Risks & Opportunities in Asia

Florence Tan, ANZ Wealth Asia

DISTINCTIVELY ASIA

Breakdown of MSCI Asia ex Japan

Source: MSCI. December 2013.

2015 GDP growth forecasts

Source: ANZ Research. March 2015. *Old series

The MSCI Asia ex Japan Index returned 9.3%* (AUD terms) over the last 10

years.

WHY ASIA?

Source: Bloomberg. March 2015. Price Index. *Including dividends

The AS51 Index returned 9%* over the same time period.

WHY ASIA?

Source: Bloomberg. March 2015. Price Index. *Including dividends

THE NEW NORMALChinese economy in transition

Source: Bloomberg. September 2014.

Falling commodity prices

Source: ANZ Research. September 2014.

LOW OIL PRICES – WINNERS & LOSERS

Impact of 25% drop in oil prices on 2015 current balance for oil importers.

Source: IIF Calculations. Feb 2015.

Oil importers account for 98% of MSCI Asia Pacific’s market capitalisation

Source: BofA Merril Lynch Global Research, EIA, MSCI.

UPSIDE FROM REFORMS

9 June 2014 BBC

Indian government announces rapid economic reforms

• Maintaining fiscal discipline• Focus on infrastructure investment• Trim subsidy burden• Improve ease of doing business• Empowering state governments

INDIA - A REFORMIST BUDGET

• Lower GDP and fixed asset investment growth targets• Price reforms• Fiscal reforms

CHINA – CLUES FROM THE NPC

A MULTI-YEAR RESTRUCTURING STORY

SOE share in listed securities EM SOEs have underperformed

Source: BofA Merrill Lynch Global Research, Factset, Bloomberg. Based on stocks with market cap above US$1b. August 2014.

Source: BofA Merrill Lynch Global Research, Factset. August 2014.

MULTIPLE INVESTMENT OPPORTUNITIESClean energy

IT services

Healthcare Consumer Electronics

Technology Food

CHINESE PROPERTY CASTS A LONG SHADOW

China: 70 cities property prices (%mom)

Source: ANZ Research. February 2015. Source: Financial Times. August 2014.

• Large FX reserves • China has a record of buying bad loans from the commercial

banks in the past decade• Most of the debt is RMB denominated • Most of the USD-denominated debt is trade-related and short

term • A relatively closed capital account

CHINA – NO HARD LANDING

TAPER TANTURM 2.0?Current Accounts (% of GDP)

Source: Bloomberg. March 2015. Source: IIF Portfolio Flows Tracker. February 2015.

Non-Resident Portfolio Flows into Emerging

Markets

VALUATIONS LOOK FAIR

Source: ANZ Global Wealth. March 2015.

MSCI Asia ex Japan

STAY ACTIVEMonthly excess returns of EM equity funds vs MSCI EM

Returns in AUD. As of Dec 2013. This output should be read in conjunction with, and is subject to, MercerInsight MPA: Improtant notices and Third-party data attributions. See www.mercerinsight.com/omportantnotices for details. Copyright: @2013 Mercer LLC. All rights reserved.

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