VanEck Green Bond ETF · AMEX:GRNB
VanEck Green Bond ETF — VanEck — Investor Presentation (May 2019)
16 slides from VanEck Green Bond ETF's investor presentation, May 2019
Slide 1: China in 2019: Pursuing a middle-income growth model
May 2019 China in 2019: Pursuing a middle-income growth model
Slide 2: Natural slowdown, bigger global contribution
Natural slowdown, bigger global contribution We believe China’s economy is bound to slow as it matures and relies more on consumption – similar to what happened with regional peers China’s contribution to global growth will still remain significant, in our opinion China Has High Real GDP but Low
Slide 3: Innovation, economic complexity ahead of peers
Innovation, economic complexity ahead of peers We believe China’s innovation record is impressive Economic complexity is significantly above the peer group China Has a Diverse and Sophisticated Economy 2.5 2 1.5 China Israel France 1 Mexico Economic Complexity Index 0.5 Turkey 0 Brazil -0.5 -1 -
Slide 4: Secular transformation to consumption-based economy
Secular transformation to consumption-based economy Rising middle class drives secular transformation to consumption-base economy – higher incomes are associated with a higher share of services in GDP The share of GDP driven by investment is slipping below 30% and services account for nearly 60%
Slide 5: Transformation has costs – widening macro imbalances
Transformation has costs – widening macro imbalances China accumulated multiple macroeconomic imbalances while getting richer China’s leverage – including corporates – is among the highest in the world So is M2/GDP ratio Past Growth Was Fueled by Additional Debt The Supply of Money is Still Hi
Slide 6: Price deflation reignited debt concerns
Price deflation reignited debt concerns Even though the producer price index (PPI) is driven mostly by commodity prices… …it pushes nominal GDP lower, worsening China’s debt/GDP ratio PPI and Oil Prices are Highly Correlated Decreasing Prices Have Pushed Down Nominal GDP 10 80 30 Brent crude pri
Slide 7: Price deflation has implications for corporates
Price deflation has implications for corporates Lower PPI and nominal GDP growth may eat into corporate profits… …which can be problematic as debt servicing ratios remain high Declining Prices Reflected in Corporate Profits Private Debt Service Coverage Ratio is Elevated 35 10 30 30 8 Turkey, 27
Slide 8: Dealing with imbalances is painful
Dealing with imbalances is painful China has begun to address some of the most pressing issues – high leverage and shadow banking However, the deleveraging drive hit the private sector and smaller companies the hardest in our opinion, while State Owned Enterprise (“SOE”) borrowing costs remained
Slide 9: Some traditional policy tools appear less effective
Some traditional policy tools appear less effective We believe the transmission mechanism is not working properly in 2018, as past policy moves (2018 RRR cuts) failed to ease China’s financial conditions as they had in the past easing cycles The PBoC, however, persevered, and the “drip stimulus”
Slide 10: Fiscal stance remains stimulative
Fiscal stance remains stimulative Authorities are relying more on policy support through fiscal channels, in our view China’s budget deficit was at historic wide in 2018… …albeit not as wide as it was in the U.S. after the global financial crisis China Fiscal Balance, % GDP 4 2 Fiscal Balance
Slide 11: China growth forecasts becoming less pessimistic
China growth forecasts becoming less pessimistic Downward revisions to GDP growth forecasts appear to have bottomed out We believe drip stimulus is kicking in China Growth Forecast Revisions Show Drip Stimulus Effect 101.5 101.3 101.1 100.9 100.7 100.5 100.3 100.1 99.9 99.7 99.5 Source: VanEck;
Slide 12: Services look fine and manufacturing may be turning
Services look fine and manufacturing may be turning We believe China’s manufacturing investments are rebounding Services look steady and new orders are rebounding China Manufacturing PMIs China Services PMIs 55 56 55 54 54 53 53 52 52 51 51 50 50 49 49 Apr-16 Jun-16 Oct-16 Apr-17 Apr-16 Jun-17 O
Slide 13: Important policy buffer: household balance sheets
Important policy buffer: household balance sheets We believe household balance sheets are currently in good shape However, property comprises a large portion of household assets and consumer confidence shows strong correlation with housing sector A sustained drawdown in housing prices could ha
Slide 14: Geopolitical considerations to grow in importance
Geopolitical considerations to grow in importance Trade dispute with the U.S. is affecting trade flows and confidence We believe geopolitical issues will not disappear any time soon as U.S. demands strike at the heart of China’s growth/social model Some supply chains may shift out of China C
Slide 15: U.S. currency demands may create problems down the road
U.S. currency demands may create problems down the road The U.S.’ “CNY stability” demand is in contradiction with fundamentals (slower growth, smaller current account surpluses) Renminbi appreciated a lot relative to regional peers and other reserve currencies in the past several years Past Curr
Slide 16: Disclosure
Disclosure Please note that Van Eck Securities Corporation (an affiliated broker-dealer of Van Eck Associates Corporation) may offer investments products that invest in the asset classes and country included in this presentation. This is not an offer to buy or sell, or a solicitation of any offer to