CIO VIEW
Sean Taylor – Chief Investment Officer, APAC
Head of Emerging Markets
For institutional investors only. Further distribution of this material is strictly prohibited "Australia: For Professional Investors only\.
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As of: Jan 2020; source: DWS International GmbH, Macro Research
Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.
3.1
2.2
1.1 0.8
1.8
4.2
6.2
5.1
1.2
0.8
3.1
1.6
0.9
0.2
2.5
4.4
5.8 6.2
1.5 1.7
0
1
2
3
4
5
6
7
8
World USA Euro area Japan Australia Emerging Markets China India Russia Brazil
2019E 2020E
%
MACRO VIEW: GLOBAL ECONOMY Not too fast – not too slow – growth is stabilizing through EM
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EQUITY VIEW – US VS. REST OF THE WORLD
SPEQACTL Index: S&P 500 Earning Per shares; NNCBBTAX: Corporate Business Corporate Profits before tax NIPA
Source: Bloomberg as of Jan 2020. Past performance is not a reliable indicator of future returns.
US: LESS SUPPORT FROM PROFITS AND EMPLOYMENT GOING FORWARD
0
200
400
600
800
1000
1200
1400
1600
0
5
10
15
20
25
30
35
40
45
1/09/2004 1/09/2005 1/09/2006 1/09/2007 1/09/2008 1/09/2009 1/09/2010 1/09/2011 1/09/2012 1/09/2013 1/09/2014 1/09/2015 1/09/2016 1/09/2017 1/09/2018 1/09/2019
SPEQACTL Index (L1) NNCBBTAX Index (R1)
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EQUITY VIEW – GROWTH VS. VALUE
* Next twelve months; Source: FactSet Research Systems Inc., Bloomberg Finance L.P., DWS Investment GmbH as of December 2019
Strategic outlook Equities – Balanced view on styles
GROWTH TO VALUE SPREAD HAS LIKELY PEAKED*
Past performance is not a reliable indicator of future returns.
US CHINA TRADE WAR
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1) YTD change 2019 vs. 2018, USD bn. Jan. – September 2019 / Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove to
be incorrect. Sources: Bloomberg Finance L.P., DWS Investment GmbH as of Jan 2019
Tariff agreement Phase 1 signed, conflict on technological supremacy continues
TARIFFS FREEZE
PHASE ONE AGREEMENT
U.S. – CHINA TRADE DECOUPLING TECH SUPREMACY
! ~
NO FURTHER ESCALATION;
PHASE 2 TO BE DISCUSSED
BIGGEST DECLINE IN CHINESE EXPORTS TO U.S. SINCE
THE FINANCIAL CRISIS
LONG-TERM CONFLICT SHOULD
CONTINUE
U.S.
CHINA
CHINA U.S. IMPORTS1 CHANGE YTD, IN BN $
-33 U.S.
-53 CHINA
U.S.
IMPORTS FROM
CHINESE
IMPORTS FROM
EMERGING MARKETS GROWTH OUTLOOK
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Sources: DWS Investment GmbH, As of December 2019, * Estimates for India are based on fiscal year. e= estimated
EM GROWTH OUTLOOK ESTIMATES* – CHINA 2020 GROWTH AT 5.8%
EM GROWTH OUTLOOK BY REGION – EM ASIA TO DRIVE GROWTH
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
EM CHN IND RUS KOR IDN TUR
19E 20E 21E
% YOY
0.0
1.0
2.0
3.0
4.0
5.0
6.0
EM EM Asia EM LatAm EM Eastern
19E 20E 21E
EM to recover gradually from 2020, Asia continues growth lead
Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions,
estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.
% YOY
5.7%
EMERGING MARKETS GROWTH OUTLOOK
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DRAM ASP OUTLOOK NAND PRODUCTION & SHIPMENT GROWTH AND INVENTORY
Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect. Source: Nomura Estimates, DWS International GmbH, data as of January 2020. F= forecasts
Global tech cycle to recover; supporting most of EM Asia
EMERGING MARKET: MONETARY AND FISCAL POLICY
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INFLATION, CENTRAL BANK‘S TARGETS AND KEY RATES EM: FISCAL SUPPORTING MEASURES
%
Inflation remains moderate in most EM
Sources: Refinitiv, DWS Investment GmbH, as of November 2019
-5
0
5
10
15
20
CHN KOR IDN IND PHL THL BRA MEX RUS ZAR TUR POL
Latest CPI CB CPI target range Curr. Key interest rate
• VAT rate cut
• Local government special bond issuance
• Corporate tax cut - 25% to 15%
• Increase social and infrastructure spending
• Corporate tax cut – 25% to 20%
• Spending to enhance innovation, social welfare and
creating jobs
• Fiscal stimulus package for low-income, farmers, SME,
and tourism sector
• Relocation package for firms
EM EQUITIES : WHEN TO BUY?
As of: January 2020; source: Bloomberg; past performance is not indicative of future returns.
MSCI EM RELATIVE TO MSCI WORLD (INDEXED PRICE=100)
MSCI EM vs. MSCI World – 10 Years
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CHINA’S RISING INFLUENCE
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Chinese millennial to be the central driver for global economy
Source: World Tourism Organisation (UNWTO), Goldman Sach, Chinese Tourism Bureau, IMF as of April 2017
CHINA INCOME PER CAPITA GROWTH (1999-2019)
[VALUE]x
[VALUE]x
[VALUE]x
0
2
4
6
8
10
12
14
Brazil China France Germany India Japan Mexico United Kingdom United States
While income per capita has only doubled over the past ten
years in India, it has increased tenfold in China.
CHINA’S RISING INFLUENCE
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Source: US. News & World Report ranks, Top 500, as of 2019. Total mobile payment data as of 2018.
TOTAL TRANSACTION VALUE ON MOBILE PAYMENT (US$) TOP 500 SUPERCOMPUTERS
17
227
305
118
2015 2019
China US
US China tech race - overtaking US in latest technologies
Apple
pay
$19 trillion
< $1 trillion
Pay
Total mobile payment 2018
China is innovating new technologies
-50
-40
-30
-20
-10
0
10
20
30
40
-30
-20
-10
0
10
20
30
40
Hong Kong Retail volume yoy Visitor yoy
HONG KONG PROTEST
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Sources: Bloomberg Finance L.P., DWS Investment GmbH, Goldman Sach Research, Markit; as of November 2019
RETAIL AND TOURISM SECTORS HIT BY PROTEST
Expect protest to continue for a while
Protest against the
proposed extradition Bill Protest turned
violent
Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, opinions and hypothetical
models or analysis which may prove to be incorrect.
INDIA ECONOMIC OUTLOOK
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INDIA EFFECTIVE CORPORATE TAX RATE ON PAR WITH PEERS INDIA’S GLOBAL EXPORT MARKET SHARE: MORE IS NEEDED
%
Moving in the right direction
Sources: DWS Macro Research Team, Bloomberg, India Finance Ministry, Business Standard, World bank, Nov 2019
%
Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions,
estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.
16.5
25.2
30.6
0
5
10
15
20
25
30
35
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2000 2005 2010 2015
ESG – THE PERFORMANCE PERSPECTIVE
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GLOBAL TRADITIONAL VS. ESG INDEXES SINCE 2014 ESG: SIGNAL FOR FUTURE EARNINGS RISK
1) Over subsequent three years based on Refinitiv Overall ESG score from 12/2005-12/2015 (with volatility through 12/2018) Past performance is not a reliable indicator of future returns. Forecasts are not a reliable indicator of future returns.
Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove to be incorrect. Sources: Refinitiv, BofA Merrill Lynch US Equity & Quant Strategy, Bloomberg Finance L.P., DWS Investment
GmbH as of December 2019
Long-term outperformance by reducing downside risks
Median 3-year change in S&P 500 companies' EPS volatility1
APPENDIX
PERFORMANCE OVER THE PAST 5 YEARS
16
12-month periods
Past performance is not indicative of future returns. Sources: Bloomberg Finance L.P., DWS Investment GmbH as of December 2019
12/14 - 12/15 12/15 - 12/16 12/16 - 12/17 12/17 - 12/18 12/18 - 12/19 12/14 - 12/15 12/15 - 12/16 12/16 - 12/17 12/17 - 12/18 12/18 - 12/19
German Bunds (2-year) 0.3% 0.2% -0.9% -0.4% -0.7% Euro Stoxx 50 6.4% 3.7% 9.2% -12.0% 28.3%
German Bunds (10-year) 0.8% 4.3% -0.8% 2.7% 3.2% Dax 9.6% 6.9% 12.5% -18.3% 25.5%
German Bunds (30-year) 0.4% 9.5% -2.6% 6.3% 9.2% Sw iss Market Index 1.2% -3.4% 17.9% -7.0% 30.2%
UK Gilts (10-year) 0.7% 7.8% 1.8% 1.5% 4.4% FTSE 100 -1.3% 19.2% 12.0% -8.8% 17.9%
U.S. Treasuries (2-year) 0.6% 0.9% 0.4% 1.6% 3.6% MSCI Emerging Market Index -14.9% 11.2% 37.3% -14.6% 18.8%
U.S. Treasuries (10-year) 1.7% 0.8% 2.6% 0.9% 8.6% MSCI AC Asia ex Japan Index -9.2% 5.4% 41.7% -14.4% 18.6%
U.S. Treasuries (30-year) -1.0% 1.1% 8.6% -1.8% 15.4% MSCI Emerging Markets (EM) Latin America Index-31.0% 31.0% 23.7% -6.6% 17.6%
Japanese government bonds (10-year)1.3% 1.6% 0.3% 0.9% 0.2% MSCI Japan Index 9.6% 2.4% 24.0% -12.9% 19.3%
Euro investment grade -0.7% 4.7% 2.4% -1.3% 6.3% CAC 40 11.9% 8.9% 12.7% -8.0% 30.5%
Euro high yield 0.5% 10.1% 6.1% -3.6% 10.7% MSCI World Index -0.9% 7.5% 22.4% -8.7% 27.4%
U.S. investment grade -0.8% 5.6% 6.2% -2.1% 13.9%
U.S. high yield -4.5% 17.1% 7.5% -2.1% 14.3%
EM Credit 1.2% 10.8% 8.0% -1.2% 13.2%
EM Sovereigns 1.2% 10.2% 9.3% -4.6% 14.4%
Italy (10-year) 4.9% 1.0% 1.6% -1.9% 12.7%
Spain (10-year) 1.3% 5.2% 2.1% 2.8% 8.4%
S&P 500 1.4% 12.0% 21.8% -4.4% 31.1%
Stoxx Europe 600 10.1% 2.4% 11.2% -10.3% 27.8%
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