Schroders PLC · LSE:SDR
Schroders — Schroder AsiaPacific Fund — Webinar SAPF (January 2022)
35 slides from Schroders's conference presentation, January 2022
Slide 1: Schroder AsiaPacific Fund plc
Marketing material Schroder AsiaPacific Fund plc Richard Sennitt, Fund Manager Abbas Barkhordar, Assistant Fund Manager January 2022
Slide 2: Schroders in Asia
Schroders in Asia Strength of resources both in Asia and London Schroders Asian team exceptionally well resourced Schroders office Tokyo Years of Years with Opened 1974 Fund Manager Location Focus Experience Schroders Seoul Opened 1987 Beijing Richard SENNITT London Asian Equity Specialist 28 28 Ope
Slide 3: Asia Pacific ex Japan Equities Research
Asia Pacific ex Japan Equities Research Our research team Years of Years with Years Analyst Location Coverage Years of Experience Schroders Analyst Location Coverage with Experience Schroders Head of Research, Asia Adam OSBORN Hong Kong 31 19 Regional Energy and ex Japan Equities Sameer KAKAKHEL, CF
Slide 4: Performance
Schroders Performance
Slide 5: NAV performance
Schroder AsiaPacific Fund plc NAV performance Benchmark: MSCI AC Asia ex Japan Index1 (net dividends reinvested) Current value: £1,071,050,333 Inception date: 20 November 1995 Returns to 31 December 2021 (£) 3 months 1 year 3 years 5 years 10 years % % % p.a. % p.a. % p.a. Schroder AsiaPacific Fund
Slide 6: NAV performance: calendar year returns
Schroder AsiaPacific Fund plc NAV performance Calendar year returns (£) Q4 2020 – Q4 2021 Q4 2019 – Q4 2020 Q4 2018 – Q4 2019 Q4 2017 – Q4 2018 Q4 2016 – Q4 2017 % % % % % Schroder AsiaPacific Fund plc2 1.0% 29.8% 15.0% -11.7% 38.7% MSCI AC Asia ex Japan1 -3.8% 21.2% 13.6% -9.1% 29.5% Relative perfo
Slide 7: Market returns
Market returns To 31 December 2021 Country returns in GBP Sector returns in GBP -0.7% Utilities 3.6% India 27.4% 14.9% Taiwan 7.9% -6.7% 27.3% Energy 12.3% Australia 1.6% 10.4% -0.3% Industrials 10.4% Singapore -3.8% 6.6% Information Technology 6.6% 6.0% 10.3% Indonesia 3.1% Financials -1.4% Thailan
Slide 8: Performance since inception to December 31, 2021
Schroder AsiaPacific Fund plc Performance – Since inception1 to December 31, 2021 Index 100 = 20 November 1995 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2
Slide 9: Risk considerations
Schroder AsiaPacific Fund plc Risk considerations – 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 amount originally invested. – Emerging markets, and especi
Slide 10: Outlook
Schroders Outlook
Slide 11: Asian Outlook – Recent performance of Asia has lagged
Asian Outlook – Recent performance of Asia has lagged Asian markets underperform as regulatory and economic concerns impact China Index 210 190 170 150 130 110 90 70 50 2016 2017 2018 2019 2020 2021 S&P 500 FTSE 100 MSCI AC Asia x Jp Past Performance is not a guide to future performance and may not
Slide 12: Asian Outlook – China's 'three mountains'
Asian Outlook – China’s ‘three mountains’ Why the increased focus on ‘common prosperity’ and ‘social responsibility’? Concern country ‘grows old before it becomes rich’ China, number of newborns p.a. (in million), 1960- 20201 Cost of living has risen with ‘Three Mountains’ talked about today - Prope
Slide 13: Asian Outlook – Spoils of growth in China have not been shared evenly
Asian Outlook – Spoils of growth in China have not been shared evenly Policy to focus on “common prosperity” China, Mean quintile urban disposable income (US$) Source: Morgan Stanley Research, CEIC, WIND, August 2021. 13
Slide 14: Semiconductors still required
Semiconductors still required ‘Work from home’, Cloud, 5G driving tech demand positive for Korea & Taiwan Share of wafer worldwide capacity based on fab headquarters A new tech cycle underway? location – Work from Home is driving a resurgence in demand for PC 1% <1% notebooks, smartphones, Wi-Fi dev
Slide 15: China - Evergrande not a systemic risk
China - Evergrande may look huge but in China context on a stand- alone basis it doesn’t look a systemic risk Overall residential construction activity has slowed but inventories appear ‘normal’ Large developers in context1 Evergrande growth in a different Residential inventories2 Total real estate
Slide 16: China - property market is likely to slow
China - BUT we shouldn’t be complacent – the property market is likely to slow and a more disorderly unwind would be very painful for the economy Property a driver of investment1… …and local government revenue1 Property volumes have slowed2 Share of GDP (%) Local government revenue (share of GDP) Sa
Slide 17: Asian Outlook – China easing required to sustain growth
Asian Outlook – China easing required to sustain growth Global recovery has driven exports but domestic tightening has been a drag Exports supporting manufacturing investment1 Growth follows credit cycle2 China Fixed Assets Investments, 2 year Compound annual growth rate (CAGR) 3 month moving averag
Slide 18: Asian Outlook – can newsflow improve in China?
Asian Outlook – can newsflow improve in China? Regulatory intensity potentially peaking and Party congress later in the year Regulatory noise in China peaking? Political cycle to see newsflow improve? Privately owned enterprise (POE) regulation proxy MSCI China index - China Party Congress (1997, 20
Slide 19: Asian Outlook – India has rerated up
Asian Outlook – India has rerated up Recovering earnings and fewer regulatory concerns have seen India benefit Indian earnings are recovering strongly India Price/earnings relative valuation to the region at a high* 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% 2003 2005 2007 2009 2011 2013 2015 2017 201
Slide 20: Asian Outlook – Covid concerns remain
Asian Outlook – Covid concerns remain Outside of China shift has been towards ‘Covid mitigation’ rather than ‘Zero Covid’ Covid-19 vaccine doses administered per 100 people Total number of doses administered, divided by the total population of the country Source: Official data collated by Our World
Slide 21: Asian Outlook: earnings expectations
Asian Outlook Earnings expectations improved but now moderating Earnings expectations moderating?1 …and revisions no longer positive2 Consensus EPS* growth for AC Pacific ex Japan 40% 2.5 30% 2.0 20% 1.5 10% 1.0 0% -10% 0.5 -20% 0.0 2017 2018 2019 2020 2021 2009 1999 2001 2003 2005 2007 2011 2013 20
Slide 22: Asian Outlook: rising logistics costs and shortages
Asian Outlook Risk to earnings from rising logistics costs and shortages Rising logistics costs1 Shortages – semiconductors just one If needs must…3 example2 US$ Price index Weeks – gap between ordering a chip and delivery Million tonnes 14,000 300 30 390 12,000 370 250 25 10,000 350 200 8,000 330 1
Slide 23: Asian Outlook: cost pressures and inflation
Asian Outlook Cost pressures have seen inflation rise but yet to be seen in wage growth Rising input price rises may impact margins1 But labour cost inflation remain subdued for now2 Asia Wage Growth (% 2Y Compound annual growth rate (CAGR)) 15.0 7.5% 7.0% 10.0 6.5% 6.0% 5.5% 5.0 5.0% 4.5% 0.0 4.0%
Slide 24: Asian Outlook: 'Taper tantrum' risk
Asian Outlook ‘Taper tantrum’ a risk but healthier external accounts and higher real rate differentials Asia Real rate differentials with US supportive versus Asian currencies have remained stable versus the US 20131 dollar in 2H212 5 112 1.24 Asian FX 4 1.22 110 stable versus US dollar 3 1.2 108 2
Slide 25: Stock selection to remain key
Asian Outlook – more about impact on stock valuation Stock selection to remain key MSCI Asia ex-Japan: Forward P/E peak-to-trough (x) – Valuation spreads across the 60 Peak market remain large 50 Avg since 04 Current – Financials and property are near Trough the bottom of their ranges 40 – Pharma, s
Slide 26: Valuations back to long term averages
Asian Outlook Valuations in aggregate now back to 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 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 1995 2005 1991 1993 1997 1999 2001 2003 2007 2009 2011 2
Slide 27: Asia valuation discount to the Rest of the World
Asian Outlook Asia valuation discount to the Rest of the World Price Earnings of Asia now close to 30% discount to Information technology stocks valuations have shown a the Rest of the World marked divergence 1.0 30 Forward Price / Earnings ratio (x) 25 0.9 20 0.8 15 0.7 10 0.6 5 2011 2013 2015 2017
Slide 28: Asia remains out of favour with global investors
Asian Outlook Perhaps in part because for now Asia remains out of favour with global investors Foreign institutional investors (FII) have been Leaving Global funds heavily underweight consistent net sellers Basis points (bps) 40 850 -200 AsiaPacific x Japan allocation in global mutual funds (Over/un
Slide 29: Positioning
Schroders Positioning
Slide 30: Active country positions as at 31 December 2021
Schroder AsiaPacific Fund plc Active country1 positions as at 31 December 2021 Overweight/underweight positions % of portfolio Underweight Overweight 12.9 Hong Kong 6.0 3.2 Australia 3.2 5.8 Singapore 2.8 2.6 Vietnam 2.6 1.9 United Kingdom 1.9 16.5 Korea 1.9 15.2 India 1.0 19.3 Taiwan 1.0 0.9 Nether
Slide 31: Active sector positions as at 31 December 2021
Schroder AsiaPacific Fund plc Active sector1 positions as at 31 December 2021 Overweight/underweight positions % of portfolio Overweight Underweight 34.8 Information Technology 9.0 23.3 Financials 4.7 17.5 Consumer Discretionary 2.9 3.6 Real Estate -0.1 1.4 Energy -1.5 8.8 Communication Services -1.
Slide 32: Top 10 holdings by absolute weight
Top 10 holdings by absolute weight Schroder Asia Pacific Fund As at 31 December 2021 Stock Country Sector Portfolio weight (%) Benchmark1 weight (%) Active weight (%) Samsung Electronics* Korea Information Technology 9.9 5.3 +4.6 TSMC Taiwan Information Technology 9.7 7.9 +1.8 Tencent China Communic
Slide 33: What do we like in the region: key investment themes
What do we like in the region: key investment themes Tech leadership & innovation, Chinese consumption & service sector, Indian finance World Class Exporters Chinese Consumption & Techtronics Services Johnson Electric Value & Quality Midea Shenzhou International Ping An Samsung SDI – Swire Propertie
Slide 34: 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 amount originally invested. Exchange rate changes may cause the valu
Slide 35: Important information
Important information Source for ratings: Morningstar, as at 31 December 2021. © 2019 Morningstar UK Ltd. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accura
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