Jpmorgan Asian Investment Share Discussion Threads

[loganair] 16/12/2016 16:58

Emerging markets in Asia are expected to continue to grow in 2017, offering opportunities for investors amid ongoing global political and market volatility. Despite considerable political uncertainties in the near term in the US, the UK and Europe, as well as potential changes to US trade policy under the coming Trump administration, modest improvement in global economic momentum is expected to continue in the year ahead.

Against this global backdrop, opportunities can be identified in riskier, higher yielding asset classes, including Asian equities, which can offer better returns for investors seeking to manage market volatility.

Geoff Lewis, Senior Asia Strategist at Manulife Asset Management, said: "Despite the political uncertainty following Brexit and the US Presidential election, we're cautiously optimistic about the year ahead. US fixed investment is expected to pick up and global monetary policy is likely to remain accommodative which will alleviate pressures on the equity markets. There are significant opportunities in Asia for investors. The region hasn't been immune to the challenges facing the global market economy, but it's still, in our opinion, the highest quality emerging market in the world and likely to draw increased interest in 2017."

Asia (ex-Japan) is expected to outpace the US, Europe and other emerging markets such as Latin America, with 6% gross domestic product growth forecast for 2017. The latest Manulife Investor Sentiment Index (MISI)* also reveals that Asian investor sentiment for investing in Emerging Asia has jumped from 19 in 2015 to 34 in 2016.

2017: A turning point for Asian Equities:

2017 looks to be a turning point for Asian equities, which will generate opportunities for investors. While Asian stock earnings were soft in recent years, earnings are expected to be revised up in the coming year as a result of an improved economic environment as well as supportive fiscal and monetary policies.

More broadly, when compared to 2016, capital flows, exchange rates and bond spreads across most of the region are expected to continue to stabilise in 2017, creating a more positive macro environment for equities. Real interest rates in Asia, which constitute the improving inflation outlook, are increasingly more favourable, indicating a lower vulnerability for Asian stocks to future interest rate increases from the US Federal Reserve.

Among the Asian markets, opportunities should become available in Chinese equities, as evident by the improving private investment landscape and the first positive Producer Price Index (PPI) reading in 55 months. North Asian markets, such as China, South Korea and Taiwan, are also expected to perform better in the early part of 2017 due to the perceived positive impact of fiscal stimuluses and increased economic activities in the US. The uncertainty over forthcoming elections in Europe may result in an increased volatility in global markets and Southeast Asia should therefore perform relatively better given that its economies are driven largely by domestic consumption and policies, as was observed in 2016.

The MISI survey revealed that 80% of investors indicate that the next six months will be a "neutral to good time" to invest in equities. The top three reasons cited by those investors that favour Asian stocks were signs that market conditions are improving (41.5%), a stable market place (38.5%), and low interest and lending rates that drive the asset class (35.8%).

Ronald Chan, Chief Investment Officer of Equities Asia (ex-Japan) at Manulife Asset Management, commented: "We believe 2017 could prove a turning point for Asian equities, particularly if China's gradual economic rebound presents positive knock-on effects for other regional economies. As the economic outlook brightens, valuations are also expected to improve, which could offer meaningful gains for opportunistic investors. At Manulife, we see constructive opportunities in Indonesia, China and India equities."

[loganair] 07/10/2016 09:22

By Sharat Shroff is a portfolio manager on the Matthews Pacific Tiger fund:

In Asia, household wealth creation has been a major theme for two decades, particularly in China. We have seen personal wealth grow uninterrupted since the 1997 Asian financial crisis. The rate might have accelerated or decelerated, but we do not see the trend being altered.

This growing middle class is an increasingly important driver of business activity in the region, and has been a source of new ideas for the portfolio.

For the past two to three years, consumption has supported domestic demand, while investment activity has been grinding lower across many parts of Asia.

What has powered Asia's best-performing market in 2016?

However, it is also worth noting that in countries like Thailand and Malaysia, household debt has continued to expand, and the tepid outlook for income growth suggests consumption growth may not be as supportive as it has been in the recent past.

Yet there are other countries – such as India, Indonesia and the Philippines – where the outlook for income growth and household debt is not overly constraining for continued growth in private consumption.

That being said, policymakers and central bankers realise the need to boost investment growth, which has led to vigorous rate cuts in economies like Indonesia, and to hopes for greater fiscal support in other countries like India.

Trade and sentiment: Brexit's impact on Asia

The purest driver of investment activity is, however, continued emphasis on structural reforms to boost productivity and ease the cost of doing business in any given country.

In this regard, progress has been slow and uneven, whether it is reforming state-owned enterprises (SOE) in China or easing land and labour regulations in India and Indonesia.

Nonetheless, these are issues that are well-defined and are being gradually addressed. We believe there is an opportunity for Asian businesses and policymakers to clearly set themselves apart from the uncertainty that might impact economic activity globally.

Bull Points:

• Asia's overall levels of personal wealth have grown uninterrupted since the 1997 Asian financial crisis

• Governments are introducing structural reforms

Bear Points:

• Investment activity has been grinding lower across many parts of Asia

• The recovery in earnings across the region remains bumpy

[loganair] 27/9/2016 17:15

Emerging markets recover, but now for the hard part by Michelle McGagh:

Emerging markets have been strong performers this year, but now earnings need to improve, say investment trust managers.

Emerging markets have only entered the first leg of a recovery and company earnings need to improve before a genuine turnaround can take hold.

Emerging markets have had a rocky few years but investments trusts focused on the sector are among the best performers of 2016. Shares in these trusts have risen 31% on average since the start of the year.

The outcome of the EU referendum in June provided a further boost to emerging market investments as the value of sterling fell, however, it is only just the start of the recovery.

Carlos Hardenberg, manager of the Templeton Emerging Markets investment trust, said the ‘pendulum was swinging back’ in favour or emerging markets. Shares in the trust are up 42.8% this year, making up all the ground lost in a torrid 2015. Hardenberg took control the fund from veteran emerging market manager Mark Mobius last September.

‘The market always over reacts when the general consensus turns negative,’ said Hardenberg. ‘Share prices are more volatile than underlying earnings. We are seeing industrial production, as a measure of recovery, increasing in emerging markets...if you go country by country, there is a healthy degree of orders.

‘GDP growth is slowly improving and over the next two years markets like Russia and Brazil will see the biggest relative improvements.’

Omar Negyal, manager of the JPMorgan Global Emerging Markets Income trust, targets income rather than capital growth in his fund and said the real recovery in emerging markets will have begun when company earnings stabilise.

‘What we are seeing in emerging markets is the first leg of recovery,’ he said.

‘China is stabilising and there is an improvement in trade balances in emerging markets. For the second leg [of recovery] to come through, earnings have to start to improve. We are at the start of that,' he said.

He said improved earnings would help the ‘rerating of high yield equities in the asset class’.

China has been the main problem for emerging markets, with slowing growth dragging the sector down.


Hardenberg holds 19% of his trust in the country. He said there were still concerns around housing and ‘over capacity in steel and cement that will have to be dealt with in future’.

‘The big negative for emerging markets is the overall impact of global uncertainty and demand and supply in commodity markets,’ said Hardenberg.

Former chief economist at the International Monetary Fund Ken Rogoff has also warned of the threat China poses to the global economy due to its high levels of debt. He said there was ‘no question’ that ‘China is the greatest risk’.

‘China has been the engine of global growth,’ he said. ‘China has been really important. But China is going through a big political revolution. And I think the economy is slowing down much more than the official figures show,’ he said.

However, the good news is that sentiment towards other emerging markets is becoming more positive and local emerging market currencies are ‘slowly recovery’ and companies are finally keeping ‘capital expenditure down and concentrating on cost management’, said Hardenberg.

Emerging companies in mid and small cap - there are more opportunities there,’ said Hardenberg, adding that many tech companies - of which he has been a fan - were ‘leap-frogging’ more established businesses.

In particular, Hardenberg said he looked for companies ‘that have sustainable business models in an area with a high barrier to entry’.

‘We are expecting that emerging markets will see a sideways development over the next 12 months and there is a clear risk from China...and there is some danger already priced in,’ he said.

Although Asia is the largest geographic weighting in his trust, Hardenberg said he did not ‘have exposure to Chinese banks or insurance companies’ because of their poor asset quality and concerns the companies were ‘hiding how they are restructuring’.

China is the concern for Negyal, whose trust has mounted a recovery almost as impressive as Templeton's this year, with the shares up 38.6%.

‘China is very important for emerging markets at a quarter of the asset class and for the rest of the emerging markets it is vital... because it drives the rest of the emerging markets via trade links,’ he said.

‘That’s commodity prices in Latin America or manufactured goods in the rest of Asia. There are very few emerging markets that are isolated from China. From an economic perspective, Latin America will benefit from stabilisation [in China].’

Also important for Negyal is for emerging markets ‘to re-enter growth territory’ to ensure companies can continue to pay dividends.

‘Emerging market dividends and earnings have been under pressure,’ he said. ‘The near term outlook for dividends is still a concern and it is something we want to be cautious about but in the mid and long-term growth opportunities can be seen as well,’ said Negyal.

[loganair] 07/8/2016 12:02

31st May 2016 - Portfolio analysis by JP Morgan:

The trust's share price and net asset value outperformed the benchmark in May. Strong stock selection in Taiwan, India and Korea accounted for the outperformance. The top contributor was Tencent, a Chinese internet play, which reported strong revenue and profit numbers for the first quarter of 2016, helped by a strong momentum in the mobile games division. A number of the portfolio's technology stocks which are focused towards smartphone growth were also strong contributors over the month, stocks such as AAC Technologies, Advanced Semiconductor Engineering and Largan Precision. Our holding in a number of financials in China and India underperformed. Ping An Insurance in China reported strong results, but the market remains concerned about reinvestment risk in the low return environment. China Merchants Bank reported strong results but concerns over higher non-performing loans lead to underperformance.

[loganair] 03/3/2016 10:49

31st January 2016 - Portfolio analysis by JP Morgan:

The fund underperformed the index in January. Poor stock selection in China, Singapore and Korea accounted for underperformance over the month. Asset allocation was negative, as the fund is overweight China (As I have written to JP Morgan many, many times before that in my good opinion it would be best for China to be no more than 20% of the Asian fund instead of the current 31.8%) and underweight outperforming markets such as Malaysia (has Zero% in Malaysia.) The fund is geared, which contributed to negative asset allocation returns. The best performing stock was Airports of Thailand, due to strong passenger arrival numbers and the emergence of low cost airlines. Overweights in Largan Precision, AAC Technologies and Taiwan Semiconductor Manufacturing Company also contributed to returns. Our core internet position in Tencent remained more resilient than peers. China Taiping Insurance, Ping An Insurance and property company China Vanke declined, as did shares in Sino Biopharmaceutical. Phoenix Healthcare and CSPC Pharmaceutical continued to underperform.

[loganair] 10/2/2016 21:56

31st December 2015 - Portfolio analysis by JP Morgan:

The trust's share price and net asset value outperformed the benchmark, due to stock selection in China and Thailand. The biggest detractor was country allocation within ASEAN (overweight Thailand and underweight Malaysia and Singapore) and an overweight in China. China Vanke, China's largest homebuilder, outperformed following a change of ownership as the largest shareholder, China Resources, was replaced by Shenzhen Jushenghua. Airports of Thailand performed well as it raised its net profit numbers on increased air traffic and tourism numbers. ASE in Taiwan rose after Siliconware Precision announced that it would discuss the offer made by ASE. Changan Auto rallied as auto sales for both domestic and foreign brands rose. On the negative side, China Everbright was hurt by reports of construction delays given stricter environmental standards and concerns over an earnings miss. Largan, Catcher and AAC Technologies (in the Apple supply chain) underperformed, given Apple order cuts and poor sell-through numbers.

[loganair] 30/1/2016 11:11

Assessing Asia’s Growth Prospects by Robert Horrocks, Chief Investment Officer, Matthews Asia:

I think it is fair to say that sentiment toward China, and by extension, Asia, is quite polarized. Some investors see opportunity in the weakness of the second half of 2015, others have doubts over the reality of recent growth rates and are anxious over a slower headline rate of growth in China. It is not hard to see why: the prospect of further tightening by U.S. monetary policy; slowing nominal growth; low margins and disappointing earnings growth; a strong dollar and weak local currencies; increasing credit spreads; and poor momentum in the equity markets. And all of this is happening at a time when valuations, whilst not expensive, cannot be regarded as cheap in absolute terms.

Now, let me just suggest that we have some data that should allow us to be more confident over Asia’s ability to weather the world’s deflationary forces. First, current accounts in Asia are generally positive. That means Asia's countries are saving more domestically than they invest domestically. And so, they are relatively less reliant on foreign capital. Second, inflation rates are low across much of the region (again Indonesia and India are exceptions, even though they have been successful at moderate price rises). These low inflation rates mean that Asia’s policymakers have a lot of room to offset deflationary impulses by either monetary policy or even government spending or tax cuts. A return to a more inflationary environment would relieve some pressure on margins, earnings and valuations.

The question is: are we seeing any signs of such a response? I think we are. First, there are the natural responses of markets: prices adjust. Most obviously, in the face of deflationary U.S. pressures, Asia's currencies have taken the strain. Then, we have the active response of policymakers. In India, we have seen the central bank successfully squeeze down core inflation rates without too severe an impact on industrial profits (perhaps helped by lower commodity prices).In China, we are seeing authorities raise the growth rate of narrow money, continue to press with financial system reforms, and support the property market. Japan is continuing its policy of reflation and structural reform initiatives. So, in the face of a deflationary U.S. policy, the three Asia giants seem to be leaning in the other direction. The degree of offset is perhaps still small. But talking to clients and investors around the region leaves me to believe that there is no great liquidity crisis.

In this context, Asia's long-term growth prospects still look good. High savings rates, large manufacturing bases, reformist governments pursuing financial, legal, and corporate reforms mean that Asia should continue to invest and potentially grow at higher rates than the rest of the world. Over time, this investment will continue to raise real wages across the region.

Although the headwinds are currently considerable, Asia's businesses seem to be weathering the storm, and so long as we keep our eye on the long term, the investment environment should offer up some good opportunities.

[loganair] 26/12/2015 09:54

30th November 2015 - Portfolio analysis by JP Morgan:

The trust's net asset value outperformed the benchmark, while the share price underperformed. Stock selection in China and India contributed positively, while stock selection in Korea detracted. Our holding in ikang Healthcare benefited performance as the stock rallied 26% after receiving a USD 1.5 billion acquisition offer from an investor group that includes its main competitor. Our core internet position in Tencent also helped performance given strong mobile gaming and advertising revenue, which are major long-term growth drivers. Financials, such as China Vanke and AIA, performed strongly. Indian auto stocks, such as Martui Suzuki and Tata Motors, rallied on the back of strong domestic car sales in October. Underperformers included Vipshop, Samsung Electronics and ASE. Vipshop fell after missing revenue guidance for the first time in its listed history. Samsung Electronics fell on a weak fourth-quarter outlook given seasonal factors and a continued slowdown in its smartphone segment.

[loganair] 15/12/2015 19:46

31st October 2015 - Portfolio analysis by JP Morgan:

The trust's share price outperformed the benchmark, while the net asset value underperformed. Stock selection was positive in most markets, with the exception of China, while asset allocation was weak. Our overweight position in Samsung Electronics benefited performance as the company announced both a buyback and cancellation of shares in excess of market expectations. Vipshop outperformed as the stock traded higher in anticipation of earnings. An underweight in China Mobile contributed positively, as the stock retreated given its defensive earnings stream in a cyclical rebound. In a reversal from the last quarter, several of the top contributors became detractors in October. Our stock picks in technology, including overweights in Catcher Technology and Largan Precision in Taiwan, hurt returns amid profit-taking in the Apple supply chain. Meanwhile, the government's proposal of larger-than-expected feed-in tariff cuts stirred concerns around profitability for wind and solar power developers. China Longyuan Power Group experienced the biggest decline in a year.

[loganair] 15/12/2015 18:53

JPMorgan secures backing after arresting Asian trust decline by Daniel Grote:

Board of JPMorgan Asian recommends reappointment of managers after investment trust beats benchmark despite suffering losses.

The board of JPMorgan Asian (JAI) has recommended the reappointment of the investment trust's managers, after they arrested the decline of the 'problem child' fund.

Last year JPMorgan was told it needed to 'deliver significant performance improvement in 2015 in order to justify its reappointment' after years of 'mediocre' results that had left it languishing towards the bottom of the performance tables.

In the trust's results for the year to the end of September, chairman James Long said the managers had 'risen to and exceeded' the challenge, and the board would recommend they be reappointed at the trust's 2016 annual general meeting.

The trust's net asset value fell 2.9% over the year in a tough 12 months for Asian markets, with the MSCI Asia ex-Japan index falling 6.3% over that period.

'Although the overall return was negative in a difficult market for Asian equities generally, it is at least pleasing to note that the company's return on net assets represents an outperformance against its benchmark... of 3.4%,' said Long.

Since the period covered by the results, Richard Titherington has replaced Ted Pulling as manager of the trust, which analysts at Numis had dubbed a 'problem child' for Numis given the underperformance issues. Sonia Yu has remained as manager, working alongside Titherington.

However, Numis said JPMorgan was not yet out of the woods. 'We believe it has been positive to see the board publicly highlighting its review of the manager's performance after a period of relative poor performance, demonstrating the benefits of investment companies having an external board,' they said.

'However, it remains a relatively short period of outperformance and we would expect that the board and investors continue to keep a close eye on performance in advance of the regular, three-yearly continuation vote in 2017.'

[loganair] 15/12/2015 18:50

Any news or views about the JP Morgan Asian Investment Trust.

Geographical Breakdown as at 30 November 2015 & 31 January 2017:

China.........31.5% China........33.3%
S.Korea.......16.0% S.Korea......17.7%
India.........13.6% Hong Kong....12.0%
Taiwan........13.1% Taiwan.......11.7%
Hong Kong.....11.0% India........10.5%
Thailand.......4.3% Indonesia.....5.3%
Singapore..... 2.5% Thailand......5.0%
Indonesia......2.0% Vietnam.......2.3%
Vietnam........1.4% Singapore.....1.2%
Philippines....0.9% Philippines...0.7%

Dividend now to be paid Quarterly - 3.1p + 3.0p last Yearly Dividend = a Total dividend payable of 6.1p (2.5p 2016, 2.2p 2015) on 06 February 2017.

Quarterly payments give investors a more consistent income and allow investment companies to 'smooth over' payouts.

Second Quarterly interim dividend of 3.4p paid on 10th May 2017
Third Quarterly interim dividend of 3.6p paid on 08th August 2017
Fourth Quarterly interim dividend of 3.8p paid on 12th October 2017
First Quarterly interim dividend of 4.0p paid on 06th February 2018
Second Quarterly interim dividend of 3.9p paid on 09th May 2018
Third Quarterly interim dividend of 3.9p paid on 08th August 2018