Guide to the Markets Guide to the Markets - Asia - MARKET INSIGHTS - JP Morgan Asset Management
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Guide to the Markets - Asia
MARKET INSIGHTS
Guide to the Markets
Asia | 4Q 2020 | As of September 30, 2020Global Market Insights Strategy Team GTM – Asia | 2
Dr. David Kelly, CFA
New York
Karen Ward
Samantha Azzarello London Tilmann Galler, CFA Tai Hui
Hong Kong Chaoping Zhu, CFA
New York Frankfurt
Shanghai
David Lebovitz
New York
Michael Bell, CFA
Dr. Cecelia Mundt Maria Paola Toschi Marcella Chow
London
New York Milan Hong Kong
Gabriela Santos Shogo Maekawa
New York Tokyo
Hugh Gimber, CFA
London Ian Hui Agnes Lin
Vincent Juvyns
Hong Kong Taipei
Meera Pandit, CFA Luxembourg
New York
John Manley
New York
Ambrose Crofton, CFA
London
Manuel Arroyo Ozores, CFA Dr. Jasslyn Yeo, CFA
Jordan Jackson Madrid Singapore
New York Kerry Craig, CFA
Jennie Li
Melbourne
New York Jai Malhi, CFA
London
Lucia Gutierrez Mellado
Max McKechnie Madrid
LondonPage reference GTM – Asia | 3
Regional and local economy Fixed income
4. Asia: Economic snapshot 45. Global fixed income: Yields and returns
5. ASEAN: Economic snapshot 46. Global fixed income: Return composition
6. ASEAN: Monetary and fiscal policy 47. Global fixed income: Valuations
7. China: Economic snapshot 48. Global fixed income: Bond yields
8. China: Cyclical indicators 49. Global fixed income: Negative-yielding debt and bond market size
9. China: Fiscal policy 50. Global fixed income: Yields and risks
10. China: Monetary policy and credit growth 51. Global fixed income: Interest rate sensitivity
11. China: Exchange rate and foreign reserves 52. U.S. real yields
53. U.S. investment grade bonds
Global economy 54. U.S. securitized assets
12. Global growth 55. U.S. high yield bonds
13. Global Purchasing Managers’ Index (PMI) 56. Emerging market debt
14. Global supply chains 57. China bonds
15. Global trade
16. Global inflation Other asset classes
17. Central bank policy rates 58. Asset class returns
18. Central bank balance sheets 59. Volatility
19. Global monetary policy 60. U.S. dollar
20. Fiscal policy response 61. Currencies
21. Political calendar 62. Emerging market external positions
22. China-U.S. economic relations 63. Commodities
23. United States: Election 64. Gold
24. United States: Presidential candidates’ campaign platform 65. Oil: Short-term market dynamics
25. United States: Economic growth and the composition of GDP 66. Alternative sources of income
26. United States: Business cycle thermometer 67. Understanding alternatives
27. United States: Employment and wages
28. United States: Inflation Investing principles
29. United States: Monetary policy 68. Real return on cash and yields
30. Eurozone: Economic snapshot 69. Annual returns and intra-year declines
70. Fixed income annual returns and intra-year declines
Equities 71. The compounding effect
31. Global and Asia equity market returns 72. Portfolio construction, asset class returns and volatility
32. Global equities: Return composition 73. The benefits of diversification and long-term investing
33. Global equities: Earnings expectations
34. Global equities: Valuations
35. Global equities: Dividend yield
36. Global equities: Growth versus value
37. APAC ex-Japan equities: Performance drivers
38. APAC ex-Japan equities: Earnings expectations by market and sector
39. APAC ex-Japan equities: Exports and earnings
40. China: Equities snapshot
41. China: Foreign ownership of equities
42. United States: Earnings and performance
43. United States: Sector earnings and valuations
44. United States: Bear markets and subsequent bull returns
3Asia: Economic snapshot GTM – Asia | 4
EM Asia ex-China* manufacturing PMI and real GDP growth EM Asia ex-China* investment and exports
local economy
Index Year-over-year change Year-over-year change, 3-month moving average
Regional and
65 Manufacturing PMI GDP growth 12% 30%
60 8% 20%
Nominal investment
55 4% 10%
50 0% 0%
45 -4% -10%
Export volumes
40 -8% -20%
35 -12% -30%
'04 '06 '08 '10 '12 '14 '16 '18 '20 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19
Source: IHS Markit, J.P. Morgan Economic Research, National Statistics Agencies, J.P. Morgan Asset Management; (Right) Netherlands Bureau of Policy Analysis.
PMI = Purchasing Managers’ Index. Manufacturing PMIs are relative to 50, which indicates contraction (below 50) or expansion (above 50) of the manufacturing
sector. *Emerging Market (EM) Asia ex-China includes Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
4ASEAN: Economic snapshot GTM – Asia | 5
Exports Consumption growth
local economy
Year-over-year change, 6-month moving average Year-over-year change
Regional and
50% 15%
Vietnam
10% Malaysia
5%
0%
40%
-5%
Thailand
-10% Philippines
Malaysia Indonesia
-15%
30% -20%
-25%
Vietnam -30% Singapore
20% -35%
'12 '14 '16 '18 '20
Singapore
Current account balance
10% Share of GDP
25%
Singapore
20%
0% 15%
10% Philippines Thailand
Indonesia
-10% 5% Malaysia
Thailand 0%
Philippines
-5% Indonesia
-20% Vietnam
'10 '12 '14 '16 '18 '20 -10%
'12 '14 '16 '18 '20
Source: FactSet, National Statistics Agencies, J.P. Morgan Asset Management; (Top right) OECD; (Bottom right) Bangko Sentral ng Pilipinas, Bank Indonesia, Bank
Negara Malaysia, Bank of Thailand, State Bank of Vietnam, Statistics Singapore.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
5ASEAN: Monetary and fiscal policy GTM – Asia | 6
Central bank policy rates* Government deficit or surplus
local economy
Per annum Share of GDP
Regional and
7% 3%
2%
Vietnam
6% Singapore
1%
Indonesia
0%
5%
-1%
Thailand
4% Philippines
-2%
Indonesia
-3% Philippines
3%
-4% Malaysia
Malaysia
2% -5%
Vietnam
-6%
1%
Thailand -7%
0% -8%
'17 '18 '19 '20 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Bangko Sentral ng Pilipinas, Bank Indonesia, Bank Negara Malaysia, Bank of Thailand, FactSet, State Bank of Vietnam, J.P. Morgan Asset Management;
(Right) Bureau of Treasury Philippines, Ministry of Finance Indonesia, Statistics Singapore.
*The central banks’ policy rates used are: Bank Indonesia 7-day reverse repo rate (Indonesia), overnight policy rate (Malaysia), Bangko Sentral ng Pilipinas overnight
reverse repurchase facility (Philippines), one-day repurchase rate (Thailand) and Vietnam Base Rate (Vietnam). Singapore is not included as the Monetary Authority of
Singapore manages the exchange rate of the Singapore dollar, rather than interest rates, in its monetary policy.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
6China: Economic snapshot GTM – Asia | 7
Contribution to real GDP growth Caixin/Markit Purchasing Managers’ Indices
local economy
Year-over-year change Level
Regional and
20% 65
Gross capital formation (investment)
Consumption
08/2020: 54.0
Net exports 60
16% 09/2020: 53.0
GDP
55 Services
12%
50
8%
Manufacturing
45
4%
40
0%
35
-4%
1H2020: -1.6% 30
-8% 25
'80 '85 '90 '95 '00 '05 '10 '15 '20 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: J.P. Morgan Asset Management; (Left) CEIC, National Bureau of Statistics of China; (Right) Caixin/Markit, J.P. Morgan Economic Research.
*Purchasing Managers’ Index (PMI) is relative to 50, which indicates deceleration (below 50) or acceleration (above 50) of economic activities in the sector.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
7China: Cyclical indicators GTM – Asia | 8
Fixed asset investment Consumption
local economy
Year-to-date, year-over-year change Year-over-year change, 3-month moving average
Regional and
40% 12% 55%
Retail sales Online sales
30% 8%
45%
Private
4%
20% State-owned enterprises
35%
0%
10%
-4% 25%
0%
Aggregate -8%
15%
-10%
-12%
5%
-20%
-16%
-30% -20% -5%
'11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '16 '17 '18 '19 '20
Source: CEIC, National Bureau of Statistics of China, J.P. Morgan Asset Management.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
8China: Fiscal policy GTM – Asia | 9
Fiscal revenue and expenditure* Government financing**
local economy
Year-over-year change, 3-month moving average RMB billions, bond issuance
Regional and
30% 2,000
1,800 Special local government bonds
Expenditure
General local government bonds
20% 1,600 Central government bonds
1,400
Revenue
10% 1,200
1,000
0% 800
600
-10% 400
200
-20% 0
'14 '15 '16 '17 '18 '19 '20 '18 '19 '20
Source: CEIC, J.P. Morgan Asset Management; (Left) Ministry of Finance of China; (Right) China Central Depository & Clearing Co. Ltd., Ministry of Finance of China.
*Fiscal revenue includes taxes, government funds, which are mostly derived from local government land sales, and other government revenues. Fiscal expenditure
includes government spending of funds raised from taxes, government funds and general bond issuance.
**General local government bonds are issued to raise funds and offset fiscal deficits so as to maintain the ordinary operation of local governments. They are backed
by the future fiscal revenue of the local governments. Special local government bonds are issued to support specific infrastructure and public projects. They are
backed by the future revenue generated from the projects.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
9China: Monetary policy and credit growth GTM – Asia | 10
Chinese credit impulse and global new orders Key interest rates
local economy
% of nominal GDP, year-over-year change Difference from one year ago Per annum
Regional and
20% 20 7.5%
Global composite PMI - New orders
15% 15
10 6.0%
10%
5
5%
Lending rate (1-year)
0 4.5%
0%
Loan prime
-5 rate (1-year)**
Medium-term lending
-5% facility (1-year)
-10 3.0%
-10%
-15
Interbank repo (7-day)
-15%
-20 1.5%
Deposit rate (1-year)
-20% -25
Credit impulse* (advanced 6 months)
-25% -30 0.0%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '15 '16 '17 '18 '19 '20
Source: CEIC, People’s Bank of China, J.P. Morgan Asset Management; (Left) Ministry of Finance of China; (Right) National Interbank Funding Center.
*Credit impulse measures the year-over-year change of credit flow (net aggregate social financing) as a percentage of nominal GDP. Rolling 12-month nominal GDP
and credit stock are used in the calculation. **In August 2019, the PBoC started to release 1-year and 5-year loan prime rates (LPR) on a monthly basis, which are
based on quotes from 18 large banks. LPR has become the benchmark for commercial loans and floating rate loan contracts.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
10China: Exchange rate and foreign reserves GTM – Asia | 11
Chinese yuan exchange rate: CFETS RMB* vs. USD USD / CNY and change in FX reserves
local economy
Index, Jan. 2016 = 100 USD billions
Regional and
106 120 6.0
USD / CNY (inverted)
Stronger yuan
104 90
6.2
102
USD / CNY 60
100 6.4
30
98
0 6.6
96
-30
94 6.8
-60
92
7.0
CFETS RMB index -90
90
Weaker yuan
Change in monthly FX reserves
88 -120 7.2
'16 '17 '18 '19 '20 '13 '14 '15 '16 '17 '18 '19 '20
Source: FactSet, J.P. Morgan Asset Management; (Left) China Foreign Exchange Trade Center, J.P. Morgan Economic Research; (Right) People’s Bank of China.
*CFETS RMB index is the China Foreign Exchange Trade System basket of 24 currencies traded against the Chinese renminbi. Past performance is not a reliable
indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
11Global growth GTM – Asia | 12
Real GDP growth Real GDP levels
Forecast
Quarter-over-quarter change Indexed to 1Q 2006 = 100
15% 11.8% 150 400
China Forecast Eurozone China
10%
5% 1.9% 2.5% 2.0% 1.0% 1.1% 1.4% 1.4% U.S.
0% Japan
-5%
Global economy
140 340
-10%
-15% -10.5%
10% 7.4%
U.S.
5% 130 280
0.6% 0.6% 0.5% 0.5% 0.4% 0.4%
0%
-5% -1.3%
-10% 120 220
-9.0%
20%
Eurozone 11.8%
10%
0.1% 0.9% 1.1% 0.9% 0.6% 0.5%
0%
110 160
-10% -3.7%
-11.8%
-20%
5% 2.6% 3.1%
Japan 0.7% 0.7% 100 100
0.2% 0.2%
0%
-0.6%
-1.8%
-5%
-7.9% 90 40
-10%
4Q '19 1Q '20 2Q '20 3Q '20 4Q '20 1Q '21 2Q '21 3Q '21 4Q '21 '06 '08 '10 '12 '14 '16 '18 '20
Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
12Global Purchasing Managers’ Index (PMI) GTM – Asia | 13
Global manufacturing and services PMI Global manufacturing PMI breakdown
Index
Aug '20
Nov '19
May '20
Dec '19
Feb '20
Jun '20
Sep '20
Oct '19
Apr '20
Jan '20
Mar '20
Jul '20
65
Services Global 51.8 52.3
60
DM* 51.2 52.2
Global economy
EM** 52.5 52.8
55 U.S. (Markit) 53.1 53.2
U.S. (ISM) 56.0 55.4
Euro area 51.7 53.7
50 Germ any 52.2 56.4
France 49.8 51.2
45 Italy 53.1 53.2
Spain 49.9 50.8
UK 55.2 54.1
40 Lowest point 4/20: 39.6 Australia 53.6 55.4
Japan 47.2 47.7
China (Markit) 53.1 53.0
35
China (NBS) 51.0 51.5
Manufacturing
Korea 48.5 49.8
30 Taiw an 52.2 55.2
Indonesia 50.8 47.2
India 52.0 56.8
25
Lowest point 4/20: 23.7 Russia 51.1 48.9
Brazil 64.7 64.9
20 Mexico 41.3 42.1
'99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 # m arkets above 50 6 5 7 7 7 3 0 1 5 10 11 11
Source: Australian Industry Group, Institute for Supply Management, J.P. Morgan Economic Research, Markit, J.P. Morgan Asset Management.
PMIs are relative to 50, which indicates deceleration (below 50) or acceleration (above 50) of the sector. Heatmap colors are based on PMI relative to the 50 level,
with green (red) corresponding to acceleration (deceleration). *Developed market includes Australia, Canada, Denmark, euro area, Japan, New Zealand, Norway,
Sweden, Switzerland, UK and the U.S. **Emerging market includes Brazil, Chile, China, Colombia, Croatia, Czech Republic, Hong Kong SAR, Hungary, India,
Indonesia, Israel, Korea, Malaysia, Mexico, Philippines, Poland, Romania, Russia, Saudi Arabia, Singapore, South Africa, Taiwan, Thailand, Turkey and Vietnam.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
13Global supply chains GTM – Asia | 14
Foreign value added in domestic exports Supplier delivery times
Source of foreign value add in exports as a % of total goods exports*, 2015 Manufacturing PMI subindex, G4** average
56
35% U.S. Japan Taiwan Other
53
China Korea Euro area
50
Global economy
30% 47
44
41
25%
38
35
'07 '09 '11 '13 '15 '17 '19
20%
Manufacturing as share of global total
30%
15%
2000 2008 2018
25%
10% 20%
15%
5% 10%
5%
0% 0%
U.S. China Japan Korea Taiwan Euro area U.S. China EU Japan Korea Taiwan ASEAN ROW
Source: J.P. Morgan Asset Management; (Left) OECD Trade in Value Add; (Top right) J.P. Morgan Economics Research, Markit; (Bottom right) United Nations
Industrial Development Organization.
*Origin country of value-added to goods exported from each country to the world, divided by gross exports from each country. 2015 is the latest year for which country
by country data are available.
**G4 is defined as the four largest economies: China, euro area, Japan and the U.S.
ASEAN is the Association of Southeast Asian Nations, ROW is rest of the world.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
14Global trade GTM – Asia | 15
Global trade activity Exports growth
Year-over-year change, 3MMA Index, 4-month lead Year-over-year change, 3MMA
20% 75 25%
Global trade volume growth New export orders*
70 20%
15% Emerging markets
Global economy
65 15%
10%
60 10%
5%
55 5%
0% 50 0%
45 -5%
-5%
40 -10%
Developed markets
-10%
35 -15%
-15%
30 -20%
-20% 25 -25%
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19
Source: FactSet, Markit, Netherlands Bureau for Economic Policy Analysis, J.P. Morgan Economics Research, J.P. Morgan Asset Management.
*Series shown is the Global Manufacturing Purchasing Managers’ Index Sub-Index for new export orders. Emerging markets and developed markets as defined by
Netherlands Bureau of Policy Research world trade monitor.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
15Global inflation GTM – Asia | 16
Headline consumer prices
Year-over-year change, quarterly
Below trend Inflation running Above trend
Legend
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Jul Aug
Global economy
Developed Markets
U.S. 1.0% 1.3%
UK 1.0% 0.2%
Eurozone 0.4% -0.2%
Japan 0.3% 0.2%
Australia 1.3% 1.3%
China 2.7% 2.4%
India 6.7% 6.7%
Korea 0.3% 0.7%
EM Asia
Taiwan -0.5% -0.2%
Indonesia 1.1% 1.0%
Malaysia -1.3% -1.4%
Thailand -1.0% -0.5%
Brazil 2.3% 2.4%
Other EM
Mexico 3.6% 4.0%
Russia -1.2% -0.7%
Turkey 11.8% 11.8%
South Africa 3.2% 3.1%
Source: Department of Statistics Malaysia, DGBAS, Eurostat, FactSet, Goskomstat of Russia, IBGE, India Ministry of Statistics & Programme Implementation, INEGI,
J.P. Morgan Economics Research, Korean National Statistical Office, Melbourne Institute, Ministry of Commerce Thailand, Ministry of Internal Affairs &
Communications Japan, National Bureau of Statistics China, Office for National Statistics UK, Statistics Indonesia, Statistics Institute Turkey, Statistics South Africa,
U.S. Department of Labor, J.P. Morgan Asset Management. Quarterly averages, with the exception of the two most recent figures, which are single month readings,
are shown. Colors are based on z-score of year-over-year inflation rate relative to each country’s own 10-year history where red (blue) indicates inflation above (below)
long-run trend. EM represents emerging markets.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
16Central bank policy rates GTM – Asia | 17
G4 central bank key policy rates Changes in central bank policy rates
Per annum Number of hikes or cuts***
7% Deposit 200
Policy rate
rate*
Eurozone 0.0% -0.5%
6% Japan** -0.1 to 0.0% -0.1% 150 Developed markets
Rate hikes
UK 0.1% 0.1%
Global economy
Emerging markets
U.S. 0.0 to 0.25% 0.1%
5% 100
4% 50
3% 0
2% -50
Developed markets
1% -100 Rate cuts
Emerging markets
0% -150
-1% -200
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 YTD
'20
Source: J.P. Morgan Asset Management; (Left) FactSet; (Right) BIS.
G4 are the Bank of England, the Bank of Japan (BoJ), the European Central Bank and the U.S. Federal Reserve. *Key deposit rates that central banks charge
commercial banks on their excess reserves. **The BoJ has adopted a three-tier system in which a negative interest rate of -0.1% will be applied to the policy rate
balance of the aggregate amount of all financial institutions that hold current accounts at the BoJ. ***Count covers the 38 central banks included in the Bank for
International Settlements’ central bank policy monitor except Argentina, Croatia and Hong Kong. Year-to-date data reflect most recently available as of 18/09/20.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
17Central bank balance sheets GTM – Asia | 18
G4 bank purchases and government issuance* G4 central bank balance sheets
USD trillions USD trillions
4 10 Forecast** 26
12-month change Central bank 24
3 in balance sheet balance sheet
22
Global economy
8
2 20
18
1 6
16
0
14
4
12
-1
10
-2 Net issuance – G4 ex-U.S. 2
8
Net issuance – U.S.
-3 Net purchase – U.S. 6
Net purchase – G4 ex-U.S.
0 4
Net supply after QE
-4
2
-5 -2 0
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: Bank of England, Bank of Japan, Bloomberg, European Central Bank, J.P. Morgan Securities Research, UK debt management office, U.S. Federal Reserve,
J.P. Morgan Asset Management. (Right) FactSet. *G4 is the eurozone, Japan, UK and the U.S. 2020 and 2021 estimates are from J.P. Morgan Asset Management’s
Global Fixed Income, Currency and Commodities team. **Forecasts are based on implied monetary policy settings.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
18Global monetary policy GTM – Asia | 19
UK China Japan
• Asset purchase program • Policy rate cuts during February to • Commercial paper and corporate
• COVID Corporate Financing Facility April 2020 bond additional purchases
• Term funding scheme for small and • Re-lending loans to SMEs with • Special program to support financing
medium-sized enterprises (SMEs) deferred principal and interest in response to COVID-19
• Cut countercyclical capital buffer payments • Doubling of annual purchase limits of
• Financing of government spending equity exchange-traded funds and
Global economy
needs real estate investment trusts
• “Ways and Means Facility”
Eurozone
• Pandemic Emergency Purchase Indonesia
Program • Bank Indonesia 7-day
U.S.
• Corporate Sector Purchase Program reverse repo rate cut
• Average inflation targeting • Targeted Long-Term Refinancing
framework • Bank Indonesia is buying
Operations government bonds to help
• Asset purchase program • Pandemic Emergency Longer-Term
• Commercial Paper Funding fund the deficit
Refinancing Operations India • Deposit Facility rate cut
Facility • Eurosystem repo facility • Targeted Long-Term Repo • Lending Facility rate cut
• Corporate credit facilities
Operation • Rupiah exchange rate
• Main Street Lending Program
• Repo rate cut, reverse repo rate stabilization policy
• Money Market Fund Liquidity
cut and cash reserve ratio cut
Facility
• Municipal Liquidity Facility
• Paycheck Protection Program Australia & New Zealand
Liquidity Facility Brazil
• AUS: Yield curve control: 0.25%
• Reduction of reserve • Reduction of reserve requirements target on 3-year yield
requirements • Creation of credit lines • AUS: Term funding facility for
• Term Asset-Backed Securities • FX spot intervention banks and financial institutions
Loan Facility • Prohibition of dividend payments • NZ: Cut official cash rate to 0.25%
• Central bank authorized to buy • NZ: Large scale asset purchases
securities in secondary market
Source: Bank Indonesia, Bank of England, Bank of Japan, Central Bank of Brazil, European Central Bank, People’s Bank of China, Reserve Bank of Australia,
Reserve Bank of India, Reserve Bank of New Zealand, U.S. Federal Reserve, J.P. Morgan Asset Management.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
19Fiscal policy response GTM – Asia | 20
Estimated fiscal support in response to the COVID-19 pandemic
% of GDP
35% 34%
32%
30%
Global economy
Additional spending or foregone revenue
Loans, equity and guarantees
25% 24%
20%
17%
16%
15%
15%
12%
11%
11%
10% 9%
10% 9%
6% 7%
5%
5%
5% 4% 4%
3% 3% 4%
2% 3% 3% 3%
2% 2%
1% 1%
1% 0% 1%
0%
Mexico India Indonesia France Argentina Korea Spain Italy China UK Brazil Australia Germany Japan U.S. Singapore
Source: IMF Fiscal Monitor, J.P. Morgan Asset Management. Percent of GDP are based on June 2020 World Economic Outlook Update for 2020. Additional spending
and foregone revenue refer to increases in government expenditure and reductions in tax revenue. Loans, equity and guarantees refer to additional liquidity support
offered to firms and banks. Data represent key fiscal measures governments have announced in response to the COVID-19 pandemic as of 12/06/20.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
20Political calendar GTM – Asia | 21
Developed markets political timeline
3 November U.S. 2021
U.S. Presidential 31 December UK
and Congressional Brexit transition 6 May UK 5 September Hong Kong
elections period ends Local elections Legislative election
Global economy
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
21-22 November 20 January U.S. June Global
Global Presidential inauguration WTO Ministerial
G20 summit Meeting
Emerging markets political timeline
2021
11-15 November ASEAN March China
ASEAN Summit National People’s Congress
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
26-29 October China April/May ASEAN
Fifth Plenum of the 19th ASEAN Summit
CPC Central Committee
Source: Bloomberg Finance L.P., J.P. Morgan Asset Management.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
21China-U.S. economic relations GTM – Asia | 22
U.S. exports to China Trade growth
USD billions Year-over-year change, 3-month moving average
90 85.0 70%
80 2020 YTD
70 60% U.S. exports to China
2020 commitment*
60
Global economy
50 50%
40 33.3 32.0
30 26.0 40%
20
7.6
10 3.8 30%
0
Agricultural Energy Manufactured 20%
Foreign direct investment 10%
USD billions
20
U.S. FDI into China 0%
15
10 -10%
5 -20% U.S. imports from China
China FDI into U.S.
0
-30%
-5
-10
-40%
'02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: FactSet, J.P. Morgan Asset Management; (Top left) U.S. Census Bureau, U.S. Trade Representative; (Bottom Left) National Bureau of Statistics China, U.S.
Bureau of Economic Analysis; (Right) U.S. Census Bureau.
*2020 commitment is the amount China agreed to commit to buying in the “Phase One” trade deal with the U.S., which includes the 2017 amount and an additional
uplift.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
22United States: Election GTM – Asia | 23
Votes or seats in the Electoral College, Senate and the House of Trump vs. Biden polling in swing states****
Representatives % point spread
Number of votes / elected 10
representatives needed for majority Range of poll results since 1 June
Latest
Electoral College* Last election result
270
Global economy
5
538 Trump
lead
227 vs. 304
0
Senate** 51 Biden
lead
5
100
47 vs. 53
10
House of Representatives*** 218
435 15
233 vs. 201
Democratic Party Republican Party
Source: J.P. Morgan Asset Management; (Left) The Cook Political Report, 270 to Win; (Right) Real Clear Politics, *In 2016 Trump earned 306 pledged electors, Clinton
232. They lost, respectively, two and five votes to faithless electors in the official tally. **51 seats are needed for a simple majority if the dominant party in the Senate is
not represented in the White House. If the president and majority party are the same, only 50 seats are needed for a majority because the vice president casts the tie-
breaking vote. 2016 numbers include two independents that vote with the Democrats.***There are currently 4 vacancies and one Libertarian. Chart assumes that the
vacant seats return to the party that held them. ****Number in parentheses after each state name reflects the number of electoral college votes for the state.
Based on current conditions subject to change from time to time. Provided solely to illustrate general trend.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
23United States: Presidential candidates’ campaign platform GTM – Asia | 24
Presidential candidates’ campaign platform
Comparison of anticipated changes
Issues Trump Biden
Taxes • Tax cuts to boost take-home pay • Reverse 2017 tax cuts & raise taxes on corporate income,
• Tax credits for “Made in America” high income individuals and capital gains
Global economy
• Expand tax credits to support domestic manufacturing
• More tax credits to low-middle-income families
China • Reduce reliance on China • Reinforce intellectual property rights protection, trade
• Promote companies to relocate back to the U.S. from practices
China • Cooperation on issues of mutual interest (climate change)
• Not resorting to unilateral trade tariff
Infrastructure • High-speed internet network • High-speed internet network
• Clean drinking water and clean air • Clean drinking water
• Clean energy
• Upgrade ports and freights
Energy • Promote energy independence • Reduce emissions
• Green energy
Regulations • Deregulation for energy independence • Strengthen regulations on financial services, technology and
energy
Foreign Policy • “America First” • “Revitalizing American Diplomacy”
Health care • Cut prescription drug prices • Universal health care (Affordable Care Act)
• Reduce insurance premium • Cut prescription drug prices
• Reduce insurance premium
Source: 2020 Democratic Party Platform, Donald Trump campaign website, J.P. Morgan Asset Management.
Based on current conditions subject to change from time to time. Provided solely to illustrate general trend.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
24United States: Economic growth and the composition of GDP GTM – Asia | 25
Real GDP Components of GDP
Year-over-year change 2Q20 nominal GDP, USD trillions
10% Real GDP 2Q20 21
4.0% Housing
Year-over-year change: -9.0%
8% 19
Quarter-over-quarter SAAR* change: -31.4%
12.0% Investment ex-housing
Global economy
17
6% Average post-Global
Average: 2.7% Financial Crisis: 1.3%
15 19.7% Gov’t spending
4%
13
2%
11
0%
9
-2%
7 67.1% Consumption
-4%
5
-6%
3
-8% 1
-10% -1
'70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20 -2.8% Net exports
Source: Bureau of Economic Analysis, FactSet, J.P. Morgan Asset Management.
*SAAR stands for seasonally adjusted annualized rate.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
25United States: Business cycle thermometer GTM – Asia | 26
U.S. business cycle indicators
Current percentile rank relative to range of data since Jan. 1990
100
Global economy
Latest
75
Elevated
50
Retrenched
25
3
months
ago
0
Consumer Wage Nonfarm Housing Light Vehicle Business Capex Durable Industrial Leading Credit Example
Confidence Growth Payrolls Starts Sales Confidence Orders Production Economic Conditions
Index
Consumers Businesses
Source: BEA, Conference Board U.S., FactSet, U.S. Census Bureau, U.S. Department of Labor, Wards Intelligence, J.P. Morgan Asset Management.
Indicators are: Consumer Confidence – Monthly survey index of how consumers perceive their own financial status and the general economy; Wage Growth – Average hourly
earnings of production and non-supervisory workers; Nonfarm Payrolls – Monthly change in U.S. nonfarm employment (three-month moving average); Housing Starts – Number of
private housing units that construction has started within a specified timeframe; Light Vehicle Sales – Cars and passenger trucks sold in a given month; Business Confidence –
Monthly survey of Chief Executive Officers about their outlook for the economy; Capex – Monthly new orders of non-defense capital goods (excluding aircraft); Durable Orders –
Monthly new orders of durable goods in the manufacturing sector, seasonally adjusted; Industrial Production – Monthly output of the industrial sector; Leading Economic Index – An
index aggregating values of 10 key variables intended to forecast future U.S. economic activity; Credit Conditions – Leading Credit Index that aggregates performance of six financial
26 market instruments to track credit conditions in the U.S. economy.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.United States: Employment and wages GTM – Asia | 27
Unemployment rate and average hourly earnings*
Percent of labor force, year-over-year change, seasonally adjusted
16%
First Fed hike after recession**
14% Recessions
Global economy
12%
10%
8% 09/2020: 7.9%
6% Unemployment rate
09/2020: 4.6%
4%
2% Average hourly
earnings
0%
'85 '90 '95 '00 '05 '10 '15 '20
Source: FactSet, U.S. Bureau of Labor Statistics, J.P. Morgan Asset Management.
*Average hourly earnings are calculated from the wages of production and non-supervisory workers.
** The first Fed hike after the last 3 recessions happened on 13/12/93, 25/12/03 and 20/01/15.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
27United States: Inflation GTM – Asia | 28
Headline and core consumer price index (CPI)
Year-over-year change, seasonally adjusted
15%
50-yr. avg. Aug ’20
Headline CPI 3.9% 1.3%
Core CPI 3.8% 1.7%
12%
Global economy
Food CPI 3.9% 4.1%
Energy CPI 4.0% -9.1%
Headline PCE deflator 3.4% 1.4%
9% Core PCE deflator 3.3% 1.6%
6%
3%
0%
-3%
'75 '80 '85 '90 '95 '00 '05 '10 '15 '20
Source: Bureau of Economic Analysis, Department of Labor Statistics, FactSet, J.P. Morgan Asset Management.
Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of
consumer expenditures instead of the fixed-weight basket used in CPI calculations.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
28United States: Monetary policy GTM – Asia | 29
Federal funds rate expectations Federal Reserve’s credit facilities
Market expectations for the fed funds rate USD billions
Federal funds rate Market expectations on 30/09/20 $800 Current amount outstanding Maximum amount outstanding
6%
FOMC year-end estimates FOMC long-run projection Program limit
$700
Global economy
5%
$600
4%
$500
$400
3%
2.50%
$300
2%
$200
1% $100
$0
0% Long CPFF PDCF PPPLF CCF Main MLF MMLF TALF
'06 '08 '10 '12 '14 '16 '18 '20 '22 run Street
Source: Bloomberg Finance L.P., FactSet, U.S. Federal Reserve, J.P. Morgan Asset Management.
Market expectations are the federal funds rates priced into the Fed Fund futures market as of 30/09/20. The Federal Reserve’s credit facilities include the Commercial
Paper Funding Facility (CPFF), Primary Dealer Credit Facility (PDCF), Paycheck Protection Program Lending Facility (PPLF), Corporate Credit Facility (CCF),
Municipal Liquidity Facility (MLF), Money Market Mutual Fund Liquidity Facility (MMLF), Term Asset-Backed Securities Loan Facility (TALF) and the Main Street
Lending Facilities, which include the Main Street Expanded Loan Facility (MSELF), Main Street New Loan Facility (MSNLF) and the Main Street Priority Loan Facility
(MSPLF).
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
29Eurozone: Economic snapshot GTM – Asia | 30
Eurozone activity Eurozone CPI inflation
Year-over-year change Year-over-year change
30% 3.5%
3.0%
2.5%
ECB inflation target: 2%
20% 2.0%
Global economy
1.5%
1.0%
0.5% Core CPI
10% Exports
0.0%
-0.5% Headline CPI
0% -1.0%
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Industrial
production
Consumer confidence* and retail sales
-10% Year-over-year change, 3-month moving average Index
6% 0
Retail sales Consumer confidence
4%
2% -5
-20%
0%
-10
-2%
-4%
-30% -15
-6%
-8% -20
-10%
-40%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 -12% -25
'11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Eurostat, FactSet, J.P. Morgan Asset Management; (Bottom right) European Commission.
Core CPI is defined as CPI excluding food and energy prices.
*Eurozone consumer confidence as reported by the European Commission, which measures the level of optimism that consumers have about the economy in relation
to prior months and is typically below zero.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
30Global and Asia equity market returns GTM – Asia | 31
10-yrs ('10 - '20)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3Q '20 YTD '20 Ann. Ret. Ann. Vol.
ASEAN U.S. India U.S. China A Japan Taiwan China U.S. Taiwan Taiwan China A U.S. China A
32.4% 2.1% 26.0% 32.4% 52.1% 9.9% 19.6% 54.3% -4.4% 37.7% 17.1% 16.8% 13.7% 24.3%
Korea ASEAN China Japan India China A U.S. Korea India China A China A China Taiwan India
27.2% -6.1% 23.1% 27.3% 23.9% 2.4% 12.0% 47.8% -7.3% 37.2% 15.5% 16.6% 10.3% 23.3%
Taiwan Europe ASEAN Europe U.S. U.S. Korea India Taiwan U.S. India Taiwan China China
22.7% -10.5% 22.8% 26.0% 13.7% 1.4% 9.2% 38.8% -8.2% 31.5% 15.1% 15.3% 6.8% 20.5%
APAC APAC APAC
India Korea Taiwan Taiwan Europe ASEAN Europe Korea U.S. China A Korea
ex-JP ex-JP ex-JP
20.9% -11.8% 22.6% 9.8% 10.1% -2.3% 7.1% 37.3% -8.4% 24.6% 12.9% 5.6% 6.6% 20.2%
Equities
APAC
Japan Korea Korea China India ASEAN China A Japan China China Korea Japan Taiwan
ex-JP
18.4% -14.2% 21.5% 4.2% 8.3% -6.1% 6.2% 32.6% -12.6% 23.7% 12.6% 4.8% 6.5% 17.6%
APAC APAC APAC APAC APAC APAC
Japan Europe China ASEAN Korea Japan ASEAN Japan
ex-JP ex-JP ex-JP ex-JP ex-JP ex-JP
15.6% -15.4% 19.9% 4.0% 6.4% -6.3% 2.7% 30.1% -13.7% 20.1% 9.6% 3.0% 5.4% 16.9%
APAC APAC APAC
U.S. China Taiwan China China Taiwan Europe U.S. Japan Europe Europe
ex-JP ex-JP ex-JP
15.1% -18.2% 17.7% 3.7% 3.1% -7.6% 1.1% 28.5% -14.3% 19.5% 8.9% -0.3% 4.9% 16.4%
APAC
China Taiwan U.S. China A Japan Europe Europe China Korea Japan India Korea ASEAN
ex-JP
4.8% -20.2% 16.0% -2.6% -3.7% -9.1% 0.2% 26.2% -18.7% 13.1% 7.1% -4.4% 4.8% 16.2%
Europe China A China A India Europe Taiwan India Japan Korea ASEAN Europe Europe India U.S.
4.5% -20.5% 10.9% -3.8% -5.7% -11.0% -1.4% 24.4% -20.5% 8.8% 4.6% -8.4% 1.7% 13.5%
China A India Japan ASEAN Korea ASEAN China A U.S. China A India ASEAN ASEAN ASEAN Japan
-8.4% -37.2% 8.4% -4.5% -10.7% -18.4% -15.2% 21.8% -27.6% 7.6% -4.7% -22.4% 0.7% 13.4%
Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.
Returns are total returns based on MSCI indices, except the U.S., which is the S&P 500, and China A, which is the CSI 300 index in U.S. dollar terms. China return is
based on the MSCI China index. 10-yr total (gross) return data is used to calculate annualized returns (Ann. Ret.) and annualized volatility (Ann. Vol.) and reflect the
period 30/09/10 – 30/09/20. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
31Global equities: Return composition GTM – Asia | 32
Sources of global equity returns*
Total return, USD
40% Total return Multiple expansion**
2019 2020 YTD
31.5% Currency return Dividend yield
30% EPS growth outlook***
24.6%
20.1%
19.5% 18.9%
20%
10%
Equities
5.6%
3.0%
0%
-0.3% -0.9%
-10%
-8.4%
-20%
-30%
U.S. Europe Japan Asia Pacific EM U.S. Europe Japan Asia Pacific EM
ex-Japan ex-Japan
Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. *All return values are MSCI Gross Index (official) data, except the U.S., which is the S&P
500. **Multiple expansion is based on the forward price-to-earnings ratio. ***Earnings per share (EPS) growth outlook is based on next 12 month aggregate (NTMA)
earnings estimates. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
32Global equities: Earnings expectations GTM – Asia | 33
Earnings growth Earnings revisions ratios
Earnings per share, year-over-year change, consensus estimates Net earnings revisions to consensus estimates, 13-week moving average
50% 60%
2019 2020 2021
40%
40%
40%
32% U.S.
Japan
30% 26%
24%
20%
20%
Equities
10% 0%
1%
-2%
0% Europe
-1% -20%
-2%
-10% -6%
-9%
-40%
-20% Asia Pacific
-19%
ex-Japan
-30% -60%
-33%
-40%
-80%
U.S. EM Asia Pacific ex- Europe
Japan '14 '15 '16 '17 '18 '19 '20
Source: IBES, MSCI, Standard & Poor’s, Thomson Reuters Datastream, J.P. Morgan Asset Management. Asia Pacific ex-Japan, emerging markets (EM), Europe and
U.S. equity indices used are the MSCI Asia Pacific ex-Japan, MSCI Emerging Markets, MSCI Europe and S&P 500, respectively. Consensus estimates used are
calendar year estimates from IBES. Revisions are based on the current unreported year. Net earnings revisions is (number of companies with upward earnings
revisions – number of companies with downward earnings revisions) / number of total companies. Past performance is not a reliable indicator of current and future
results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
33Global equities: Valuations GTM – Asia | 34
Equity market valuations – Price-to-earnings 15-yr. range
Forward P/E ratios 38.3 15-yr. average
35.8
30x Latest
21.7 22.6
20x 17.9 16.3
16.7 18.1 17.3 16.6 16.7 17.8
15.4 14.0 15.2
15.8 15.8 15.7 14.9 15.1 15.8 16.7
14.7 15.0 15.4 13.4 14.2 15.2
15.0 12.8 13.8 13.8
11.5 12.4 11.8 12.4 11.3
13.1
10x 9.8 12.2 8.9
7.1
0x
S&P 500 Europe Asia Pac Emerging ASEAN China A China Hong India Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand Brazil Mexico Russia
Equities
ex-UK ex-Japan markets (CSI 300) Kong
Equity market valuations – Price-to-book
Trailing P/B ratios 15-yr. range
5.2 5.2
5x 15-yr. average
Latest
4x
3.6
3.4
3x 3.0
2.7 2.9 2.7
2.4
2.1 2.1
2x 2.0 1.9 2.1 2.0 2.0
1.7 1.7 1.7 1.9 1.9 1.9
1.7 1.6 1.5 1.8 1.7
1.7 1.6 1.4 1.6 1.4 1.4 1.5 1.5
1.2 1.2
1x 1.1 1.0 1.0 1.0
0.8
0x
S&P 500 Europe Asia Pac Emerging ASEAN China A China Hong India Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand Brazil Mexico Russia
ex-UK ex-Japan markets (CSI 300) Kong
Source: Bloomberg Finance L.P., China Securities Index, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.
Price-to-earnings (P/E) and price-to-book (P/B) ratios are in local currency terms. China A valuation is based on the CSI 300 Index and use 10 years of data due to
availability. China valuation is based on the MSCI China. 15-year range for P/E and P/B ratios are cut off to maintain a more reasonable scale for some indices.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
34Global equities: Dividend yield GTM – Asia | 35
Equity yield index
% yield
5% Buyback yield*
4% Dividend yield
1.1%
3% 2.5% 1.9% 1.3% 0.3% 0.3%
2%
2.7% 2.4% 2.3%
1% 2.0% 2.3%
1.7%
0%
Equities
S&P 500 MSCI World MSCI Europe MSCI Japan MSCI APAC ex-JP MSCI Emerging Markets
Risk and return profile** Number of companies yielding greater than 3% by region
Constituents of MSCI AC World Index
Annualized Annualized Risk-adjusted 400
return volatility return 331
350
MSCI World (DM) 7.2% 15.6% 0.46 300
250
MSCI World (DM) 200
6.2% 12.1% 0.51 143
High Dividend 132 124
150
92
MSCI AC Asia 100
7.5% 20.6% 0.37
Pacific ex-Japan 50
MSCI AC APAC 0
6.3% 13.9% 0.45 Asia Pac. ex- U.S. EM ex-Asia Europe Japan
ex-JP High Div
Japan
Source: FactSet, MSCI, Standard & Poors, J.P. Morgan Asset Management; (Top) Bloomberg Finance L.P.
*Buyback yield is last 12 months’ buybacks divided by the market cap of the index.
**Annualized return and volatility based on total monthly return data (USD) over the latest 15 years. Risk-adjusted return is calculated as annualized return /
annualized volatility. Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
35Global equities: Growth versus value GTM – Asia | 36
Growth vs. value valuations* Growth vs. value relative performance
MSCI World growth / value fwd. P/E ratio, # of std. dev. over / under average MSCI World value / growth performance
5 2.0
Recession
Growth expensive
4
relative to value 1.8
3
Growth
1.6 underperforming
value
2
1.4
Equities
1
0 1.2
-1
1.0
-2
Growth
Growth cheap relative 0.8
-3 outperforming
to value
value
-4 0.6
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20
Source: FactSet, MSCI, J.P. Morgan Asset Management.
*Growth is the MSCI World Growth index and value is the MSCI World Value index.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
36APAC ex-Japan equities: Performance drivers GTM – Asia | 37
APAC ex-JP vs. DM growth and equity performance APAC ex-JP price-to-book and subsequent returns
%, next 12 months’ growth estimates Index level %, next 12 months’ price return in USD
18% 120 120%
Emerging Asia minus DM GDP growth Current level
80%
16% 110
APAC ex-JP growth &
equity outperformance 40%
14%
100
0%
12%
90
-40%
10%
80 -80%
Equities
0.8 1.2 1.6 2 2.4 2.8
8%
70
APAC ex-JP / DM equity performance and USD index
6% Relative index level, Dec. 1997 = 100 Index level
60 250 40
4% MSCI APAC ex-JP / MSCI World (DM)
50 200 60
2%
150 80
40
0%
APAC ex-JP growth & 100 100
equity underperformance 30
-2%
50 120
MSCI APAC ex-JP / MSCI World (DM) USD Index (inverted)
-4% 20 0 140
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: FactSet, MSCI, J.P. Morgan Asset Management; (Left) J.P. Morgan Economic Research; (Top right) MSCI.
DM = Developed markets.
Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
37APAC ex-Japan equities: Earnings expectations by market and sector GTM – Asia | 38
Earnings growth by market
Earnings per share, year-over-year change, consensus estimates 2020 2021
50% 38.3% 42.0% 42.7%
31.8% 32.1% 32.3% 34.8%
24.2%
25% 19.5% 17.3%
11.4%14.2%
0.3%
0%
-6.2% -10.2%
-25%
-26.6% -27.0%
-37.0% -33.8% -34.4%
-50%
Taiwan China Asia Pacific ex- Thailand Singapore Indonesia Hong Kong Philippines Korea India
Japan
Equities
Earnings growth by sector
Earnings per share, year-over-year change, consensus estimates 2020 2021
80% 62.9% 63.9%
60%
32.2% 39.1%
40% 14.7% 24.3% 24.7%
12.8% 14.2% 16.8% 17.0% 17.9%
20% 10.5% 10.0% 11.1% 10.4%
0%
-20% -3.3%
-13.7% -10.6%
-20.4%
-40% -27.4%
-60% -50.4%
Utilities Consumer Financials Real estate Communication Materials Information Health care Industrials Consumer Energy
staples services technology discretionary
Source: MSCI, J.P. Morgan Asset Management. (Top) IBES. Equity indices used are the respective MSCI indices. Consensus estimates used are calendar year
estimates from IBES. (Bottom) FactSet. Sector indices used are from the MSCI AC Asia Pacific ex-Japan Index. Consensus estimates used are calendar year
estimates from FactSet. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
38APAC ex-Japan equities: Exports and earnings GTM – Asia | 39
Domestic vs. exports-oriented Asian companies* Growth in nominal exports and earnings per share
MSCI AC Asia Pacific ex-Japan, earnings per share, Jan. 2009 = 100 USD, year-over-year change
600 80%
MSCI AC Asia
60% Pacific ex-Japan EPS
500
Less than 70% of
revenue derived
domestically 40%
400
Equities
20%
300
0%
200
-20% EM Asia ex-China exports**
Between 70% and
100 95% of revenue
More than 95% of derived domestically -40%
revenue derived
domestically
0 -60%
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19
Source: FactSet, MSCI, J.P. Morgan Asset Management; (Right) CEIC, national statistics agencies.
Earnings per share (EPS) used is next 12 months’ aggregate estimate. *Universe of stocks within the MSCI AC Asia Pacific ex-Japan index are split into three buckets
depending on their revenue exposure to their domestic market. Over the time period examined (01/01/09 – 30/09/20), monthly adjustments are made to the buckets to
reflect changes in a company's operations over time. Subsequently, earnings-per-share (EPS) for each bucket is calculated by summing the market-value weighted
EPS for each company on a monthly basis over the examined period. Each EPS series is then indexed to 100 on 01/01/09. **EM Asia ex-China includes Hong Kong,
Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. Overall exports aggregate is gross domestic product (GDP)-weighted. Past performance is not a reliable
indicator of current and future results. For illustrative purposes only.
39 Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.China: Equities snapshot GTM – Asia | 40
Sector composition of major China indices* Earnings growth of MSCI China**
Earnings per share, year-over-year change, consensus estimates
2020 2021
MSCI
SHCOMP STAR SZCOMP ChiNext 50.1%
China Energy
-54.8%
Consumer discretionary 41.5%
Consumer discretionary 25.8% 7.5% 1.7% 12.8% 6.7% 2.9%
Industrials 29.7%
Consumer staples 8.8% 10.1% 0.2% 10.5% 3.3% -19.4%
Health care 25.4%
Communication services 15.0% 0.5% 0.0% 0.0% 0.1% -7.9%
Consumer staples 19.8%
Energy 1.9% 4.6% 0.2% 0.6% 0.2% 25.3%
Equities
MSCI China 19.3%
Financials 16.1% 30.9% 0.0% 5.4% 3.2% -9.7%
Real estate 17.2%
Health care 7.3% 7.3% 26.0% 13.6% 25.1% -5.5%
Communication services 16.6%
Industrials 7.3% 14.6% 10.4% 17.6% 23.2% 6.7%
Materials 15.5%
-2.2%
Information technology 8.4% 10.5% 54.9% 24.0% 30.6%
Utilities 12.9%
-0.5%
Materials 3.7% 8.0% 6.5% 10.9% 7.3%
Financials 9.5%
-9.4%
Real estate 3.9% 2.5% 0.0% 3.1% 0.0%
Information technology 7.4%
42.4%
Utilities 1.9% 3.3% 0.0% 1.4% 0.2%
-100% -50% 0% 50% 100%
Source: FactSet, MSCI, J.P. Morgan Asset Management; (Left) Wind. *MSCI China represents primarily offshore listed Chinese equities and the onshore equities
included in MSCI benchmarks. MSCI China sector weight data as of 31/08/20. SHCOMP refers to all stocks that are traded at the Shanghai Stock Exchange. STAR,
officially known as the Shanghai Stock Exchange Science and Technology Innovation Board, is the tech-oriented subsidiary of the Shanghai Stock Exchange.
SZCOMP refers to all stocks that are traded at the Shenzhen Stock Exchange. ChiNext is the tech-oriented subsidiary of the Shenzhen Stock Exchange. **Sector
indices used are from the MSCI China Index. Consensus estimates used are calendar year estimates from FactSet. Past performance is not a reliable indicator of
current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
40China: Foreign ownership of equities GTM – Asia | 41
Foreign investors’ holdings of onshore Chinese equities MSCI A-share inclusion
RMB trillions China’s % share in selected emerging market indicators
3.0 Total as a % of 4.0% 80%
Foreign investor holdings
domestic market cap 3.5%
2.5
A-share
3.0%
2.0 Offshore China
2.5%
1.5 2.0%
60% Share of MSCI EM Index***
1.5%
1.0
1.0% 21.1%
0.5
0.5%
0.0 0.0%
Equities
'14 '15 '16 '17 '18 '19 '20 4.9%
40%
Stock Connect monthly net flows
RMB billions HKD billions
90 Southbound (China to Hong Kong) 150
Northbound (Hong Kong to China)
60 120
46.3%
43.2%
90 20%
30 37.0%
60 30.7%
0
30
-30
0
-60 -30 0%
Share of EM Share of EM 20% A-share 100% A-share
-90 -60 GDP* market cap** inclusion inclusion
'15 '16 '17 '18 '19 '20 (Current)
Source: J.P. Morgan Asset Management; (Top left) CEIC, People’s Bank of China, Shanghai Stock Exchange, Shenzhen Stock Exchange; (Bottom left) CEIC, Hong
Kong Exchanges and Clearing Limited; (Right) Bloomberg, MSCI, World Bank. *Share of EM GDP is for 2019 and is calculated as Chinese nominal GDP in U.S.
dollars as a percentage of all emerging markets within the MSCI EM index.**Share of EM market cap is for 2019 and is calculated as China’s market capitalization of
listed domestic companies as a percentage of all emerging markets’ capitalization of listed domestic companies within the MSCI EM index. ***Currently, an index
inclusion factor (IIF) of 20% is applied to China A Large Cap, ChiNext Large Cap and China A Mid Cap (including eligible ChiNext shares). 100% A-share inclusion is
shown for illustrative purposes only. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
41United States: Earnings and performance GTM – Asia | 42
S&P 500 earnings and performance S&P 500 performance contribution
Next 12 months’ earnings per share estimates Index level Price return since 23 March low
200 4,000
S&PNext
500 12 months’
forward EPS S&P 500Index
indexlevel
level Total
EPS estimates
180 Energy
3,500
Utilities
160
3,000 Real Estate
140 Materials
Equities
2,500 Cons.
Staples
120
Financials
2,000
100 Industrials
1,500 Telecoms
80
Health Care
60 1,000
Cons. Disc
Info Tech
40 500
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
42United States: Sector earnings and valuations GTM – Asia | 43
S&P 500 earnings growth estimates S&P 500 price-to-earnings
Year-over-year change Year-over-year change Forward price-to-earnings ratio
120% 60% 60x
2020 2021 relative to 2019
100% Current
2021
15-year range
80% 40% 50x
15-year average
60%
40% 20% 40x
20%
30x
Equities
0% 0%
-20%
20x
-40% -20%
-60%
10x
-80% -40%
-100%
0x
-120% -60%
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management; (Left) Compustat. *Energy sector earnings are expected to increase by 709% in 2021. **The
forward price-to-earnings ratio in the energy sector at 30 September 2020 was -24x. The energy sector reached a historic maximum of 1,720x and a historic minimum
of -1,138x.
Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
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