Economic Outlook & Investment Strategy 1 YTD Global Stock - PowerPoint PPT Presentation

Economic Outlook & Investment Strategy 1

YTD Global Stock Market Performances MSCI ACWI 9.27% DOW JONES INDUS. AVG 15.02% S&P 500 INDEX 16.15% NASDAQ COMPOSITE INDEX 19.95% STXE 50 € Pr 7.13% FTSE 100 INDEX 12.29% DAX INDEX 6.45% CAC 40 INDEX 11.20% NIKKEI 225 30.10% TAIWAN TAIEX INDEX 6.99% KOSPI INDEX -3.37% ALL ORDINARIES INDX 14.09% Straits Times Index STI -1.73% FTSE Bursa Malaysia KLCI 4.50% STOCK EXCH OF THAI INDEX -4.62% MICEX INDEX -4.37% BRAZIL IBOVESPA INDEX -17.95% S&P BSE SENSEX INDEX -2.92% CSI 300 INDEX -6.09% SHANGHAI SE A SHARE INDX -4.96% SHANGHAI SE B SHARE INDX 1.95% SHENZHEN SE A SHARE INDX 14.28% SHENZHEN SE B SHARE INDX 17.30% CSI Hong Kong 100 Index -4.53% HANG SENG INDEX -1.33% HANG SENG CHINA ENT INDX -10.83% Source: Bloomberg Data as of 31/8/2013; Fund performance is calculated in the fund’s base currency on NAV-to-NAV basis with gross dividend reinvested. 2 Investment involves risks, please read the important information.

Market Concerns on US, Europe and China Economy When Will US Tapering Begin Market Concerns Will Euro Debt Will China Crisis Reignite Tighten Policy 3 Investment involves risks, please read the important information.

US 4 Investment involves risks, please read the important information.

Bernanke’s First Tapering Talk On May 22, Bernanke first expressed his view in the Q&A session at • Congress testimony that the Fed might consider tapering its bond purchase program later this year if the US economy growth is strong and sustainable. US 10-Year Treasury Yield Trend 2.89% 3.0 美國 10 年期國債孳息 US 10-Year Treasury Yield 2.8 2.6 2.4 2.2 2.0 % 1.8 1.6 1.4 1.2 1.0 09/2012 10/2012 11/2012 12/2012 01/2013 02/2013 03/2013 04/2013 05/2013 06/2013 07/2013 08/2013 Source: Bloomberg Data as of 31/8/2013 5 Investment involves risks, please read the important information.

Volatile Investment Market – Equity Major Stock Market Year to Date on May 22 May 22 to Present Index (Before Bernanke’s First (After Bernanke’s First Tapering Talk) Tapering Talk) MSCI World Index 12.63% -2.98% S&P 500 Index 17.05% -0.77% STOXX Europe 50 Index 13.12% -5.30% MSCI Asia ex-Japan Index 4.03% -7.93% Shanghai Shenzhen CSI 300 Index 3.95% -9.65% Hang Seng China Enterprises Index -3.25% -7.83% Hang Seng Index 3.43% -4.60% Nikkei 225 Index 51.60% -14.18% Source: Bloomberg Data as of 31/8/2013; Fund performance is calculated in the fund’s base currency on NAV-to-NAV basis with gross dividend reinvested. 6 Investment involves risks, please read the important information.

Volatile Investment Market – Currency Major Currency Year to Date on May 22 May 22 to Present Performance (Before Bernanke’s First (After Bernanke’s First Tapering Talk) Tapering Talk) against USD JPY -15.92% 5.38% AUD -6.69% -7.39% CHF -6.44% 5.62% NZD -2.53% -1.15% GBP 1.04% -7.41% KON -4.93% -0.34% EUR -2.54% 3.45% TWD -2.97% -0.31% RMB 1.64% 0.04% Source: Bloomberg Data as of 31/7/2013 7 Investment involves risks, please read the important information.

Volatile Investment Market – Bond Major Country As of 22 May 2013 As of 31 August 2013 Government Bond Yield (Before Bernanke’s First (After Bernanke’s First Tapering Talk) Tapering Talk) US 10-Year Govt Bond 2.0395% 2.7839% Spain 10-Year Govt Bond 4.1800% 4.5370% Italy 10-Year Govt Bond 3.9120% 4.4010% Greece 10-Year Govt Bond 8.1320% 10.2990% Japan 10-Year Govt Bond 0.8910% 0.7200% Germany 10-Year Govt Bond 1.4270% 1.8560% UK 10-Year Govt Bond 1.9030% 2.7720% Source: Bloomberg Data as of 31/8/2013 8 Investment involves risks, please read the important information.

Fed hints at tapering On 19 June, Bernanke stated, after the FOMC policy meeting, growth in jobs market could lift • consumers’ sentiment, and if the unemployment rate fell to 7%, which signaled a continuous improvement in labour market, a timetable for exiting QE would be laid out. 2015 will be a Reduce bond End QE in the suitable time for purchase later middle of next the 1 st interest this year year rate hike US economy forecast by Fed (Sep 2013) 2013 2014 2015 Economics 2.0%-2.3% 2.9%-3.1% 3.0%-3.5% growth Unemployment 7.1%-7.3% 6.5%-6.8% 5.9%-6.2% Source: US Fed Note: The thresholds for raising rate are 6.5% unemployment rate and 2.5% inflation. 9 Investment involves risks, please read the important information.

US economy recovery on track, unemployment rate fall Nonfarm payroll net change(‘000) and unemployment rate(%) Source: Bloomberg Data as of 31/8/2013 10 Investment involves risks, please read the important information.

Improvement in housing market US S&P/CS Composite-20home price index(YoY) Source: Bloomberg Data as of 31/7/2013 11 Investment involves risks, please read the important information.

US stock earnings record decent growth Dow Jones Industrial Average Trailing 12M Earning per share Current level: USD 1043.99 2007 level: USD 808.01 Source: Bloomberg Data as of 31/8/2013 13 Investment involves risks, please read the important information.

US stocks reaching new high Dow Jones Industrial Average vs. S&P 500 Source : Bloomberg Data as of 31/8/2013 14 Investment involves risks, please read the important information.

Coming new chairman for Fed It was widely expected Obama will nominate the next Fed chairman within month, taking over Bernanke whose tenure ends at Jan 2014. After Lawrence Summers’ withdrawal from consideration, Yellen has become the front-runner for the quest. Yellen, the Fed’s vice chairman since 2010, has participated in policy formulation, and has a similar stance to Bernanke, implying a continuation of current policy, bringing stability for the market. Janet Yellen Lawrence Summers Investment involves risks, please read the important information.

Europe 16 Investment involves risks, please read the important information.

Euro debt crisis fades European countries can trigger Outright Monetary Transaction (OMT) at any time, which significantly reduce the Euro sovereignty risk. 10 Years Treasury Bond Yield of European Countries Source: Bloomberg Data as of 31/8/2013 17 Investment involves risks, please read the important information.

Manufacturing Back into Expansionary Territory Eurozone Manufacturing PMI 65 歐元區 Eurozone 德國 Germany 法國 60 France 意大利 Italy 55 51.8 51.4 51.3 50 49.7 45 40 01/2010 04/2010 07/2010 10/2010 01/2011 04/2011 07/2011 10/2011 01/2012 04/2012 07/2012 10/2012 01/2013 04/2013 07/2013 Source: Bloomberg Data as of 31/8/2013 18 Investment involves risks, please read the important information.

German election In the German federal election, the Christian Democratic Union (CDU) led by Chancellor Angela Merkel won with 41.5% of the vote, much higher than 33% in previous election. Being the largest economy in the Eurozone, Germany’s political situation remains crucial in the progress of Euro-debt crisis and shaping the future policy. Investment involves risks, please read the important information.

China 20 Investment involves risks, please read the important information.

Concerns on liquidity risk In Fitch’s view, wealth management products (WMP) continues to pose a risk to the banking sector in China because it accounts for a sizable amount of funding. The primary risk centers on the cash payout pressure posed by WMPs’ short-term nature, the poor liquidity of underlying assets, the high mobility of WMP investors, and banks’ mismatched assets and liabilities. Number of Products Issued Per Day SHIBOR (Overnight) 15.0% 13.4% 12.0% 9.0% 1yr average:2.4% 1 年平均 :2.4% 6.0% 3.7% 3.0% 0.0% 07/2012 08/2012 09/2012 10/2012 11/2012 12/2012 01/2013 02/2013 03/2013 04/2013 05/2013 06/2013 07/2013 Source: Wind, Puyi Wealth Mgmt Source: Bloomberg As of 31/7/2013 21 Investment involves risks, please read the important information.

Stabilized Manufacturing PMI China’s Manufacturing PMI 55 中國官方製造業採購經理指數 China Official Manufacturing PMI 54 滙豐中國製造業採購經理指數 HSBC China Manufacturing PMI 53 52 51 51 50.1 50 49 48 47 46 45 12/2011 01/2012 02/2012 03/2012 04/2012 05/2012 06/2012 07/2012 08/2012 09/2012 10/2012 11/2012 12/2012 01/2013 02/2013 03/2013 04/2013 05/2013 06/2013 07/2013 08/2013 Source: Bloomberg As of 31/8/2013 22 Investment involves risks, please read the important information.

No imminent and large-scale stimulus Domestic Chinese economic growth momentum continued to slow down without imminent signs of a new round of government stimulus policy. Investors sentiment recovered to some extent triggered by Chinese government showing attitude to set up economic growth bottom line. China Main Economic goals Item 2013 2012 GDP 7.5% 7.5% CPI 3.5% 4.0% M2 14% 13% Investment in Fixed Assets 18% 16% Retail Sales 14.0% 14.5% Trade Balance 10% 8% Urbanization rate 53.37% 52.07% Source ： Report on the Work of the Government, 2013 23 Investment involves risks, please read the important information.