Asian inflation
The key risk is rising Asian inflation Composition of consumer price index and inflation: G3 vs emerging economies (% pa) 60% Consumer Price Index 6% Inflation: G3 vs emerging economies (%pa) 3.0% 50% 5% 2.7% 40% 4% 2.4% Emerging Energy economies Food (LHS) 30% 3% 2.1% 20% 2% 1.8% 10% 1% US, Europe
Slide 8: Australia has experienced more policy headwinds
Australia has experienced more policy headwinds Change in official central bank interest rates and currency relative to US dollar (%) 80% 2.0% Change in official interest rates (RHS) 60% 1.5% Change in exchange rate (LHS) 40% 1.0% 20% 0.5% 0% 0.0% -20% -0.5% Japan US UK Europe Korea China Thailand N
Slide 9: Our largest ever mining investment boom is coming
Our largest ever mining investment boom is coming Mining investment: contribution to economic growth and nominal GDP (%) 6% 6% Mining investment average share 5% Activity Growth 5% 1861 - 2010 1.0% 0.2% 2011- 2014 5.2% 1.5% 4% 4% 3% 3% 2% 2% Mining investment share of 1% economic activity 1% 0% 0% M
Slide 10: Policy settings are 12 months ahead of the economy
Policy settings are 12 months ahead of the economy Quarterly economic growth and inflation (%pa, pre and post floods) Growth Inflation 1.4% +0.4% +0.8% 1.2% Pre-flood outlook Post-flood outlook 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2011 2011 2011 2012 2012
Slide 11: Earnings – in downgrade territory for nine months
Earnings – in downgrade territory for nine months Ratio of earnings upgrades to downgrades 2.0 2.0 Net upgrades 1.6 1.6 2011/12 1.2 1.2 0.8 0.8 0.4 0.4 2010/11 Net downgrades 0.0 0.0 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Source: Macquarie E
Slide 12: Valuations may be 'fair', but where is the value?
Valuations may be ‘fair’, but where is the value? Australian sharemarket P/E ratios times times 25 25 Historic 20 earnings 20 15 15 10 10 Forward earnings 5 5 0 0 1961 1971 1981 1991 2001 2011 Source: Reserve Bank of Australia, UBS Australia Limited and Citigroup as at 31 January 2011.
Slide 13: The Australian sharemarket prefers low inflation
The Australian sharemarket prefers low inflation Australian sharemarket average calendar returns and inflation: 1882-2010 (%) Return Return (%) (%) Dividends 15% Capital gains 15% 12% 12% 9% 9% 6% 6% 3% 3% 0% 0% <0% 0% - 3% 3% -6% 6% - 9% 9%+ Inflation rate (%) Source: Australian Stock Exchange as a
Slide 14: Portfolio implications
Portfolio implications Global and Australian economies - robust in 2011 and 2012 Earnings growth need to improve for local shares to move higher Valuations – skewed by resource earnings The era of ‘cheap money’ is over A much better environment, but patience is required
Slide 15: Important note
Important note This presentation has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426 for financial advisers only. It is general information only and is not intended to provide you with financial advice. To the extent permitted by law, no liability is a