Great thank you.
Can you hear me OK?
Yep.
OK.
So I can't see if the slides are up.
But if we just turn to slide 2, which
highlights the performance for the company.
Can you-- so I don't have--
I can't see if the slides are presented.
Are we on slide 2?
Yeah.
OK, great.
Well, thank you, everyone, for coming.
We'll start here with a review of the performance
for the fiscal year.
You can see, over the one-year period,
the company outperformed the index by nearly 5%.
And again, I think one thing that we're very pleased about
is over a three-year, five-year, 10-year, and since inception,
since launch, the company the fund
has outperformed the index over every single period.
And you can see the calendar year performance--
this is not fiscal year, calendar year--
but you can see, for the last 10 years, roughly,
the fund has outperformed the index nearly every year.
And in those years where the fund didn't outperform,
it was slightly below the index level.
So that was in 2020 and in 2014.
So I think we are very pleased with the consistency
of the outperformance over such a long period.
If we can just turn to slide 3, please.
Slide 3 highlights the attribution
on a country and sector level.
So you can see that for the fiscal year ending September
30, 2023, that China, Korea, Taiwan, and India and Hong
Kong and Indonesia contributed positively
to the fund's performance.
We'll touch on this in a bit more detail.
But this was through a combination
of overweights and underweights within the fund
versus the index.
And you can see, on the right-hand side there,
the large contribution from the consumer discretionary sector.
The consumer discretionary sector
is a broad definition of companies
and individual sectors and industries within Asia.
But to give some color here, this
would include the fund owning--
being overweight auto manufacturing and auto
manufacturers in India, such as Maruti Suzuki,
as well as being underweight e-commerce companies in China
where the market environment has been extremely competitive,
as well as underweight EV manufacturers
in China, which also has been extremely competitive.
This also includes a number of different names
that are quite niche or maybe have
specific competitive advantages.
And that would include companies like Shenzhou International,
which is a vertically integrated textile manufacturer.
And then if we just kind of move down
some of the sector attribution, utilities
was the second largest contributor.
This was mainly on the basis of owning China Yangtze, which
is a Chinese utility.
And as interest rates continue to fall in China,
stable dividend-paying companies are outperforming.
And then I think it comes as no surprise,
but the holdings in the technology sector
performed strongly throughout the year.
This was mainly a combination of Taiwan Semiconductor,
Samsung Electronics, Hynix.
And these companies have performed well mainly
on the back of a very positive outlook
for high-performance computing related to demand from AI.
And then the fourth leading contributor from a sector basis
was real estate.
This is really a combination of being underweight
Chinese residential real estate developers, as well as Hong
Kong developers, and owning the leading Chinese developer,
which actually outperformed during the fiscal year
despite the very challenging backdrop to that sector.
And then in terms of consumer staples,
this is a mix of companies, including some Chinese consumer
staples companies, as well as being
underweight some more expensive ones in India that derated.
Maybe I'll just touch on the underperformance, briefly,
of Singapore.
You can see there at the bottom left, again, on slide 3,
this was primarily coming from an internet conglomerate that
is headquartered in Singapore called Sea Limited,
but their business is primarily derived
through Southeast Asia in terms of e-commerce and video game
developing.
So we'll just turn to slide 3--
that's right, slide 4.
So here is the performance attribution
on a stock-level basis.
I touched on these briefly already, but in terms
of the contributors, again, a number
of companies within the technology sector
that include SK Hynix, which is a Korean company that produces
memory chips, and their lead in high-bandwidth memory
over their other Korean competitors sons
electronics and US competitors.
This has been a big competitive advantage
in terms of growing demand from servers and AI.
And then I touched on, briefly, the competitive environment
and backdrop in Chinese e-commerce.
And you can see that the fund was underweight names
such as Meituan and JD.
And you can see those stocks fell, respectively,
around 30% to 45% for the fiscal year.
And then I mentioned, earlier, the overweight
in Maruti Suzuki.
The Indian economy has performed very strongly,
and Maruti is a leading auto manufacturer
and dealer in that country.
And then I touched on, also earlier,
some of the technology names--
Samsung Electronics, Taiwan Semiconductor.
And at the very bottom there is Trip.com.
This is an online travel agency in China.
The stock performed particularly strongly in the first half
of the fiscal year post the reopening
of the Chinese economy when the zero COVID
restrictions were lifted.
If I just touch on some of the detractors briefly,
some of the main names that we touched on already,
Sea Limited.
Sea Limited, again, is a video game developer
and e-commerce company.
This underperformed primarily because of rising competition
from Chinese e-commerce companies growing
in Southeast Asia.
There's a number of companies in China
that also underperformed during the period.
This includes Foshan Haitian, which is--
they make the leading brand of soy sauce in China.
So you think about, it's like the Kikkoman of China.
And a couple of other names there,
also AIA also have underperformed.
And then maybe I touch on Pinduoduo.
This is a company that you may have heard of.
They are an e-commerce company in China
that focuses on selling cheap goods.
More recently, they have been expanding overseas
through their brand called Temu.
And this company, essentially, is selling cheap goods
into developed markets.
And this business has done very well
as consumers are seen to be downtrading globally.
Those are the main positive highlights for the fiscal year
under review.
I'll just turn to slide 5 briefly.
For the first quarter of the fiscal year 2023,
the fund had a difficult start.
And this has primarily been through a combination
of being underweight India, which has performed very
strongly, and being neutral China,
but stock selection in China was difficult.
This is primarily because of the positions
in the industrial space in China holding overweights
in automation companies and industrial leaders
such as [INAUDIBLE] that have performed poorly and derated
with a poor economic outlook in China,
as well as some consumer discretionary names.
Maruti Suzuki performed poorly in the first quarter.
I'll just turn to slide 6 so you can get a little bit of color
on this.
On the right-hand side would be the top 10 detractors.
I'd also mention Yum China.
Yum China is the franchise operator
of Kentucky Fried Chicken and Pizza Hut in China.
And as I mentioned on the previous slides,
with names like Foshon Haitian, where
they've witnessed increasing competition
and they suffered from downtrading in terms
of individual Chinese consumers and restaurant chains,
we've seen a similar dynamic play out
in the fast food market in China.
I'll just go to slide 8 now in terms of the positioning.
So you can see here, on the top half of the slide,
the fund is overweight.
The largest overweight is technology,
followed by financials, and then consumer discretionary.
And then on the right-hand side, the fund
remains underweight consumer staples.
This has been a long-held underweight,
mainly because we find the sector is overvalued
and growth is relatively low.
And then that's followed by real estate and energy.
I think we touched on the outlook in China
for the residential real estate sector.
We are extremely cautious on the developers themselves
in terms of that sector.
And then energy, we are underweight
mainly because many of the companies within the sector
in Asia have ESG challenges.
And then I just highlight, at the bottom
of page 8, the country positioning.
So Hong Kong is a 2% overweight, but I
would couple that with the underweight in China, which
is 1.6%.
We look at these markets as being combined and not
necessarily unique to Hong Kong.
So many of the Hong Kong-listed companies,
their economics are driven by what's
happening in mainland China.
And the long-standing overweight in Indonesia remains.
We're very optimistic not only on the economy,
but also on the underlying dynamics of the corporates.
The top corporates in Indonesia are very well run.
They're conservatively managed.
They earn high returns.
And they've generated stable, consistent growth.
In Singapore, the main overweight is DBS.
It's a bank which pays a 7% dividend yield.
They have managed this company much better than
in the past in terms of generating better
returns on capital and paying that out to minority
shareholders.
This fund is neutral Korea and Thailand and India,
and as I mentioned, underweight China, underweight Malaysia,
and slightly underweight Taiwan.
And I'll move to the next slide on page 9.
So some of the portfolio positions.
On the left-hand side, these are the top positions
by absolute weight.
So you can see Taiwan Semiconductor
is pushing near a 10% weight in the portfolio.
As I'm sure you're aware, this is a very strongly growing
business, and its index size in the market is growing.
And that's followed by Samsung Electronics, Tencent,
HDFC Bank, AIA, Infosys, Maruti, Axis Bank, Hong Kong Exchange,
and Shenzhou International.
And then in terms of the relative positions,
the active weights are on the right-hand side
there with HDFC, Maruti, Shenzhou, Tencent,
and Axis Bank being the largest overweights or largest bets.
And you can see the top five underweights.
There is zero holding in Alibaba.
I touched on, earlier, our view of the competitive nature
of the e-commerce sector in China, Reliance Industries,
Pinduoduo, ICICI Bank, and China Construction Bank.
If we just turn to the next slide, please.
Here are the portfolio characteristics.
You can see that the fund has a slight growth
bias versus the index.
So the 12-month price-to-earnings ratio
is 15.5 times versus the benchmark at 12.5 times.
The price-to-book ratio is slightly higher.
The dividend yield is slightly lower.
Return on equity is higher.
And the balance sheets of the companies we hold
are much better.
That's something that we might touch on later
in the Q&A session.
And then you can see there the five-year expected growth
rates are higher.
Our average number of red flags-- this
is an internal proprietary research framework
that we use to determine a company's governance,
economics, and duration.
And you can see that the average company we hold
has a lower number of red flags compared to the index.
And this also corresponds to the lower MSCI carbon intensity.
And then just below that, you can see the number of issuers
is around 60, the active share is near 70%,
the predicted tracking error is 3.5%, and the beta is 1.
In terms of the strategic classification,
I think this is a framework that most of you are familiar with.
You can see that we are overweight premium companies
and quality companies and underweight trading companies.
And on the bottom there, the fund
is overweight mega-caps, underweight midcaps,
and overweight large caps.
I think I'll stop there for IAS to take the market outlook.
Thank you, Rob.
Good morning all.
Thank you all for being here.
And over the next few minutes, I will
give an overview of what our outlook is now
for the Asia investment trust, and obviously,
an outlook for the region.
Just to begin with, this is what we call our heat map dashboard.
I'm not going to go through each thing in individually,
but use this page, actually, just
to give a broad outlook of what we think about the region.
If we're looking at 2024, basically, green
means good, yellow, not so bad, orange,
sort of improving a bit.
But to put that into a story, first of all,
in terms of growth, we're looking at growth in Asia,
looking to pick up actually in the next couple of years.
And I think that's best illustrated by earnings
as opposed to GDP growth.
Last year, earnings for the region--
this is ex-Japan-- was about flat.
This year, we're actually forecasting about 20%/21%
earnings growth.
So quite a decent pickup in earnings growth in the region.
Second, what's also very positive
is in terms of valuations.
Valuations in Asia today are trading just
below its long-term average.
So both from a PE level, from a price to book level,
and even in our own internal signals,
which we measure forecasts over a five-year period,
Asia is trading at a bit of a discount
to its long term average.
So growth is coming back.
Valuations are attractive.
Also, very importantly, if we believe that US dollar interest
rates are going to start flattening out and easing,
this has generally been very positive for the Asian
and emerging market region.
So we've got positive tailwinds coupled with valuations
and growth coming back.
So generally, a pretty positive picture.
Maybe it's also worth highlighting, though, what
are the risks to that scenario?
One.
There's no doubt China, in terms of, especially, its property
side, is a bit of an overhang on the economy today.
We have to see how that evolves.
We believe that the government will intervene
in some sort of measures of setting up a bank
to buy up bad loans and so on to take it out of the system
and isolate it so that the system can go back
to real growth in that area and stabilize it.
We'll have to see what happens over there.
But importantly, China, in many other areas,
as Rob pointed out, we've got great corporate earnings
coming out from various sectors.
And I'll touch on that in a little while.
But we have to see how that evolves.
The other thing is also on the interest rate
scenario and inflation.
Our base case today is that inflation
is starting to stabilize and starting to ease.
And that will allow interest rates
to come down, which is what the markets are
sort of anticipating.
If inflation proves to be persistent
and interest rates stay high, that obviously
has an implication on equity markets as a whole,
not only to Asia, but probably the US as well.
And that's something to bear in mind as well.
Moving forward, just touching on China,
the left-hand chart is showing that there
are issues in terms of fixed asset investment, which,
a lot of it is driven by an overhang of the property
sector.
And that remains something that we have to watch out for.
Consumption, on the right-hand side, is starting to tick up.
In complete honesty, it hasn't recovered as fast and as rapid
as we thought that might happen after the COVID
restrictions were eased.
But certainly, all the data that's coming out today
is suggesting it's all improving and it's getting
back close to pre-COVID levels.
Interesting to see tourist movements in China
are getting much higher again.
Domestic consumer consumption is getting better,
but we still need to see stronger numbers over there.
But in terms of earnings, just to point out,
last year, earnings growth in China as a whole for the market
was about 12%.
The forecast for the current year is about 15%.
So even though there are softness
in certain parts of China, there are corporates that are still
producing good earnings.
And this is particularly in the technology space,
in the whole energy transformation space,
and even in the consumption space.
So China today is very, very cheap as well.
It's trading at 1 times book--
or 1 times 1 times-- sorry, 1.1 times book,
which is the cheapest it has been
since the Asian financial crisis.
So we believe a lot of the bad news is in the price,
and from a bottom-up level, there are actually
great opportunities still.
In terms of earnings in general for Asia-Pacific,
I mentioned the numbers earlier on,
that we are forecasting a recovery to about 20%
from being flat last year.
This chart is just showing earnings revisions,
which is showing earnings revisions upwards compared
to earnings revisions downwards.
Generally, a rising line is good--
a negative line is bad.
We are seeing green shoots of earnings recovery,
and certainly, from a bottom-up level, when we visit companies,
we are seeing that the outlook is looking much better.
But this is obviously something we will monitor,
but the outlook is definitely higher earnings
growth into this year, and hopefully, next year as well.
This is just showing valuations pictorially.
On the left-hand side is price to book.
As I mentioned, it's below the long-term average.
So it's on the cheaper side.
The right-hand side is just our own internal signals,
which is suggesting, again, that it's
trading on the cheaper side compared
to its five-year average.
In terms of individual markets, on the left-hand side
is showing our forecast, in terms of countries,
of expected returns of each country,
which is a combination of earnings growth,
valuations, and so on over a five-year period.
China, as you can see, which I suggested
by saying it's very cheap, is looking very attractive.
There are obviously still risks involved,
but that's one of the reasons why it is trading very cheap.
So we are being very diligent about making
sure we have the right opportunities in the portfolio.
In terms of the others, Taiwan is also
looking attractive, Hong Kong, Indonesia, and Korea as well.
These are all relative to each other.
The ones that are the bottom, in terms of, like, India,
by itself, it's looking fine.
But when you stack it up against the rest
of the Asian countries, the expected returns
are lower than the rest but fundamentally still very sound.
So on this, as Rob already pointed out,
we are overweight Korea.
We're overweight Indonesia.
If we look at China/Hong Kong combined,
we also actually have a small overweight there as well.
Maybe just moving on in terms of some themes
and maybe just touching on some stocks.
We are overweight the financial sector,
as Rob has already mentioned.
And there are a few reasons for this.
And the one big theme here is this continuous financial
deepening in the Asian region.
There's still underpenetration in terms of the banking system.
And this will continue to grow as Asia continues
to become very prosperous.
So we take the left-hand side, first of all.
That's showing, basically, insurance penetration.
I know-- sorry, it's a little bit difficult to read.
I apologize.
But simply put, as GDP per capita continues to grow,
there's a strong correlation between higher GDP
per capita and percentage of ownership
of insurance products.
And I think we all agree that places like China, Indonesia,
India, et cetera, is that GDP per capita
is going to continue to grow, and therefore, there
are great opportunities for the insurance sector.
Hence, some are overweights in those areas,
in AIA, for instance, which benefits from growing insurance
penetration in the region.
Banking as well.
If we look at the middle chart, the green
is actually-- the green is showing the unbanked percentage
of population in each country.
As you can see in Indonesia particularly, which
is in the middle part, there's still
a very high percentage of the population that's unbanked.
And then you can draw that analogy with many others.
Singapore, which is the most developed city in that chart,
blue means percentage that's already banked.
And we believe that the other countries around there
will continue to move to the Singapore average, which,
again, really benefits the banking
companies in the region.
And examples of that are things like HDFC Bank in India, BCA,
which Rob already mentioned.
Both great managed banks, very strong balance sheets,
great management, great visibility
in earnings over multi-year periods,
and compounding for shareholders.
Lastly, on this example, in terms of financial services,
we've got an example here for Hong Kong exchange,
which is the stock exchange of Hong Kong.
There's a trend line that you can
see where average daily turnover continues to increase.
And we believe, as China continues to grow,
which it will, and the connectivity
between Hong Kong and China, the turnover in the Hong Kong
exchange is going to continue to grow and benefit shareholders.
Couple of stock examples of what we hold just to finish off.
Sorry to belabor the point.
Bank Central Asia, which is BCA, I
think we talked about it enough.
But this is just showing in terms, again, of bank accounts
as a percentage of the population above 15
of China, Indonesia, India, Malaysia,
Thailand, and Philippines.
As you can see, it has continued to grow.
But Indonesia certainly still has a lot more to go.
And we are particularly very positive on BCA as a result.
Another area that we do like is tech hardware.
And must admit, although there is a lot of news
and a lot of positivity on AI, we
think that news is actually very justified.
There is a lot of things happening in the AI space,
and there are certainly companies in Asia
that are benefiting from it.
The left-hand chart is showing the number of AI server
volumes, how it's growing and how it's forecast to grow.
Now, what does that mean for certain companies in Asia?
And we use TSMC as an example.
It's a leading tech manufacturer-- semiconductor
manufacturer-- in Taiwan.
Essentially, 40% of TSMC's production
is actually at the high-end chips.
And these are what are used in AI servers.
So companies like TSMC are a great beneficiary
as AI continues to develop, and certainly,
is a big holding for us in your trust.
Lastly, again, in the technology space,
there's a company called Largan, which is based in Taiwan.
It's essentially a leading mobile lens maker.
So as you all know, these mobile phones
have become very sophisticated in the camera function.
This chart is actually showing, now,
the content of how much of a camera
is now in a mobile phone.
And essentially, it's become roughly about 20%
of your average iPhone.
And as each iPhone comes out, it generally-- that content
continues to get higher and higher, of the camera.
And Largan is a leading producer of the lens in the camera.
And again, we think this is a company that
is a big beneficiary as we continue to see development
in the mobile phone space.
So with that, I'm going to close off
by just saying that Asia has had a bit of a difficult year
or so.
Frankly, China has been an issue there.
We've seen a lot of softness in China
led by the real estate side.
There have been geopolitical tensions as well.
And certainly, government regulatory issues
have also been a little bit uncertain.
Maybe just commenting on that, we certainly
believe that the Chinese policymakers want
a balance between, shall we say, common prosperity,
but also want the economy to continue to grow,
as it needs to, for social stability
and to bring up the population.
We've seen strong evidence, with some of the policy flip-flops,
that the policy makers have actually now understood
some of the issues and are taking proper action
to regain investor confidence.
And I'm not talking about just equity investor confidence.
We're talking about local investors who
are investing in corporates, in plant and machinery,
and to get their confidence back again.
We believe, as we said, in terms of price, valuations,
a lot of that bad news is there.
And I think we are well-positioned in the fund
to take advantage of, hopefully, a recovery in that area.
Generally, the environment looks positive with the risk
that the economy in China continues to soften.
That may have an impact.
But we are confident, our base case scenario,
that we will see stabilization in the recovery from here.
Thank you.