Schroders PLC · LSE:SDR
Schroders — Schroder AsiaPacific Fund — Investor Presentation (January 2024)
38 slides from Schroders's investor presentation, January 2024
Slide 1: Schroder AsiaPacific Fund plc
Marketing material Schroder AsiaPacific Fund plc Richard Sennitt, Fund Manager Abbas Barkhordar, Fund Manager January 2024
Slide 2: Team – Strength in depth
Team – Strength in depth Experienced portfolio managers and analyst team based in London and Asia Schroders Asian team exceptionally well resourced Years of Years with Fund Manager Focus Experience Schroders Shanghai 0 Richard SENNITT Asian Equity Specialist 30 30 Sarah LIU Candice CHEN Kelly ZHANG
Slide 3: Performance
Schroders Performance
Slide 4: Investment objective and policy
Schroder AsiaPacific Fund plc Investment objective and policy The Company's principal investment objective is to achieve capital growth through investment primarily in equities of companies located in the continent of Asia (excluding the Middle East and Japan), together with the Far Eastern countrie
Slide 5: NAV performance (to 30 September 2023)
Schroder AsiaPacific Fund plc NAV performance Benchmark: MSCI AC Asia ex Japan Index1 (net dividends reinvested) Shareholder funds : £851.3 million Inception date: 20 November 1995 Past performance is not a guide to future performance and may not be repeated. The value of investments and the income
Slide 6: NAV performance (to 31 December 2023)
Schroder AsiaPacific Fund plc NAV performance Benchmark: MSCI AC Asia ex Japan Index1 (net dividends reinvested) Shareholder funds : £835.7 million Inception date: 20 November 1995 Past performance is not a guide to future performance and may not be repeated. The value of investments and the income
Slide 7: NAV Performance: calendar year returns
Schroder AsiaPacific Fund plc NAV Performance 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 amounts originally invested. The return may increase or decrease
Slide 8: Style differences have been significant
Style differences have been significant Growth vs Value throughout the pandemic Past Performance is not a guide to future performance and may not be repeated. Source: Refinitiv Eikon Datastream, as at 31 December 2023, in GBP. The regions and countries shown are for illustrative purposes only and sh
Slide 9: Market returns
Market returns To 31 December 2023 Country returns in GBP Sector returns in GBP Taiwan 12.4% Information Technology 12.9% 23.1% 24.5% Korea 10.4% Energy 1.5% 16.2% 8.7% India 7.1% MSCI AC AxJ 1.9% 14.0% 0.0% Australia* 10.3% Industrials 1.3% 8.3% -2.9% Indonesia -2.4% Financials -0.7% 1.3% -3.2% MSC
Slide 10: Performance – Since inception to December 31, 2023
Schroder AsiaPacific Fund plc Performance – Since inception1 to December 31, 2023 Index 100 = 20 November 1995 1000 900 800 700 600 500 400 300 200 100 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Schroder AsiaPacific Fund plc2 MSCI AC Asia ex Japan (NDR)3 FTSE 100 Pa
Slide 11: Risk considerations
Schroder AsiaPacific Fund plc Risk considerations – Concentration risk: The company may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the company, both up or down, which may adverse
Slide 12: Outlook
Schroders Outlook
Slide 13: Market outlook
Market outlook Topics and issues ➢ China – consensus now more realistic about weak growth, but structural concerns remain ➢ Geopolitical risks – US-China, Taiwan, Ukraine, Middle East ➢ Information technology – strong long-term demand outlook, early signs of a cyclical recovery ➢ Attractive opportun
Slide 14: China – consensus is now negative
China – consensus is now negative Negative articles about China surged last year Source: The Economist, Bloomberg, Schroders Economics Group. 29 August 2023. The regions and countries shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. 14
Slide 15: China – weak property market and poor confidence impacting consumer
China – weak property market and poor confidence impacting consumer Stabilisation of property market needed for improvement in sentiment Weak sales but starting to stabilise at low levels1 China consumer confidence2 Index Million sq. meters 130 100 100% 125 90 80% 80 120 60% 70 115 40% 60 110 20% 50
Slide 16: China is ramping up manufacturing investment to offset the property slowdown
China is ramping up manufacturing investment to offset the property slowdown Piecemeal fiscal stimulus to continue but budget deficit leaves little room for big bang Manufacturing investment1 Property investment1 Augmented budget deficit2 Jan 2019 = 100 Augmented net lending/borrowing % GDP* Jan 201
Slide 17: China – why have returns been so disappointing – big picture
China – why have returns been so disappointing – big picture Turning Japanese? Will more fixed asset investment via stimulus packages just add to high debt levels and reduce capital efficiency? GDP and Capital Stock Per Capita¹ China Incremental Capital Output Chinese stockmarkets have Ratio (ICOR)²
Slide 18: China exports – deglobalisation in action?
China exports – deglobalisation in action? China export reliance on developed markets apparently falling but in part a reorientation Mexico exports to the US surging but so are imports China export destination – shift away from US & DM1 from China2 70 60 50 40 30 20 10 0 2010 2021 2000 2001 2002 200
Slide 19: Global leads point to better outlook for exports
Global leads point to better outlook for exports Asian export volumes are seeing recovery 25 30 20 15 20 10 10 5 0 0 -5 -10 -10 -20 -15 -30 -20 2001 2004 2007 2010 2013 2016 2019 2022 South Korea Export Volumes* (3m Avg % y/y Adv 2m, LHS) CPB World Export Volumes (3m Avg. % y/y, RHS) Source: Refinit
Slide 20: Inventory adjustment seen in many industries as retail inventories now normalizing
Inventory adjustment seen in many industries as retail inventories now normalizing Sportswear industry seeing this as well as supplier consolidation improving outlook Inventory is trending down while sales is Nike supply chain consolidation trend2 Nike supplier Shenzhou should benefit3 staying flatt
Slide 21: Hong Kong likely to benefit from China opening up post Covid
Hong Kong likely to benefit from China opening up post Covid Recovery will support growth Hong Kong monthly visitor number of arrivals 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 Mar 21 Mar 22 Mar 23 Source
Slide 22: Semiconductor sector starting to show signs of life
Semiconductor sector starting to show signs of life Production and capex cuts have seen inventory adjustment Korea export growth in US dollar terms1 Samsung valuation lagged versus peers2 (%YoY, 3mma) Price/Book Value 80 2.8 70 2.6 60 2.4 50 2.2 40 30 2.0 20 1.8 10 1.6 0 1.4 -10 1.2 -20 -30 1.0 -40
Slide 23: Indian performance driven by rerating of Small and Midcaps
Indian performance driven by rerating of Small and Midcaps Domestic flows have seen SMID* outperform – large cap relatively more attractive India performance – SMID versus India valuations – SMID versus India monthly net inflows into Large1 Large1 domestic mutual funds strong2 115 4 350 Index, 100=D
Slide 24: Indian private banks
Indian private banks Appealing runway of growth at good returns Structural market share growth1 Strong asset quality2 Attractive returns3 Deposit market share - Public vs. Private India gross NPLs* as a % of loans Return on assets – largest 3 banks per country 100% 16 2.5 90% 14 2.0 80% 12 70% 1.5 1
Slide 25: Asian financials – penetration of insurance and credit still low in many markets
Asian financials – penetration of insurance and credit still low in many markets Low levels of insurance cover and significant need for protection Penetration1, % of GDP Out-of-pocket health expenditure2 10% 50% 9% 45% 8% 40% 7% 35% 6% 30% 5% 25% 4% 20% 3% 15% 2% 10% 1% 5% 0% 0% UK India ASEAN Great
Slide 26: Asian financials – Banking sector not homogenous across the region
Asian financials – Banking sector not homogenous across the region Underpenetrated markets offer growth, more mature dividend yield Shareholder return a focus Attractive valuations with reasonable returns 250% 9 250% 20 8 18 200% 7 200% 16 14 6 150% 150% 12 5 10 4 100% 100% 8 3 6 50% 2 50% 4 1 2 0%
Slide 27: Asian market valuations
Asian market valuations Valuations in aggregate off the bottom but still reasonable versus long term averages Price to book (x) Historic price/earnings (x) 3.0 30 2.7 25 2.4 20 2.1 1.8 15 1.5 10 1.2 0.9 5 2003 2015 1991 1993 1995 1997 1999 2001 2005 2007 2009 2011 2013 2017 2019 2021 2023 2003 1991
Slide 28: Valuation picture mixed across countries
Valuation picture mixed across countries However, less extreme than towards the end of last year Price earnings ratio (P/E) Next 12 Months of MSCI AC Asia Pacific ex Japan markets since 2010 30 25 20 15 10 5 0 India Australia Thailand Taiwan Indonesia Malaysia MSCI AC Philippines Hong Kong Singapore
Slide 29: Peaking US rates and a softer US dollar historically supportive for Asian markets
Peaking US rates and a softer US dollar historically supportive for Asian markets Softer dollar and US rates peaking should be supportive 770 Feb-1989 Feb-1995 May-2000 June-2006 Dec-2018 150 670 140 570 130 470 120 370 110 270 100 170 90 70 80 2021 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Slide 30: Reasons for Optimism?
Reasons for Optimism? Despite our structural caution on China we are relatively positive on Asian equities Emerging equities are an early cycle play: EM equity MSCI AC Asia Pacific ex Japan versus MSCI World outperformance phases post US recessions relative dividend yield1 500 1600 175% 165% 450 140
Slide 31: What we like in the region
What we like in the region Key investment themes Tech Leaders Samsung Electronics TSMC Manufacturing MediaTek Excellence Delta Electronics Nien Made Hon Hai CATL Healthcare Infosys Shenzhou International Bangkok Dusit TCS Samsung SDI Medial Services Giant Manufacturing Apollo Hospitals Techtronics W
Slide 32: Active country positions as at 31 December 2023
Schroder AsiaPacific Fund plc Active country1 positions as at 31 December 2023 Overweight/underweight positions % of portfolio Underweight Overweight 14.0 Hong Kong 8.2 8.0 Singapore 4.3 3.7 Australia 3.7 2.9 Vietnam 2.9 1.6 United Kingdom 1.6 2.2 Philippines 1.5 2.6 Thailand 0.6 2.6 Indonesia 0.4 1
Slide 33: Active sector positions as at 31 December 2023
Schroder AsiaPacific Fund plc Active sector1 positions as at 31 December 2023 Overweight/underweight positions % of portfolio Underweight Overweight 30.3 Financials 9.7 32.1 Information Technology 6.5 4.2 Real Estate 1.0 4.2 Health Care 0.4 6.7 Industrials -0.8 3.7 Materials -1.5 7.2 Communication S
Slide 34: Top 10 holdings by absolute weight
Top 10 holdings by absolute weight Schroder AsiaPacific Fund As at 31 December 2023 Stock Country Sector Portfolio weight (%) Benchmark1 weight (%) Active weight (%) Samsung Electronics* Korea Information Technology 9.5 5.4 +4.1 TSMC Taiwan Information Technology 9.4 7.8 +1.6 Tencent China Communica
Slide 35: Summary
Summary ➢ Asian Markets have been impacted by the global rise in interest rates and economic slowdown, as well as geopolitics ➢ China’s recovery has disappointed – ongoing ‘piecemeal’ stimulus measures expected but property sector remains a risk ➢ Geopolitical risks remain – US-China, Taiwan, Ukrain
Slide 36: Important information
Important information Marketing material. 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 amounts originally invested. Exchange rate changes may cause the val
Slide 37: Important information
Important information Marketing material. Third party data including MSCI data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purpose without the data provider's consent. Third party data is provided without any warranties of any kind. The dat
Slide 38: Thank you
Schroders "a Thank you
Schroder AsiaPacific Fund — Investor Presentation (January 2024) on 6ix