Ninety One Plc · LSE:N91
Ninety One — 91 global insights 2024 em a hotspot for equity investors en
27 slides from Ninety One's investor presentation, 2024
Slide 1: Emerging markets: a new hotspot for equity investors?
Emerging markets: a new hotspot for equity investors? Varun Laijawalla and Wenchang Ma
Slide 2: Target audience
Target audience Audience General risks This document is being provided for informational purposes for The value of investments, and any income generated from them, can discussion with professional investors and financial advisors only. fall as well as rise. Costs and charges will reduce the current
Slide 3: Varun Laijawalla
Varun Laijawalla
Slide 4: A decade of underperformance vs Developed Markets…
100 200 0 50 150 250 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017 Mar 2018 Source Bloomberg, 31 August 2024; MXEF = MSCI EM, MXWO = MSCI DM Jun 2018 Sep 2018 Dec 2018 Mar 2019 MXEF (EM) Jun 2019 Sep 2019 Dec 2019 Mar 2020 Jun 20
Slide 5: But… Emerging market equities is an inherently cyclical asset class
But… Emerging market equities is an inherently cyclical asset class Timing is important 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 25.55% 34.00% 32.17% 39.38% 78.51% 26.85% 7.84% 18.23% 38.82% 13.69% 1.38% 21.31% 37.28% 1.87% 31.49% 19.96% 28.
Slide 6: The private sector is now dominant
The private sector is now dominant State-owned enterprises have a much more diminished presence Top 20 Companies By Ownership/Activity 46 43 54 62 65 68 34 21 49 24 2 24 29 20 22 14 4 2 8 4 5 2000 2005 2010 2015 2020 2024 State and/ or natural resources - China State and/or Natural Resources Private
Slide 7: Emerging Markets are being governed more thoughtfully
Emerging Markets are being governed more thoughtfully Improved institutional frameworks have led to fiscal sustainability Governance effectiveness for Top 5 markets Structurally lower economic volatility and lower average inflation rates (India, Taiwan, Korea, Brazil, Saudi) 0.70 EM ex China 0.… 14
Slide 8: #1: The Interest Rate Cycle
#1: The Interest Rate Cycle Policy loosening underway in Emerging Markets Benchmark Interest Rates: Developed & Emerging Markets 15 10 5 0 -5 Brazil Hungary Chile Mexico South Poland India Indonesia US Great EU Australia Korea Thailand Taiwan Africa Britain Recent Peak Mar-24 Change Source: Bloomber
Slide 9: #2: The US Dollar
#2: The US Dollar Dollar is now close to 20-year highs Middle East Inverse relationship between USD performance and EM equity performance conflict 140 Asian financial Russian invasion 1.0 crisis Ruble crisis of the Ukraine 0.9 120 Brazil crisis 0.8 Strong dollar Strong dollar 100 0.7 0.6 80 0.5 60 0
Slide 10: #3: Robust earnings growth
30 60 70 90 100 0 50 10 40 80 20 MSCI Korea MSCI Indonesia EPS Growth FY1 MSCI Mexico Source: FactSet, as of June 2024 EPS Growth Forecasts (%) MSCI South Africa EPS Growth FY2 MSCI Hong Kong MSCI Taiwan MSCI AC Asia ex JP MSCI EM (Emerging Markets) MSCI India #3: Robust earnings growth MSCI China A
Slide 11: #4: Bargain basement valuations
#4: Bargain basement valuations Price/Earnings ratio Price/Book ratio 35x 6.0x 30x 5.0x 4.8x 25x 25.5x 4.0x 22.1x 20x 3.4x 3.0x 16.0x 15x 2.0x 10x 1.8x 1.0x 5x 0x 0.0x 2003 2004 2006 2007 2008 2009 2005 2020 2021 2022 2023 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2003 2004 2006 2007 20
Slide 12: Our process has led us to identify leading companies in India
Our process has led us to identify leading companies in India No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided. This is not a buy, sell or hold recommendation for any p
Slide 13: Wenchang Ma
Wenchang Ma
Slide 14: Valuation of Chinese equities looks attractive
Valuation of Chinese equities looks attractive A shares derated 50% in the last three years Price/Book ratio Forward Price/Earnings Ratio 4.0 25 3.5 3.4 20 18.6 3.0 2.5 15 11.9 2.0 10.2 10 1.5 1.5 1.4 9.4 1.3 1.0 5 0.5 0.0 0 Dec 11 Dec 12 Dec 13 Dec 14 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec 2
Slide 15: Consensus earnings revisions
Consensus earnings revisions Earnings revisions downcycle is yet to turnaround but showing some signs of stabilisation EPS integer of MSCI China A Onshore EPS integer of MSCI China (HKD) 9 500 8.5 MSCI China 23E EPS 450 MSCI China 8 25E EPS 7.5 MSCI China 400 24E EPS 7 350 6.5 300 2025E 6 2024E 5.5
Slide 16: Foreign investor flow to A share market is stabilising
Foreign investor flow to A share market is stabilising Overall foreign participation is still low, at 3.2% of total A share free float Stock Connect Northbound net flow (RMB bn) Stock Connect Southbound net flow (HKD bn) 2,500 200 3,500 350 300 150 3,000 2,000 250 100 2,500 200 1,500 50 2,000 150 1,
Slide 17: We are seeing improving cash flow return on investment post Covid
We are seeing improving cash flow return on investment post Covid But it has not been rewarded by the market 60% 15% 50% 12% 40% 30% 9% 20% 10% 6% 0% -10% 3% -20% -30% 0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024e MSCI China return CFROI Source: Holt, Bloomberg, Ninety One, September 2024. F
Slide 18: Record level of share buyback and dividends
Record level of share buyback and dividends Chinese companies are increasing shareholder returns Chinese companies annual buybacks (Rmb bn) Chinese companies dividend payout (Rmb bn) 250 3000 1108 1097 2500 200 929 2000 118 150 801 115 93 912 876 31 1702 1500 1623 796 627 12 716 100 1317 685 629 100
Slide 19: China is too big to be ignored
China is too big to be ignored The second largest economy is under-represented in global portfolios China is under-represented in global equities 28.8% 16.9% 13.2% 12.3% 7.2% 2.8% GDP Market cap Manufacturing Consumption RMB weight in Special % of MSCI AC World Drawing Rights Source: World Bank, IMF
Slide 20: China continues to integrate with global economy
China continues to integrate with global economy Balancing between security and global integration Export remains a key driver for China’s economy* China’s export value continues to increase but with China's Trade Linkages changing geographic tilt** Breakdown of China’s exports by destination 24% 25
Slide 21: Chinese equities have low correlation with other equity markets
Chinese equities have low correlation with other equity markets As an asset class this provides diversification value MSCI ACWI ex- US MSCI AC World TOPIX (Japan) MSCI China A MSCI Europe MSCI World MSCI China S&P 500 MSCI EM Onshore Indices MSCI China 1 0.6 0.5 0.5 0.5 0.9 0.5 0.6 0.7 MSCI China A
Slide 22: Diversified growth drivers and investment style characteristics
Diversified growth drivers and investment style characteristics Strong consumer Innovation and import Energy Transition SOE Reform brands substitution Tsingtao Brewery, Midea Zhongji Innolight, Beigene Yutong Bus, Pinggao Hisense, PetroChina No representation is being made that any investment will o
Slide 23: India vs. China
India vs. China
Slide 24: Stock example: Macrotech Developers
Stock example: Macrotech Developers Company description: one of India’s largest real estate developers, with a stronghold in the Maharashtra region Affordability index (property price / annual income) 5.9 5.3 5.1 5.1 5.1 Investment thesis 5.0 4.8 4.7 4.7 4.7 4.7 4.6 4.6 4.5 4.4 – Industry backdrop 4
Slide 25: Stock example: Hisense
Stock example: Hisense Company description: the 4th largest white goods (air-conditioner, fridge & washing machine) manufacturer in China Investment thesis – Industry backdrop – Government focus on restructuring the efficiency of state- owned enterprises (SOEs) – Company fundamentals – SOE reform fo
Slide 26: Important information
Important information This communication is for institutional investors and financial advisors only. It is not to be distributed to the public or within a country where such distribution would be contrary to applicable law or regulations. The information may discuss general market activity or indust
Slide 27: Important information
Important information Targeted or projected performance returns Investment Team Targeted or projected performance is hypothetical performance and does not represent actual results. No There is no assurance that the persons referenced herein will continue to be involved with investing assets for clie
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