Nomura Holdings, Inc. · TSE:8604
Nomura — Investor Presentation (January 2017)
25 slides from Nomura's investor presentation, January 2017
Slide 1: Asia equities – Uncertainty and divergence
Connecting Markets East & West Global Markets Research Asia equities – Uncertainty and divergence Tracking Trump, Commodities and China; How long will the reversals last?; Japan looking much better Mixo Das – NSL +65 6433 6986 mixo.das@nomura.com See Appendix A-1 for analyst certification, important
Slide 2: Asia equity outlook
Asia equity outlook Global factors at play − Re-assess framework as ‘low for long’ growth/yield environment disrupted. What does it do to valuations? − Growth: Cyclical component and structural changes. Trump boost to growth likely transitory − Commodities: Oil at highs, industrial commodities pea
Slide 3: The old framework less useful now but still instructive
The old framework less useful now but still instructive Forward EPS MSCI World (rhs) 400 24 200 12 6 100 10 But downgrade to return 8 expectations may not turn quickly 6 4 2 Global ERP 9 -5 US 10yr yield ERP (inverted, rhs) 0 8 -3 -2 7 -4 -1 6 8 1 5 7 3 4 6 5 3 5 4 10yr UST 2 7 3 1 2 9 1 0 1992 1994
Slide 4: Commodity prices have driven cyclical gains, US corporate tax cuts, growth, de-reg will help further
Commodity prices have driven cyclical gains, US corporate tax cuts, growth, de-reg will help further “Good” sectors: still seeing earnings upside “Bad” sectors: a counter-trend cycle? 300 300 Tech Health Care Discretionary Staples Financials Utilities Materials Energy 250 250 200 200 150 150 100 100
Slide 5: Outcome on growth beyond is the key question
Outcome on growth beyond is the key question Manufacturing PMIs have improved! G10 Economic surprise index US EU Japan China Global 50 59 G10 econ surprise 40 57 30 20 55 10 53 ? 0 51 -10 -20 49 -30 47 -40 Source: Bloomberg, Nomura Strategy 4
Slide 6: Many growth-related reversals this year
Many growth-related reversals this year Cross-asset correlation rose and fell Trade improvement has boosted shipping rates 1200 2000 Shanghai freight rate BDI 1800 1100 1600 1000 1400 1200 900 1000 800 800 600 700 400 600 200 Percentage of US funds outperforming S&P on 5yr basis Value outperformance
Slide 7: A closer look at active performance
A closer look at active performance Penetration of passive funds has been very strong Excess returns have a good correlation with bond yields Source: Nomura Quantitative Strategy, EPFR, Nomura Strategy 6
Slide 8: A closer look at the Value surge
A closer look at the Value surge Global Value / Growth performance over the past 40 years Value does best in early expansion, but also late-cycle 180 Value / Growth 170 160 150 140 130 120 110 100 90 80 1975 1980 1985 1990 1995 2000 2005 2010 2015 Reversal has been sharp in Japan More mixed in EM 68
Slide 9: EM vs DM: renewed underperformance?
EM vs DM: renewed underperformance? EM performance called into question after Trump Growth expectations will be key 100 EM - DM Fwd earnings growth EM / DM 60 90 50 80 40 30 70 20 60 10 0 50 -10 40 -20 30 -30 -40 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20
Slide 10: Oil prices have rallied on OPEC deal. Other commodities have gained, but now rolling over
Oil prices have rallied on OPEC deal. Other commodities have gained, but now rolling over Oil prices have gained as OPEC reached historic deal Other commodities have gained too Thermal Coal Iron Ore Copper Brent Crude Palm oil 58 210 non-OPEC members 56 agree to join deal 190 54 170 52 50 150 48 130
Slide 11: Oil still looks good in a range, but slightly higher?
Oil still looks good in a range, but slightly higher? Supply–Demand gap still wide OPEC deal will help somewhat 100.0 OPEC supply mn Barrels/Day Non-OPEC supply mn Barrels/Day (rhs) Supply mn Barrels/Day Consumption mn Barrels/Day 35 68 95.0 34 66 33 64 90.0 32 62 31 85.0 60 30 58 80.0 29 56 28 75.0
Slide 12: Impact of commodity rally in markets
Impact of commodity rally in markets Energy, Materials sectors have outperformed Credit spreads in Energy have rallied a lot! 105 -60 Energy Materials 1700 -40 100 1500 -20 95 1300 0 1100 20 90 40 900 85 60 700 80 80 500 100 75 300 120 70 US Energy sector HY credit spread (bp) Brent Crude (rhs, inve
Slide 13: China: dealing with a variety of risks
China: dealing with a variety of risks FX risks rising again as outflows accelerate Credit spreads saw another spike, bond defaults rose CNY 12m depreciation expectation 4 6% China AA spread 3.8 5% 3.6 4% 3.4 3.2 3% 3 2% 2.8 1% 2.6 2.4 0% Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Proprietary
Slide 14: China: … but making progress on 2 of the 3 Rs
China: … but making progress on 2 of the 3 Rs Theme #1 Average annual growth (2008-11, %) (2012-14, %) (2015, %) Floor space started Railway freight carried Mass market consumption proxies in goods and services Flat glasses More sports and outdoors activities Cement Coal Less but healthier and
Slide 15: Uniquely China: the large pool of domestic money
Uniquely China: the large pool of domestic money China connect flows have boosted HK-listed equities China’s wealth management products China outbound M&A has been large in 2016 Overseas tourism large enough to be an economic weapon Source: Bloomberg, Wind, CEIC, S&P, Nomura Strategy 14
Slide 16: Trend for MSCI AeJ likely declining as earnings roll over and valuations face downside
Trend for MSCI AeJ likely declining as earning roll over and valuations face downside MSCI Asia ex-Japan with our tactical calls and expected range. 580 Bullish Cautious Bullish Neutral 560 540 ? 520 500 480 460 440 420 Source: Bloomberg, Nomura Strategy 15
Slide 17: Asia strategy: Our positioning
Asia strategy: Our positioning Allocation Key long-term developments Key considerations for near-term allocation SOE/financial reform, investment-consumption rebalancing, China Overweight Credit risks, currency stability, southbound liquidity debt restructuring, Implications from new technologies HK
Slide 18: India: Managing to stay on reform track? Korea: Corporate governance champion?
India: Managing to stay on reform track? Korea: Corporate governance champion? Reform leader. Bankruptcy, GST, governance, digitization… Large-scale disruption on cash crunch. Reforms to derail? Korea corporate governance has room to improve further But domestic economic slowdown visible in housing
Slide 19: Japan: Multiple positives for equities
Japan: Multiple positives for equities Further JPY depreciation to help Earnings to drive gains 22000 128 Nikkei JPY 21000 123 20000 118 19000 18000 113 17000 108 16000 103 15000 14000 98 BOJ’s ETF buying is large! Share buyback has also helped Source: BOJ, Bloomberg, Quick, Nomura 18
Slide 20: Japan: What's ahead?
Japan: What’s ahead? No more easing expected from BOJ Where do you see upside for the Japanese economy? Rise of ESG. ROE and governance focus to remain Possibility of tax on undistributed profits Benchmarks used by GPIF and quasi public pension funds (JPY bn) Source: Cabinet office, BOJ, Nomura 19
Slide 21: Soon a robot will give this presentation
Soon a robot will give this presentation Breakdown of work by sector and type (US) Gartner sees three key new-Tech trends – • Transparently immersive experiences (AR/VR, IoT) • Perceptual smart machine age (AI, big data, cloud + device) • Platform revolution (B2B2C, blockchain and ecosystems) Phases
Slide 22: Appendix A-1
Appendix A-1 Analyst Certification I, Mixo Das, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or will be direct
Slide 23: Definition of Nomura Group's equity research rating system and sectors
Definition of Nomura Group's equity research rating system and sectors The rating system is a relative system, indicating expected performance against a specific benchmark identified for each individual stock, subject to limited management discretion. An analyst’s target price is an assessment of th
Slide 24: Opinions or estimates expressed are current opinions as of the original publication date appearing
Opinions or estimates expressed are current opinions as of the original publication date appearing on this material and the information, including the opinions and estimates contained herein, are subject to change without notice. The Nomura Group is under no duty to update this document. Any comment
Slide 25: This document has been approved for distribution in the UK and European Economic Area
This document has been approved for distribution in the UK and European Economic Area as investment research by NIplc. NIplc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. NIplc is a member of the London
Nomura Holdings — Investor Presentation (January 2017) on 6ix