Investing in China - What we should know in this fast growing market

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The development of China and ways to access the Chinese market.

The development of China and ways to access the Chinese market.

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  • 1. Investing in China 4th July 2014 Investing in China What we should know in this fast growing market 1
  • 2. Investing in China 4th July 2014 2 Pension fund asset allocation 10 years ago
  • 3. Investing in China 4th July 2014 3 Assets Pension funds consider now LDI Hub Liquid Markets Liquid Credit Illiquid Credit Illiquid Markets Collateral Mgt. Equities (EM, DM) Sterling Credit (IG) Structured Finance Reinsurance Pooled vs. Seg DGFs Global Credit (IG) Infrastructure Debt Private Equity Leverage & Liquidity Style Premia HY/Loans Senior Direct Lending Infrastructure Overlay Strategies Risk Parity ABS Mezzanine Finance Real Estate CTA Emerging Market Debt Distressed Debt Global Macro Absolute Return Bonds Senior CRE Debt Equity Long-Short Total Return Sub-IG Credit Relative Value
  • 4. Investing in China 4th July 2014 4 Shenzhen - 30 years ago Development of China
  • 5. Investing in China 4th July 2014 5 Shenzhen - Now Development of China
  • 6. Investing in China 4th July 2014 6 20 years ago Development of China
  • 7. Investing in China 4th July 2014 7 Now Development of China
  • 8. Investing in China 4th July 2014 8 Development of China
  • 9. Investing in China 4th July 2014 9 Development of China
  • 10. Investing in China 4th July 2014 10 Development of China
  • 11. Investing in China 4th July 2014 11 Development of China
  • 12. Investing in China 4th July 2014 12 Strong Growth Financial Crisis Collapse Post Crisis Recovery Recent Underperfor mance Stock Market Performance
  • 13. Investing in China 4th July 2014 13 I skate to where the puck is going to be, not where it has been. Wayne Gretzky Opportunities
  • 14. Investing in China 4th July 2014 14 Percentage of Order Adults (Age 65+) in China • Far less mature industry than developed countries • Demographic change and aging population • Rising income and affordability • Healthcare reform • Healthcare awareness Opportunities Healthcare
  • 15. Investing in China 4th July 2014 15 • Serious environmental degradation driven by economic development • Strong government support • Clean China over the next 5 years • Higher desire for clean energy Opportunities Environmental Protection
  • 16. Investing in China 4th July 2014 16 • Government Investment: Biotech, energy saving, environmental protection, high-end manufacturing • Internet Penetration Opportunities Technology
  • 17. Investing in China 4th July 2014 17 “Internet will change people’s life” 1999 Jack Ma – Founder of Alibaba Group Technological Change
  • 18. Investing in China 4th July 2014 18 E-commerce company, founded in 1999 Handled 1.1 Trillian Yuan in sales in 2012 Estimated market value $120 billion Instant/mobile messenger, founded in 1998 850 million monthly active users Market value $150 billion Search engine, founded in 2000 Handling 5 billion search queries per day Market value $65 billion Technological Change
  • 19. Investing in China 4th July 2014 19 Technological Change
  • 20. Investing in China 4th July 2014 20 “take a human desire, preferably one that has been around for a really long time. Identify that desire and use modern technology to take out steps.” Evan Williams – Co-Founder of Twitter Technological Change 1 – Eliminating steps
  • 21. Investing in China 4th July 2014 21 Technological Change 1 – Eliminating steps
  • 22. Investing in China 4th July 2014 22 Technological Change 1 – Eliminating steps
  • 23. Investing in China 4th July 2014 23 Technological Change 1 – Eliminating steps
  • 24. Investing in China 4th July 2014 24 Who stole my cheese?? Technological Change 2 – Cross Sector Competition
  • 25. Investing in China 4th July 2014 2525 MACHINERY LABOUR CAPITALLAND Intellectual property Patents Brand New Technology Data User Platform Goodwill Customer Base Human Capital I n t a n g i b l e s T a n g i b l e s Technological Change 3 – Recognition of Intangible Assets
  • 26. Investing in China 4th July 2014 26 Technological Change 4 – Innovate or Die
  • 27. Investing in China 4th July 2014 27 QQ Online Game QQ Blog Webmail QQ Mobile App, Expand Value Added Services Mobile IM Wechat Launched Mobile Social Media Apps for taxi/flight booking Mobile Payment Platform Technological Change 4 – Innovate or Die
  • 28. Investing in China 4th July 2014 28 Customer First Team Work Integrity Embrace Change Passion Commitment Technological Change 5 – Distinction and uniqueness, not just scale
  • 29. Investing in China 4th July 2014 29 Technological Change 5 – Distinction and uniqueness, not just scale
  • 30. Investing in China 4th July 2014 30 Type of Investment Domestic/Non- Domestic Currency Additional Information A Share Domestic RMB QFII license required B Share Non-Domestic USD H Share Non-Domestic HKD Other share classes traded on foreign stock exchange Non-Domestic Currencies in local stock market e.g. NYSE, NASDAQ, Singapore Indirect Investment Non-Domestic Currencies in local stock market Shares of companies in developed countries which have significant business operation in China Ways to access Chinese market
  • 31. Investing in China 4th July 2014 31 • Less capacity to access the market for foreign investors • Lack of transparency • Lack of using derivatives for hedging and portfolio replication • Demographic shift • Political risk • Increased concerns of credit growth • Property bubble • Perceived slowdown in growth Limitation and Risk
  • 32. Investing in China 4th July 2014 32 • Fast growing market • More open to the world • Opportunities include  Health Care  Environmental Protection  Technology • Technological Change  Positive to technology sector and those which use technology in the right way  Winners  Meet human desire (take out steps)  Innovate  Monetise intangible assets  Unique and distinct market position  Negative Impact  Some traditional sectors, e.g. retailers, sales agents, intermediaries  Business impacted by cross-sector competition Summary