Set Sail into the Asian Century - March 2021 Jonathan Wu - Executive Director | Chief Investment Specialist - Heathcote Investment Partners
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Set Sail into the Asian Century
March 2021
Jonathan Wu – Executive Director | Chief Investment Specialist
1
What does the world looks like from our perspective?
RISKS OPPORTUNITIES
US – Sino Trade Easy Monetary
Relations Conditions
Developed Greater China
Market Equity Bond Market
Valuations Valuations
Developed Finding ways to
Market Bond invest directly into
Valuations China A Shares
China – First in
K Shape First Out leads
Recovery economic recovery
2
Introduction
Value Partners is one of Asia’s most established asset managers
Independent asset manager
with assets under management of US$14.8 billion1 across
equities, fixed income, alternatives, multi-asset portfolios and Value Partners is listed on the Hong Kong
quantitative investment solutions Stock Exchange since 22 November 2007.
(Stock code: 806 HK)
Temple for Value Investing, where the “ideals of value investing
are implemented and transmitted to future generations.” Shareholding structure2:
• 43.7% - Management and co-founders
• 56.3% - Public shareholders
We provide an award-winning menu of funds. For example,
our flagship Value Partners Greater China Equity Strategy
offers 28 years of outstanding returns Investment management is our core
business and our compensation structure is
Fundamental investment approach with ~70 investment closely aligned to fund performance
professionals focusing on Greater China and Asia ex-Japan
investments conducting frequent due diligence meetings per
annum
240+ coveted performance awards and prizes won since
establishment
Headquartered in Hong Kong, with offices in Shanghai, Shenzhen,
Kuala Lumpur, Singapore, London, and representative offices in
Beijing, providing localized research and client servicing
Dedicated client services and committed to resolving clients’
queries in an effective and timely manner
Source: Value Partners
1. Data as at 31 January 2021 (unaudited). 2. Data as at 31 January 2021 (Value Partners)
3
Investment Philosophy
Value o Invest in companies with quality fundamentals
trading below their intrinsic value
o Prefer contrarian and non-consensus ideas
Hunt for the 3Rs 6500+ company visits
Bottom-up Picking
o the Right business, run by o On-the-ground, in-depth 360
the Right people, and at degree review of companies
the Right price o Dedication and insight to the
local market through
extensive relationships
o High conviction ideas
driven by our “walk the o Thorough audit and due
extra mile” bottom-up diligence checks
fundamental analysis
4
Premium Asia Fund Fee Reduction & Performance
Fee reduction from 1st July 2019 - Competitive fees:
• Performance fee removed
• Management fee reduced to 1.33% p.a.
• PDS in market from 1st July 2019
Cumulative Returns
300%
Premium Asia Fund
260%
Platinum Asia Fund
220%
MSCI Asia Ex-Japan
180%
140%
100%
60%
20%
-20%
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Data as at 31 January 2021
Source: Lonsec iRate
Inception Date: 1 December 2009. Past performance is not indicative of future results.
*Refers to inception of Premium Asia Fund starting first full month, which is 31 December 2009.
5
Premium Asia Fund upgraded
“Zenith has high regard for Value “Lonsec continues to hold a positive SQM Research met with key portfolio
Partners' experienced investment view on the Manager’s long heritage managers and management in
team and approach. In addition, we as a Chinese equity specialist, and the October 2020 to refresh and update
believe that the recent change to good corporate access it enjoys. our understanding of the investment
the Fund's fee structure improves Portfolio Manager Renee Hung is process, research priorities,
the overall attractiveness of the considered to be an experienced infrastructure enhancements and
strategy.” Asian equity investor, who has portfolio construction. Over the six
established a pleasing track record in months prior to this update the Fund
managing the Fund over an extended has performed very strongly relative
period. Additionally, Lonsec has to benchmark and peers in the highly
gained a greater appreciation for the challenging market environment
investment process which dominated by the global COVID
encourages idea sharing and pandemic.
accountability.”
Disclaimers:
Lonsec: Under the Lonsec Research Review and Rating Agreement and these Publication Guidelines, the Lonsec Fund Reviews, Ratings, Rating Logos and other Research Reports are for financial services professionals only and are not suitable for retail investors or the general public.
For any inadvertent or deliberate third party disclosure of the Lonsec Ratings on social media, please note that, as the Client, you will be legally responsible for claims or actions arising from the publication on social media, in accordance with the provisions in your Review and Rating
Agreement with Lonsec Research.
Zenith: Zenith Investment Partners (“Zenith”) provides the following guidelines on Zenith’s processes and procedures relating to research services, research methodologies and conflict of interest management. This information also addresses Zenith’s obligations relating to regulatory
guidance as specified by the Australian Securities & Investments Commission (ASIC). In particular, this document deals with Zenith’s obligations as defined by Regulatory Guide 79 and other regulatory guidelines and the Corporations Act.
SQM: The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036 AFSL 421913. SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating
system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating
system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM
Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.
6
Recap of 2020 Investment Themes
Source: Value Partners
7
Asia Corporates Supported by Healthier Balance Sheets
Source: Based on current MSCI universe. Dividend increase refers to an increase of 5% or more.
Bottom-up aggregated with free float adjustment based on current MSCI universe. Jefferies, FactsetDecember 2020
8Transformation of China
SUPPLY CHAIN TO THE WORLD DEMAND CHAIN TO THE WORLD
(External Dependency) (Internal Dependency)
• Labour intensive manufacturing • High Tech Precision
• Exporting Deflation to the World Manufacturing
• Price Taker • Transitioned its economy for a
• Wages below standard, still Post Globalisation World
people in poverty. • Price Maker
• Lack of Domestic Market • Strong Domestic Market
• Innovation, R&D, distribution,
brand development all internal.
9Example – Online Groceries to drive E-Commerce Boom
10Channel Checks Proving Online Platforms have the Cost Advantage
Source: Value Partners forecast
11Who do Millennials’ Trust though?
12China Tourism Group Duty Free Corp (601888 CH)
Leveraging favorable policies to unleash market potential
13Asian Equities: The Value Play in a world full of liquidity
Premium Asia Fund
Performance metrics
1 YR 3 YR 5 YR 7 YR 10 YR
PEER PEER PEER PEER PEER
FUND MEDIAN FUND MEDIAN FUND MEDIAN FUND MEDIAN FUND MEDIAN
PERFORMANCE (% PA) 29.94 19.91 12.69 8.92 16.77 11.68 13.96 10.69 13.22 9.78
STANDARD DEVIATION (% PA) 13.84 15.67 13.72 12.89 11.83 11.49 12.93 11.94 13.23 12.03
EXCESS RETURN (% PA) 11.12 1.09 3.78 0.01 2.32 -2.77 1.73 -1.54 3.35 -0.09
OUTPERFORMANCE RATIO (% PA) 83.33 78.33 66.67 68.06 66.67 67.83 66.67 66.93 65.00 64.44
WORST DRAWDOWN (%) -7.62 -9.52 -8.66 -10.95 -8.66 -10.95 -8.66 -11.50 -9.42 -11.50
TIME TO RECOVERY (MTHS) 4.00 4.30 6.00 NR 6.00 NR 15.00 NR 15.00 NR
SHARPE RATIO 3.07 2.47 0.68 0.49 1.46 1.12 0.87 0.70 0.75 0.55
INFORMATION RATIO 2.22 0.49 0.62 0.21 0.45 -0.28 0.29 -0.12 0.50 0.06
TRACKING ERROR (% PA) 5.01 8.88 6.10 7.14 5.16 6.63 5.99 6.68 6.75 6.60
FUND: PREMIUM ASIA FUND
PEER GROUP: ASIA EMERGING MARKETS
BENCHMARK USED: MSCI AC ASIA EX JAPAN NR INDEX AUD
CASH BENCHMARK: BLOOMBERG AUSBOND BANK BILL INDEX AUD
TIME TO RECOVERY: NR - NOT RECOVERED, DASH - NO DRAWDOWN DURING PERIOD
Source: Morningstar, Link fund Solutions as at 31 January 2021
15Premium Asia Fund – Investing in Trends
Sector Exposure*^ Geographical Exposure*
Insurance Indonesia
3% Cash Real Estate India 2%
Health Care Singapore
3% 3% 1%
2% Thailand 2%
1% Cash
Materials 3%
Philippines
3% Red Chips
0.5%
Information Technology 4%
Other Financials Hong Kong
28%
5% 29% United States
4%
Industrials
5% H Shares
6%
Banks
5%
Taiwan
15%
A Shares
Consumer 17%
Consumer Staples
Discretionary South Korea
Communication 12%
19% 16%
Services
12%
Source: Link Fund Solutions, Bloomberg. Data as at 31 January 2021.
^ Classification is based on Global Industry Classification Standard (GICS).
* Exposure refers to net exposure (long exposure minus short exposure) by listing. Due to rounding, percentages shown may not add up to 100%.
16Premium Asia Fund
Portfolio Characteristics
Top 10 Holdings Industry^ Listing %
Tencent Holdings Ltd Media & Entertainment Hong Kong 8.5%
Samsung Electronics Co Ltd Technology Hardware & Equipment South Korea 7.2%
Taiwan Semiconductor Manufacturing Co Ltd Semiconductors & Semiconductor Equipment Taiwan 6.3%
China Tourism Group Duty Free Retailing China A-shares 4.6%
Kweichow Moutai Co Ltd Food, Beverage & Tobacco China A-shares 3.9%
China Merchants Bank Co Ltd Banks H-shares 2.9%
Wuliangye Yibin Co Ltd Food, Beverage & Tobacco Hong Kong 2.7%
Korea Investment Holdings Diversified Financials South Korea 2.2%
Meituan Dianping Retailing Hong Kong 2.1%
Pinduoduo Inc Retailing United States 2.1%
Basic elements Top Contributors by Holdings
(data as 31st January 2021) Average Weighting Contribution
P/E (x) 16.26 Taiwan Semiconductor
6.31% 4.67%
Manufacturing Co., Ltd.
P/B (x) 2.15
Wuliangye Yibin Co., Ltd. 2.84% 3.42%
Dividend Yield (%) 2.26
Meituan Dianping 2.15% 3.36%
No. of holdings 83
Samsung Electronics Co Ltd 6.33% 3.32%
Data as at 31 January 2021
Source: Link Fund Solutions Pty Ltd, Bloomberg
^Classification is based on Global Industry Classification Standard (GICS). Tencent Holdings Ltd. 6.64% 3.30%
17Low to negative yields – the new normal
• Where can we generate return in a negative yielding environment?
o Increasing share of low and negative yielding products in the world market
o Global interest rates and bond yields will stay lower and longer post Covid-19
100%
80%
60%
40%
20%
0%
1996
1997
1997
1998
1998
1999
1999
2000
2000
2001
2001
2002
2002
2003
2003
2004
2004
2005
2005
2006
2006
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2010
2011
2011
2012
2012
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2015
2015
2016
2016
2017
2017
2018
2018
2019
2019
2020
Sub-zero 0-1% 1-2% 2-3% 3-4% 4-5% 5-10% >10%
Data to 26 June 2020
Source: Bloomberg, ICE BofAML indices
18Premium Asia Income Fund Update
Premium Asia Income Fund Cumulative Return (since launch - net of fees)
Performance Update 150%
As at 31 January 2021 – net of all fees 110%
One month 1.00%
70%
Three months 5.13%
30%
Six months 7.02%
One year 7.94% -10%
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
Feb-16
Aug-16
Feb-17
Aug-17
Feb-18
Aug-18
Feb-19
Aug-19
Feb-20
Aug-20
Since launch* +142.88%
Portfolio characteristics as at 31 January 2021
Cash yield 7.32%
Annualised return +9.88% Yield to maturity / put 8.06%
Time to maturity, years 2.925
Modified duration, years 2.19
Annualised volatility 5.63%
Number of bond positions 63
Source: Link Fund Solutions; Bloomberg
*Launch Date: 31 August 2011
Past performance is not indicative of future results
19Consistent Outperformance with Superior Downside Protection
Source: Morningstar Direct
20Contact Us
Jonathan Wu
Executive Director | Head of Distribution & Operations
Chief Investment Specialist
Premium China Funds Management
Mobile: 0416 031 676
Phone: (02) 9211 3888
Email: jonathan.wu@premiumchinafunds.com.au
Premium China Funds Management Pty Ltd
Suite 39, Level 2, 330 Wattle Street, Ultimo NSW 2007
Tel: (02) 9211 3888 Fax: (02) 9211 0220
Email: info@premiumchinafunds.com.au
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