Undiscovered global leaders in Asia Emily Whiting , Investment Specialist, EMAP Equities PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Not your father’s Emerging Markets What is behind Trump’s protectionist agenda in emerging markets 1. Low cost wages in Mexico 2. Made in China 2025 3. Currency manipulation 4. Bad trade deals Image source: Shutterstock 1 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
1% in MSCI Emerging Markets Index is misleading … China A-share inclusion in the MSCI EM Index First inclusion step: By 2025* May 2018 (10\0% inclusion factor Second inclusion step: for 234 A-shares) Aug 2018 China China 25.6 (5% inclusion factor for China China 29.5 234 A-shares) Weight Weight 30.2% 39.3% China A 13.7 China A 0.7 … China A-shares will drive Emerging Markets in the future Source: MSCI Consultation on China A-Shares Potential Inclusion, June 2017. Citi Research. *Based on free float market-cap of 234 A-share stocks to be included, and a 30% upper limit of foreign ownership. EM = Emerging Markets 2 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
China A-shares: large, liquid, inefficient and lowly correlated 3,467 USD67bn A-shares Daily Traded Value In 2017 2.1% 0.19 Foreign ownership *Correlation to MSCI Europe Source: Bloomberg. *Correlations of Weekly Returns in USD (31 March 2008 to 30 March 2018) Source: J.P. Morgan Asset Management, Bloomberg. Data as of as of 31 December 2017 Indices do not include fees or operating expenses and are not available for actual investment. 3 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
You’re probably already thinking about … Market cap Home appliances Beverages Dairy products Whirlpool Diageo Danone USD USD USD 12bn 90bn 57bn Midea Group Kweichou Moutai Inner Mongolia Yili USD USD USD 60bn 146bn 32bn Source: Bloomberg, Company Accounts, J.P. Morgan Asset Management. Data as of 31 December 2017. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. The use of their logos is in no way an endorsement of those companies by J.P. Morgan Asset Management nor is it intended to indicate an endorsement of J.P. Morgan Asset Management by those companies. 4 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
… but the opportunities lie in the next wave Consumption Consumption upgrade Upgrade n Leisure, travel & entertainment Technology Technology n Artificial intelligence and voice recognition Healthcare Healthcare n Chinese healthcare Image source: Shutterstock 5 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
iflytek: a leading voice recognition and Technology artificial intelligence solution provider Image source: Shutterstock, The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 6 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Consumption The rise of Generation - Z Upgrade In 2014, Gen Z’ers consumed 35% of online video, by 2020, what % will they consume? 48% 1. 67% 2. 82% 3. Source: iResearch, Bank of America Merrill Lynch (BofAML) Equity Research. Data as of May 2018. Image source: Shutterstock. 7 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Increasing spending power of Gen-Z in China’s online Consumption entertainment market Upgrade Generation Z’s market share contribution (%) 80 2014 2020E 67 70 66 62 60 56 50 46 46 40 35 30 22 20 10 0 Online entertainment Online video Mobile games Live broadcasting Source: iResearch, BofAML Equity Research. Data as of end May 2018 8 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Consumption AfreecaTV: riding the e-sports wave Upgrade Image source: Shutterstock, The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 9 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Huazhu Group: will this be the Consumption world’s biggest hotel company? Upgrade Image source: Shutterstock, The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 10 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Consumption Shenzhou: opportunities exist outside the ‘new economy’ Upgrade Image source: Shutterstoc. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. k 11 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Healthcare Wuxi Bio: following the molecule to become a global leader Image source: Shutterstock. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 12 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Finding global leaders before they list How many start-ups have reached unicorn status in China since 2013? 9 1. 12 2. 60 3. 127 4. Source:. Unicorns Abroad: The creation of billion-dollar start-ups is shifting out of the US, October 2017; Image source: Shutterstock 13 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Finding global leaders before they list How many start-ups have reached unicorn status in China since 2013? 9 1. 12 2. 60 3. 127 4. Source: Unicorns Abroad: The creation of billion-dollar start-ups is shifting out of the US, October 2017. Image source: Shutterstock 14 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Who are these unicorns? Top 10 Unicorns, February 2018 Company Latest Valuation Company Latest Valuation Ant Financial $150 billion Apr-18 SpaceX $21 billion Jul-17 Uber $68 billion Jun-16 WeWork $20 billion Jul-17 Didi Chuxing $56 billion Dec-17 Palantir $20 billion Oct-15 Airbnb $31 billion Mar-17 Spotify $19 billion Dec-17 Meituan-Dianping $30 billion Oct-17 Lufax $18 billion Jan-16 Source: Unicorns Abroad: The Creation Of Billion-Dollar Startups Is Shifting Out Of The US (link) October 2017. Image source: Shutterstock. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. 15 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
FinTech unicorns Insert Chris Birney video 16 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Where are all the unicorns in India? Key players along with key investors n Walmart n Microsoft n Tiger Global n Tencent n SoftBank n Alibaba n SAIF Partners n SoftBank n Tencent Sources: Company data, Economic Times. VC Circle. Inc42.com. Crunchbase. Company data. Morgan Stanley Research. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. The use of their logos is in no way an endorsement of those companies by J.P. Morgan Asset Management nor is it intended to indicate an endorsement of J.P. Morgan Asset Management by those companies. 17 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
Deep fundamental research is key to unearthing new opportunities 97 8 21 investment professionals locations languages $150m 17 analysts covering China A shares *research budget across equities Source: J.P. Morgan Asset Management as of 31 August 2018. *as of 30 th June 2018 18 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
51Job: Insert Dong video 19 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
JPM Asia Growth Fund e e l l i i t t r r High h a a Hi u u q q p p o o T T 3 3 d d Qua Quality ction, n n convict a a co 1 1 r r e e v v o o growth gr wth centrated ed concen co s s r r a a e e y y ti tilt PM team based in Asia PM S S t t r r o o n n g g r r i i s s k k Tapping into o Tap a a d d All-ca Al j j u u s s cap t t e e d d umer er nsum cons he co “the “t r r ex exposure e e t t u u r r n n re s s ow” orrow omor of tom of Joanna Kwo wok Jo Davids ds Mark Da Ma @ JPM for 16 years @ JPM for 21 years @ @ Past performance is not a reliable indicator of current and future results. 20 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
In summary… n The investment universe is rapidly evolving n You need to think forward and be ahead of the curve… n …to do that you need deep fundamental research 21 | PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION
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