Emerging Markets Equity Research 11 September 2014
Emerging Markets Strategy Dashboards Emerging Markets Equity Strategy Team Adrian MowatAC Pedro Martins Junior David Aserkoff Rajiv Batra Sanaya Tavaria
Emerging Markets LatAm CEEMEA Emerging Markets Emerging Markets
Recommendations
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(852) 2800 - 8599 (55-11) 4950-4121 (44-20) 7134-5887 (91-22) 6157-3568 (1-212) 622-5469
J.P. Morgan Securities (Asia Pacific) Limited Banco J.P. Morgan S.A. J.P. Morgan Securities plc J.P. Morgan India Private Limited J.P. Morgan Securities LLC
[email protected]
(1-212) 834-4326
J.P. Morgan Securities LLC
Global Emerging Markets Research Luis Oganes
Global Emerging Markets
OW: Taiwan, India, Brazil, Mexico, Thailand, Indonesia, Greece, UAE and Qatar UW: Korea, Chile, Peru, Poland, South Africa, Malaysia and Russia KEY TRADES: EM joins the equity bull market, Broadening global growth (Taiwan IT, Mexico, Greece) Lower CAD risk and better policy (India, Indonesia, Thailand)
For full list of J.P. Morgan equity strategists please see the directory on the back page
Key Changes Market performance to 10 September, 2014
Headline inflation data published since the last publication:
Table of Contents
Page #
• Year to date: MSCI Emerging Markets 9.8% outperforming MSCI World by 3.9%
• China: CPI 2.0%oya (J.P Morgan 2.3%, Consensus 2.2%)
Regional Summary Market Performance Liquidity Monitor Monitoring Inflation Market Drivers Cross-section Earnings Growth Earnings Revisions Sector-Country PE Matrix Valuation Distribution Demand Classification Equities relative to Bonds Economic Momentum Policy Rates Forecast Currency Forecasts Credit Risk Emerging Market Balance Sheets Emerging Market in Perspective Emerging Capital Market Index Weightings
2 3 4 5 6 7 8,9,10 11 12 13 14 15 16 17,18 19
• Year to date: MSCI EM Latin America 15.7% outperforming MSCI Emerging Markets by 5.9% • Top three markets YTD in US$: UAE, Egypt and Indonesia • Bottom three markets YTD in US$: Russia, Chile and Poland Liquidity Monitor • Top three markets by increase in ADTV (1 wk Avg. vs 3MMA): Philippines (US$0.5bn, up 150%), Colombia (US$2.1bn, up 62%) and South Africa (US$1.3bn, up 0%)
• Philippines: CPI 4.9%oya (Consensus 5.0%) • Taiwan: CPI 2.1%oya (J.P Morgan 1.8%, Consensus 1.8%) • Brazil: CPI 6.5%oya (J.P Morgan 6.57%, Consensus 6.52%) • Colombia: CPI 3.0%oya (J.P Morgan 2.93%, Consensus 2.94%) • Mexico: CPI 4.2%oya (J.P Morgan 4.16%, Consensus 4.10%) • Chile: CPI 4.5%oya (J.P Morgan 4.3%, Consensus 4.3%) • Czech Republic: CPI 0.6%oya (Consensus 0.5 %) • Russia: CPI 7.6%oya (J.P Morgan 7.6%, Consensus 7.6%) • Greece: CPI -0.3%oya (Consensus -0.5 %)
• Top three markets by increase in Daily Velocity Ratio (1 wk Avg. vs 3MMA): Philippines, Colombia, and South Africa
• Turkey: CPI 9.5%oya (Consensus 9.4%)
Sector performance • Year to date: MSCI EM Healthcare 21% outperforming MSCI Emerging Markets by 11.2%
J.P. Morgan's revisions to 2014 GDP forecasts
• Year to date: MSCI EM Materials -0.2% underperforming MSCI Emerging Markets by 10%
J.P. Morgan's revisions to 2015 GDP forecasts
• Top three key market sectors YTD in US$: Brazil Financials, Brazil Energy and India Financials • Bottom three key market sectors YTD in US$: Russia Energy, Korea Materials and Korea Information Technology
• Negative: Korea 3.6% [3.7%]
• Negative: Chile 3.1% [3.2%] J.P. Morgan's revisions to central bank policy rate forecasts • Philippines: Current 4.00% [3.75%], Last change 11 Sep 14 +25bp [31 Jul 14 +25bp], Forecast next change # [11 Sep 14 +25bp], Sep 14 4.00%, Dec 14 4.00%, Mar 15 4.00%
20 21 22 23
Please see Key Trades and Risks: Emerging Markets Equity Strategy, Mowat et al, 27 August 2014, for our non-consensus bullish call and new target of 1200 for the EM index. For more on the case for emerging market equities please see The Underdog is Back: The case for an Emerging Equities Bull Market, Mowat, et al., 25 July 2014.
Demand classification sector performance • YTD: Domestic Demand 11.5%, Global Capex 9.4%, Global Consumer 7.6% and Global Price Takers 4.1%
See page 24 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599,
[email protected]
11 September 2014
Summary: Regional and Country Valuations Global* USA Europe* Japan* Emerging Markets* EMF Asia EMF LatAm* EMF EMEA* China Brazil* Korea Taiwan South Africa* India Russia* Mexico* Malaysia Chile* Indonesia Turkey* Thailand Poland* Czech Republic* Egypt* Philippines Hungary* Greece UAE Qatar
10-Sep-14 MSCI Index 468 1,910 1,406 800 50,705 737 7,556,719 501 67 219,657 580 341 1,284 1,016 749 43,934 660 4,439 6,074 1,137,256 550 1,823 302 1,869 1,227 862 236 563 1,169
Hist.^ Trough 9.4 11.6 9.8 11.5 7.9 8.5 8.6 8.7 7.2 9.6 7.7 12.1 9.1 9.6 3.2 9.0 10.3 11.4 4.8 5.1 7.7 6.8 7.3 5.5 8.8 4.3 -
P/ EPS (Trend) 15.6 17.7 12.5 26.8 10.4 13.6 10.0 6.7 8.3 9.2 9.3 16.6 14.7 18.8 2.6 13.1 17.1 15.2 15.6 7.8 10.6 11.0 7.0 9.1 29.3 5.0 -
Current Trailing 16.0 17.6 15.5 15.1 12.1 12.7 14.9 9.6 10.4 12.3 11.5 15.2 15.5 19.4 4.6 22.3 16.5 19.3 16.3 11.2 14.9 14.6 12.8 22.6 21.4 10.7 18.6 17.6
P/E (x) 12m Fwd 14.5 16.0 14.0 14.0 11.0 11.4 13.1 9.1 9.3 11.0 9.9 13.7 13.8 16.6 4.7 19.6 15.3 15.7 14.6 10.0 13.1 13.9 14.2 10.7 19.2 10.0 17.3 15.7
2013 16.8 18.4 16.2 27.3 12.7 13.8 15.5 9.5 11.1 12.8 12.7 17.4 16.9 21.3 4.6 22.2 17.3 21.5 17.7 11.1 16.2 14.3 11.6 20.9 22.2 8.4 13.9 19.7 18.6
Prospective 2014E 2015E 15.7 14.1 17.3 15.5 15.3 13.5 15.6 14.6 11.9 10.6 12.3 11.1 14.6 12.5 9.6 8.9 10.1 9.0 12.1 10.6 11.0 9.4 14.4 13.4 14.9 13.4 18.7 15.9 4.7 4.7 22.4 18.6 16.2 14.9 18.4 14.7 15.8 14.1 11.3 9.5 14.4 12.6 14.7 13.6 13.4 14.5 23.5 8.6 21.1 18.4 12.1 9.3 16.1 18.2 17.0 17.1 15.2
Hist.^ Peak 4.1 4.0 6.1 3.0 3.6 3.4 5.1 4.9 5.7 7.6 2.9 7.8 4.7 2.6 5.3 4.1 5.1 8.9 5.9 9.4 5.9 7.1 10.0 8.4 4.9 5.3 8.5 -
Div. Yield (%) Current Prospective Trailing 2014E 2015E 2.6 2.6 2.8 2.0 2.1 2.2 3.5 3.6 3.9 1.7 2.1 2.3 2.7 2.8 3.1 2.4 2.5 2.7 3.0 3.0 3.3 3.4 3.7 4.3 3.2 3.2 3.5 3.8 4.0 4.2 1.2 1.3 1.4 2.9 2.9 3.3 3.1 3.2 3.6 1.4 1.5 1.6 4.9 5.3 6.3 1.5 1.4 1.6 3.2 3.2 3.4 2.5 2.6 2.8 2.4 2.5 2.7 2.6 3.0 3.3 3.0 3.0 3.3 3.7 3.9 4.2 5.4 5.4 5.2 1.5 2.1 3.4 2.1 2.1 2.4 3.4 3.2 4.0 0.8 1.0 1.4 2.2 2.3 2.7 3.7 3.7 4.1
Hist.^ Trough 1.3 0.9 1.1 0.9 1.0 1.0 0.6 1.1 0.5 0.4 0.5 1.2 1.4 1.4 0.2 0.7 0.6 0.9 0.9 1.0 0.6 1.0 0.5 1.0 0.9 0.6 -
P/BV (x) Current Prospective Trailing 2014E 2015E 1.9 1.9 1.8 2.5 2.4 2.2 1.7 1.7 1.6 1.4 1.2 1.1 1.5 1.5 1.3 1.6 1.6 1.5 1.8 1.8 1.6 1.2 1.2 1.0 1.5 1.5 1.3 1.5 1.5 1.3 1.1 1.1 1.0 1.9 1.9 1.7 2.6 2.5 2.3 3.0 2.9 2.6 0.5 0.5 0.5 2.8 2.8 2.6 2.1 2.1 1.9 1.6 1.6 1.5 3.4 3.3 2.9 1.5 1.5 1.4 2.2 2.1 1.9 1.4 1.4 1.3 1.5 1.5 1.2 2.0 1.8 1.6 3.1 3.0 2.8 0.9 0.8 0.8 1.1 1.1 1.1 2.1 2.1 1.9 2.6 2.6 2.4
Earnings growth (%) 2012 0.1 5.3 -3.8 -14.0 -2.7 5.6 -18.6 -10.4 1.4 -30.7 7.7 3.9 8.2 10.0 -11.1 37.3 15.6 -19.3 13.7 17.1 16.3 -5.6 -3.2 4.6 9.1 -12.3 -8.0 -
2013 8.0 8.0 -5.9 10.9 20.2 7.5 5.5 96.6 10.9 13.8 -5.9 36.9 4.9 7.1 -4.2 -1.8 0.3 -7.6 3.6 9.9 7.4 -22.1 -10.9 -28.2 8.8 0.1 3.0 13.2 6.3
Source: I/B/E/S, MSCI, J.P. Morgan estimates.
2014E 7.1 6.6 6.1 75.7 7.3 12.7 5.8 -1.3 9.6 5.3 15.2 21.0 13.3 13.9 -2.7 -0.8 7.1 16.5 12.2 -1.9 12.5 -2.7 -13.6 -10.9 5.6 -30.3 8.1 8.9
ROE (%) 2015E 11.3 11.7 12.8 6.3 11.8 11.2 16.5 8.8 11.7 14.9 17.0 7.7 11.6 17.6 0.0 20.1 8.8 24.9 11.4 18.4 14.0 8.1 -7.2 171.8 14.3 30.2 7.3 12.9
2013 12.5 14.7 11.0 5.1 12.7 12.7 11.7 13.1 14.7 11.5 9.4 12.0 16.8 16.5 13.0 13.4 12.8 8.3 22.1 15.8 15.3 10.0 13.4 7.8 15.6 10.9 11.5 11.3 14.4
2014E 12.4 14.4 11.2 7.8 12.7 13.3 12.0 12.3 15.2 12.3 10.1 13.5 17.4 16.5 11.7 12.5 13.2 8.9 22.2 13.8 15.6 9.5 11.4 9.0 15.0 7.3 11.5 15.2
2015E 13.0 15.0 12.2 7.8 13.3 13.7 13.4 12.4 15.4 13.4 10.9 13.3 17.8 17.1 11.0 14.6 13.3 10.7 21.7 14.8 15.9 9.8 9.1 19.6 15.6 8.8 6.7 11.8 16.4
Updated as of 10 September 2014
* Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. IBES Estimates are not available for Morocco, Jordan, Peru and Colombia. For all other markets, forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using JPM estimates for covered stocks and I/B/E/S estimates for the rest. Hist.^ refers to the historically lowest valuation of the MSCI indices since Jan 1991. Trough PE represents the lowest 12 month trailing PE. For dividend yield the highest values are taken to represent the best multiple. USA, Europe and Japan PE are I/B/E/S aggregate estimates. Japan Valuation estimates are for the financial year ending March P / EPS (Trend) uses the trend EPS for the indices calculated by the linear regression on the natural log of trailing EPS. For more, please refer to 'Mayday call for the shorts - Perspectives and Portfolios', 5 May 2009, Mowat et al. P / EPS (Trend)' is NM for indices where the modeled relationship is weak with a less than 0.50 R-square. The start dates China and Singapore models are modified to make them more relevant. Sector indices inputs have not been altered.
2
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
0.0%
-10.7%
22.8%
58.4%
20.9%
-0.9% 13.1%
-22.5%
-2.0%
0.4%
Philippines
Thailand
Malaysia
23.8% 21.9% 23.2%
-0.5%
-1.4%
2.2%
3.0%
2.1%
3.5%
1.8%
10.8% 12.6% 18.2% 25.3%
19.8% 1.3% 20.9% 15.0% 19.6% 8.9%
3.9% -10.1% 12.0% -6.3%
6.5% 13.5%
12.3% -8.5%
52.8% 12.2%
14.9%
-3.7%
-1.6%
-10.8%
39.2% -29.6% -1.1% 3.3%
16.8%
16.1%
10.2%
52.1%
-9.8%
8.8% 37.6%
12.7% 3.6% 0.1%
44.2%
23.9%
-2.8%
4.9%
0.0%
0.0%
21.0%
6.8% 11.6% 29.6% 6.0%
-5.0%
0.1% 21.9% 13.7%
-0.3%
-5.6%
-9.7%
-5.8%
Notes Source: Bloomberg, MSCI. Regional headings first sorted by regional weights in the MSCI EMF and then country headings from left to right by relative weights within the MSCI EMF Indices: Regions in US$ and countries in local currency. Local currency movements against the dollar : appreciation / (depreciation) Country and sector cross sections in italic blue have outperformed their indices by more than 2%. Shaded areas have underperformed their indices by more than 2%.
26.3%
-15.9% 6.0% -9.3%
Greece
1.6% 0.2% -21.5%
17.2% -3.8% -10.2% -7.1% -18.1% 9.0%
3
India
3.0%
China
18.9% 27.6% 32.4% 25.6%
Turkey
0.6% 17.2% 30.5% 19.7%
Poland
Taiwan
Korea
EMF Asia
-5.0% 3.8% 1.9% -1.4%
11.4% 53.1%
Qatar
5.6%
19.3%
49.0%
17.9% 17.4% 20.8% 33.1% 0.0% 22.2%
UAE
8.2%
10.6% -2.0% 24.6% 7.6%
25.6% 7.4% 5.8% 34.9% 71.6% 36.2%
Egypt
-7.2%
35.9% 14.2% 23.2% 33.0% 36.1% 43.6% 13.2% 28.5% 9.3% 17.9% 24.9%
-1.0% -2.6% -20.2% -2.8% 25.6% 2.0%
14.2%
3.5% -12.0% 15.4% -0.3% 10.2% -0.9% 29.0% 2.7% 24.1% 11.6% 7.8%
Czech Republic
11.1% 8.9%
22.3%
-4.3% 6.1% -7.1% 7.5% -28.5% 0.7% 25.3% -3.0% -1.8%
Hungary
15.1% 23.1% -21.4% -6.8% 14.8% 16.1%
42.1% 87.8%
8.7% -8.6% 25.4%
1.3% 26.6% -34.7% 8.8% 0.0% -4.0% -7.2% -7.6% 15.4% 17.9% -1.5%
Russia
6.2% -1.1% 16.8%
-3.9% -3.8% 6.9% 8.9%
4.0% 1.0% 12.0% 1.5%
7.4% 8.8% 10.9% 9.4% 26.9% 5.1% 13.8% 1.6% 18.0% 14.6% 10.5%
17.4% -2.7% -5.3% 0.4% 12.2% 6.5%
South Africa
21.2% 0.7%
EMEA
EMF Asia
24.8% 3.0% 34.7% 38.6%
0.4%
Chile
19.5% 4.1% 32.3% 33.0% 0.0% 14.9% 30.0% -4.4% 5.0% 15.6% 15.7%
4.9%
19.5% 4.1% 32.3% 33.0% 0.0% 14.9% 30.0% -4.4% 5.0% 15.6% 15.7%
EM Europe & ME
EMF
7.4% 8.8% 10.9% 9.4% 26.9% 5.1% 13.8% 1.6% 18.0% 14.6% 10.5%
EMF Latin America
Japan
11.2% 5.4% 8.3% 11.6% 21.0% 6.8% 14.1% -0.2% 10.7% 14.4% 9.8%
Colombia
Europe
-3.4% 7.6% 4.2% -10.9% 8.7% 3.9% 5.0% 1.1% -6.4% -6.0% -1.2%
Argentina
North America
-4.7% 0.9% 1.6% -1.7% 9.3% -5.4% -3.3% 0.0% -5.0% 11.3% 0.0%
Peru
Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecoms Utilities Region / Country Benchmark Change vs dollar
3.3% 5.3% 10.9% 6.9% 15.3% 2.7% 12.9% 9.5% 2.7% 12.4% 8.6%
Mexico
YTD 2014
0.9% 4.0% 8.9% 4.7% 13.5% 1.2% 11.4% 3.4% 1.8% 11.2% 5.9%
Brazil
Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecoms Utilities Region / Country Benchmark Change vs dollar
EMF Latin America
YTD 2014
Global
Market Performance: MSCI AC Performance by Region, Country and Sector
Indonesia
11 September 2014
21.3%
Updated as of 10 September 2014
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected] 11 September 2014
Equity Markets Liquidity Monitor Country
Stock Exchange
FF Mkt Cap (US$ Bn)
Daily Trading Value (US$ bn) 1 Wk Avg 3 MMA 13 Avg
Daily Velocity Ratio (%) 1 Wk Avg 3M Avg 13 Avg
Developed Markets
BRIC Trading value (US$ bn, 3MMA) 40
China (LHS)
India
Brazil
8
Russia
US
NYSE + NASDAQ + AMEX
22,665
37
42
38
0.16
0.19
0.20
35
7
UK
London Stk Exchange
3,757
7.3
7.2
6.5
0.19
0.19
0.19
30
6
0.75
25
5
0.32
20
4
0.28
15
3
10
2
5
1
Japan Australia HK Singapore
Tokyo Stk Exchange ASX HKSE SSE
3,558 1,453 2,488 365
17 4.9 7.7 0.8
18 4.1 5.9 0.8
25 4.3 5.9 1.1
0.48 0.34 0.32 0.23
0.50 0.29 0.26 0.21
0.32
EM Asia China
0
Shanghai & Shenzhen A
2,003
31
24
21
1.57
1.33
1.27
India
BSE & NSE
476
3.6
3.5
2.3
0.77
0.77
0.68
Indonesia
JSE
183
0.6
0.5
0.6
0.34
0.30
0.33
Korea
KSE
849
4.0
3.8
3.6
0.47
0.46
0.49
Malaysia
Bursa Malaysia
235
0.8
0.7
0.6
0.34
0.28
0.29
Philippines
PSE
72
0.5
0.2
0.3
0.64
0.32
0.39
Taiwan
TWSE & OTC
745
3.6
4.3
3.2
0.48
0.58
0.52
Thailand
TSE
145
1.5
1.4
1.6
1.04
1.04
1.17
0 00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
Korea, Taiwan, HK & Singapore Trading Value (US$ bn, 3MMA) 13
Korea
Taiwan
HK
Singapore
10 8 5 3
EMEA
Russia
RTS + MICEX + DR
283
1.3
1.3
1.5
0.48
0.42
0.46
South Africa
Johannesburg Stk Exchange
283
1.3
1.3
1.5
0.48
0.42
0.46
Turkey
Istanbul Stk Exchange
99
1.5
1.5
1.7
1.49
1.54
1.55
Poland
Warsaw Stk Exchange
101
0.7
0.7
0.7
0.70
0.69
0.76
Greece
Athens Stock Exchange
41
0.1
0.2
0.1
0.27
0.39
0.39
UAE
Abu Dhabi Securities Market
25
0.09
0.09
0.09
0.36
0.38
0.51
Qatar
Qatar Stock Exchange
26
0.21
0.14
0.07
0.84
0.61
0.38
1.5
1.0
0 04
05
06
07
08
09
10
11
12
13
14
Emerging ASEAN Trading Value (US$ bn, 3MMA) 2.5 Malaysia
Indonesia
Thailand
Philippines
2.0
LatAm
Brazil
Bovespa + DR
607
6.8
4.7
4.8
1.11
0.83
0.84
Mexico
Mexico Stk Exchange + DR
311
2.1
1.3
1.7
0.69
0.44
0.55
Chile
Santiago Stk Exchange
101
0.14
0.10
0.18
0.13
0.10
0.14
Colombia
Bogota Stk Exchange
63
0.08
0.08
0.09
0.13
0.13
0.13
Peru
Lima Stk Exchange
38
0.02
0.02
0.02
0.06
0.06
0.06
0.5
0.0 04
05
06
07
08
09
10
Source: Bloomberg, J.P. Morgan. Notes: Market cap uses all exchanges covered by Bloomberg for a specific country and primary security of company only.
11
12
13
14
Updated as of 5 September 2014
The latest one week average is red (grey box in B&W, dark blue in blue scale) if less than 90% of the three month average or blue (solid black box in B&W, light blue in blue scale) if greater than 110% of the three month average. To calculate the free float we use the MSCI free float factor for all markets except for Hong Kong, Russia and South Africa where we calculate the free float for the Hong Kong Composite Index, MICEX, and JSE. Trading value calculation for Russia, Mexico and Brazil, includes value of depository receipts traded (DR) along with local stock exchange turnover. South Africa and Australia market capitalisation and trading value includes only local listed portion of dual listed stocks. Velocity Ratio = (Trading Value / Free float market cap) * 100 4
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected] 11 September 2014
Monitoring Inflation: The real threat to EM equities Inflation Rate
Country
CB Inflation Target (%)
JPM f'cast CY2014
CPI (YoY) Date
CPI (YoY) Previous Latest
CPI (%) MoM 3M ann
Food CPI (YoY) Previous Latest
Core CPI (%) YoY 3M ann
Policy Rate Current
Policy Rate Last Change
Policy Rate Next Change
Developed Markets United States
Chained CPI
na
1.9
Jul-14
2.1
2.0
0.1
2.8
2.2
2.4
1.9
2.0
0.13
16 Dec 08 (-87.5bp)
3Q 15 (+25bp)
US core PPI
Core PPI SA
na
na
Jul-14
1.9
1.8
0.1
1.5
-
-
-
-
-
-
-
US Unit Labor Cost
LC Nonfarm
na
na
Jun-14
2.5
1.7
NA
(0.1)
-
-
-
-
-
-
-
Euro Area
CPI
under 2%
0.6
Aug-14
0.4
0.3
0.1
(1.8)
(1.1)
(1.0)
0.9
(1.7)
0.05
4 Sep 14 (-10bp)
3Q 18 (+20bp)
Japan
CPI
na
2.9
Jul-14
3.6
3.4
0.0
1.2
5.2
4.5
2.3
0.0
0.05
5 Oct 10 (-5bp)
On hold
Australia
CPI
2-3
2.6
Jun-14
2.9
3.0
NA
1.9
2.2
2.5
na
na
2.50
6 Aug 13 (-25bp)
3Q 15 (+25bp)
Hong Kong
CPI
na
4.0
Jul-14
3.6
4.0
1.0
4.1
4.2
4.1
3.1
5.4
0.50
17 Dec 08 (-100bp)
3Q 15 (+25bp)
Singapore
CPI
na
1.5
Jul-14
1.8
1.2
(0.3)
(1.7)
3.1
3.0
0.7
(3.2)
-
-
-
EM Asia China
CPI
4%
2.2
Aug-14
2.3
2.0
(0.5)
(2.4)
3.6
3.0
1.7
1.4
6.00
7 Jul 12 (-31bp)
On hold
Korea
CPI
3.0 (±1)
1.5
Aug-14
1.6
1.4
0.2
0.8
1.1
(0.4)
2.3
1.5
2.25
14 Aug 14 (-25bp)
On hold
Indonesia
CPI
4.5 (±1)
5.7
Aug-14
4.5
4.0
(0.2)
7.6
9.1
2.3
5.5
4.8
7.50
12 Nov 13 (+25bp)
On hold
India
WPI
na
na
Jul-14
5.4
5.2
1.1
8.7
8.1
8.4
3.4
5.2
8.00
28 Jan 14 (+25bp)
4Q 14 (+25bp)
India
CPI
6%
8.5
Jul-14
8.6
8.0
1.1
8.7
8.1
8.4
3.4
5.2
8.00
28 Jan 14 (+25bp)
4Q 14 (+25bp)
Malaysia
CPI
na
2.7
Jul-14
3.3
3.2
0.1
1.5
3.5
3.1
2.6
1.1
3.25
10 Jul 14 (+25bp)
18 Sep 14 (+25bp)
Philippines
CPI
4.0 (±1)
4.2
Aug-14
4.9
4.9
0.3
5.3
4.6
4.0
2.5
1.2
4.00
11 Sep 14 (+25bp)
-
Thailand
CPI
0.5 - 3.0
2.6
Aug-14
2.2
2.1
(0.1)
(1.1)
0.2
(0.6)
0.4
1.0
2.00
12 Mar 14 (-25bp)
1Q 15 (+25bp)
Taiwan
CPI
na
1.4
Aug-14
1.8
2.1
0.4
3.7
4.2
5.6
1.1
3.1
1.88
30 Jun 11 (+12.5bp)
1Q 15 (+12.5bp)
Latin America Brazil
CPI IPCA
4.5 (±2)
6.3
Aug-14
6.5
6.5
0.3
2.7
7.7
7.5
6.7
7.2
11.00
2 Apr 14 (+25bp)
On hold
Colombia
CPI
3.0 (±1)
2.8
Aug-14
2.9
3.0
0.2
1.8
3.3
3.5
na
na
4.50
29 Aug 14 (+25bp)
4Q 14 (+25bp)
Mexico
CPI
3.0 (±1)
4.1
Aug-14
4.1
4.2
0.4
3.3
5.4
5.7
3.4
2.5
3.00
6 Jun 14 (-50bp)
4Q 15 (+25bp)
Peru Chile
CPI CPI NSA
2.0 (±1) 3.0 (±1)
3.0 4.0
Aug-14 Aug-14
3.3 4.7
2.7 4.5
(0.1) 0.3
2.1 2.4
4.0 6.3
3.6 6.7
2.6 4.4
1.5 4.1
3.75 3.50
10 Jul 14 (-25bp) 14 Aug 14 (-25bp)
1Q 15 (+25bp) 11 Sep 14 (-25bp)
Europe, Middle East and Africa Czech Republic
CPI
2.0 (±1)
0.9
Aug-14
0.5
0.6
0.7
2.7
0.6
1.1
0.7
1.8
0.05
1 Nov 12 (-20bp)
On hold
Hungary
CPI
3%
0.1
Jul-14
(0.1)
0.2
(2.4)
(10.2)
(1.1)
(0.3)
2.7
2.7
2.10
22 Jul 14 (-20bp)
4Q 15 (+20bp)
Poland
CPI
1.5 - 3.5%
0.2
Jul-14
0.3
(0.2)
0.6
2.0
0.3
(0.4)
0.3
0.5
2.50
3 Jul 13 (-25bp)
4Q 14 (-50bp)
Russia
CPI
5-6%
7.2
Aug-14
7.5
7.6
2.2
11.8
9.9
10.3
6.6
12.5
8.00
25 Jul 14 (+50bp)
1Q 15 (-25bp) 18 Sep 14 (+25bp)
South Africa
CPI
3-6%
6.1
Jul-14
6.6
6.3
0.8
5.2
9.2
9.0
5.7
5.0
5.75
17 Jul 14 (+25bp)
Greece
CPI
2%
-
Aug-14
(0.7)
(0.3)
(1.2)
(7.1)
(2.6)
(2.4)
(1.1)
(5.2)
0.25
-
-
Turkey
CPI
5.0 (±2)
9.0
Aug-14
9.3
9.5
0.1
3.5
12.6
14.4
9.7
2.1
8.25
17 Jul 14 (-50bp)
On hold
Source: J.P. Morgan Economics, Bloomberg. Note: Current inflation data for countries which outside/above target range is highlighted. MoM and 3 month annualised data is calculated from inflation indices. * under review # Countries where central banks target is not available. We have given J.P. Morgan Economic estimates. RBI forecasts inflation not target. In case of Taiwan, Estimate by DGBAS,CB targets M2 growth
5
Updated as of 10 September 2014
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
Outlook: Market Drivers Global and developed market drivers
Country Global
Positive Acceleration in DM growth
Negative Bond yields grinding higher
US
Recovering housing market, fiscal drag easing
Higher bond yields. higher mortgage rates, declining NIMs
Europe
Improving financing conditions, , Lower fiscal drag, falling EUR/USD, potentially more aggressive ECB
Weak economy, deflation risk, weak credit backdrop
UK
Strong domestic recovery, unemployment rate going down
Political headwinds, potential earlier than expected start of monetary tightening cycle
Japan
New PM's pro-growth policy of fiscal boost and inflation targeting, more competitive Yen, QQE
Rising energy costs and fiscal sustainability worries
Australia
Low sovereign debt, monetary policy flexibility, high dividend yield market attracting local and global flows.
Hong Kong
Stabilizing property price, slower land sales. DM economic recovery drives HK exports. Closer integration to Pearl River Delta is positive in the long run.
Risk to growth from capex/terms of trade downturn, potential currency fragility, high household debt levels, and exposure to growth risks in China. Vulnerable to the Fed’s policy normalization. Economic fundamentals remain weak with slowly recovering GDP. Credit risk from trade financing for banks.
Singapore
We expect a modest rebound in 2014 GDP growth expectations with general economic conditions starting to rebound against 2Q13 lows. General economic growth for 2014 is expected to benefit from low-base effects in 2013 (note that street has lowered GDP forecasts seven times since January 2013).
Ongoing foreign labor tightening is expected to structurally impact corporate earnings and GDP growth, with long-term GDP growth to moderate from a 10-year historical CAGR of 6.2% to 4.1% on our estimates. We also estimate Singapore to transition up to 172,000 jobs away from Manufacturing into Services while progressing into a productivity-led growth model, which would create long-term structural drag.
Source: J.P. Morgan. Emerging Market Drivers Country Positive China Stabilizing growth prospects; valuations partly discounting fundamental weakness Brazil Large and liquid market offering many bottom up options, large infrastructure investment program, labor market still sturdy
Negative Less policy flexibility, growth sectors expensive, excessive leverage Large share of commodity stocks in the index, government interventionism, high inflation/domestic monetary tightening, consensus earnings are too high, risk of sovereign debt downgrade, local currency weakness. Weakening of the JPY
Korea
Recovery in domestic demand, benefitting from DM economic growth
Taiwan
Global economy is expected to see solid upturn in 2H14. Taiwan's export and industrial sectors should benefit from the solid demand in DM and China. China-related sectors, Cement, Automation and Industrials, benefits from the improving macro. Easing concerns over China's asset quality also imposes less downside risks on Taiwan financial sector. Mayoral elections in year-end are likely to stimulate potential election rally in 2H14. Among technology sector, we forecast stronger growth profile for LED/Foundry/Display but muted for OSAT/mobile/PC.
Taiwan is vulnerable to the external environment. A series of civil disobedience started from end-March and the upcoming election at year end add up political risks. Cross-strait development is now delayed due to people's opposition to the content and legislative procedure of the Trade in Service Agreement.
South Africa
Pick-up in commodity prices. Strikers return to work. Locals keep selling bonds to buy stocks.
Eskom issues highlight policy paralysis. Growth remains sluggish. Valuations expensive v own history.
India
Improved corporate and consumer confidence, Expectations on growth revival, Easy global liquidity helping lower cost of capital
Sticky core CPI inflation, slower-than-expected progress on key policy reforms, Weak investment cycle
Russia
Rebound from trough valuations. High dividend yield with upside. Exporters should benefit from record-lows on RUB.
More sanctions likely. Deteriorating economy and higher rates diminish upside if politics improve
Mexico
High correlation to US manufacturing recovery, undervalued FX, underpenetrated credit sector, internal economy picking up from government spending, reform agenda to boost growth, no inflation concerns.
High valuations, earnings disappointment, no room for disappointment on economic growth, market depth.
Malaysia
Government fiscal consolidation gaining traction with subsidy cuts and GST implementation next year. Oil and gas/railway-related capex fueling domestic growth, CPO price rise on supply tightness/bio fuel blending requirements; recovering exports.
Diminishing current account surplus on imported capital equipment, property demand slowdown on cooling measures, moderating consumption growth on the back of subsidy cuts, 3-year peak in foreign ownership.
Indonesia Turkey
Healthy transmission of nominal GDP growth to EPS growth, Policy credibility improved with fuel price increases and recent BI actions, underweight investor positioning. ECB QE will help finance the high CAD. Keeps pace with firm EM rally. Best revisions in the region. High beta in EM bull mkt.
Financing persistent CA deficit, decelerating economic growth, Infrastructure bottlenecks, transmission of weaker Rupiah impact through the economy. Export markets at risk in MENA (ISIS). Do rates need to rise further given 9+% CPI?
Thailand
Flexible monetary condition, healthy corporate balance sheet, strong FDI, better exports
Political uncertainties, low public spending, high household debt, negative EPS revision
Qatar & UAE Poland Greece
Strong GDP growth, stable FX, high payout ratios, few problems. Saudi opening helps. Strong momentum. Strong pension fund uptake. Bond yields at new lows while 2014-5 GDP still likely to avg 3% Growth returning. Banks still look cheap v peers and 2Q earnings indicate no new capital needed.
Valuations high and EPS growth limited. More rate cuts will hurt bank NIMs. Tusk move to EU presidency introduces political risks High volatility from bond market and hedge fund-heavy investor base. AQR process.
Czech Republic
Eurozone recovery. High payout ratios.
Small not very liquid stock market with limited choices
Philippines
Rising investment spending, improving consumption driven by steady remittances flow, fast-growing non-electronics exports, positive CA position, ample domestic liquidity
Sharp increase in interest rates, upward inflation pressures, disruption to government infrastructure spending momentum, sharp currency weakness
Hungary Eurozone recovery. Current account now in surplus. Source: J.P. Morgan.
PM Orban’s long and consistent track record of high effective taxation. Low growth hurts. Updated as of 10 September 2014 6
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected] 11 September 2014
Profit Outlook: Earnings Forecast Matrices for Countries and Sectors EM Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Indonesia Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Philippines Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities South Africa Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Russia Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Weight (%) 100.0 9.0 8.0 10.6 27.9 2.0 6.5 16.4 8.4 7.7 3.5 Weight (%) 100.0 17.7 12.3 3.3 35.2 2.7 3.8 0.0 6.5 13.4 5.0 Weight (%) 100.0 3.8 7.0 0.0 39.7 0.0 25.2 0.0 0.0 18.6 5.8 Weight (%) 100.0 24.3 4.8 10.8 27.5 6.2 3.3 0.0 9.2 13.9 0.0 Weight (%) 100.0 0.0 7.7 56.3 16.1 0.0 0.0 0.0 9.9 8.9 1.1
EPS Growth Consensus 2014 2015 6.9 11.7 8.5 14.9 10.9 17.4 0.1 2.8 7.3 12.3 20.5 20.6 35.4 30.1 7.6 9.3 6.5 19.2 -7.6 11.7 35.8 6.3
Median -
2014 -
J.P. Morgan 2015 -
Median 11.5 11.3 11.6 6.9 11.9 17.7 10.4 18.9 8.7 4.8 9.0
Median 13.0 35.5 19.1 -1.9 6.1 14.1 18.9 NA 10.2 6.1 4.3
2014 12.2 11.5 17.1 NA 15.7 14.1 17.8 NA 10.2 4.1 4.3
J.P. Morgan 2015 11.4 14.9 11.2 2.0 10.1 19.7 18.0 NA 13.0 8.8 14.0
Median 13.8 23.2 21.2 4.5 9.5 14.1 20.6 NA 9.1 5.7 -17.5
Median 5.3 20.1 18.0 NA 10.4 NA 4.4 NA NA 4.9 0.2
2014 5.6 20.1 18.0 NA 4.5 NA 6.4 NA NA 5.0 0.1
J.P. Morgan 2015 14.3 20.5 22.5 NA 15.5 NA 16.3 NA NA 6.0 15.1
Median 8.0 17.9 17.3 NA 5.3 NA 4.4 NA NA 8.0 10.4
Median -
2014 -
J.P. Morgan 2015 -
Median 11.7 16.8 10.2 2.6 11.9 18.0 6.1 NA 9.4 9.2 NA
Median -
2014 -
J.P. Morgan 2015 -
Median 8.6 NA 10.4 -2.6 -5.8 NA NA NA 155.6 -7.9 62.5
EPS Growth Consensus 2014 2015 9.7 12.9 11.3 15.8 31.3 15.9 NA 1.4 9.6 13.3 14.1 19.7 20.6 8.7 NA NA 9.2 10.7 3.8 13.9 -17.5 6.1 EPS Growth Consensus 2014 2015 6.5 13.8 17.9 16.5 17.3 17.8 NA NA 7.5 15.4 NA NA 3.9 15.0 NA NA NA NA 3.8 4.5 9.5 23.8 EPS Growth Consensus 2014 2015 12.0 12.7 24.4 22.3 10.3 15.2 2.9 1.5 10.2 11.7 23.0 17.4 9.0 9.6 NA NA 12.6 23.2 11.1 8.2 NA NA EPS Growth Consensus 2014 2015 -2.9 -0.1 NA NA 10.4 22.7 -4.4 -7.4 -9.3 25.5 NA NA NA NA NA NA 120.2 23.7 -16.0 5.9 NA -5.8
China Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Korea Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Taiwan Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Brazil Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Poland Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Weight (%) 100.0 5.3 4.8 14.5 35.6 1.9 6.2 13.2 2.8 11.9 3.9 Weight (%) 100.0 18.4 6.1 1.5 15.4 0.6 11.4 35.0 8.5 1.2 2.0 Weight (%) 100.0 4.0 2.7 0.6 17.9 0.1 2.9 57.7 10.0 4.2 0.0 Weight (%) 100.0 5.5 15.1 16.3 34.3 0.7 4.8 3.2 12.5 2.8 4.9 Weight (%) 100.0 6.1 1.3 10.5 53.4 0.0 0.0 0.0 11.5 3.2 14.0
EPS Growth Consensus 2014 2015 8.7 10.5 23.7 17.5 3.5 21.6 3.9 7.2 8.4 8.8 22.0 19.4 5.6 18.2 47.4 30.1 12.2 20.2 -6.3 1.8 20.5 12.2
Median 12.0 18.1 9.2 -3.8 11.4 16.1 10.5 53.8 8.5 12.8 32.1
2014 9.6 20.8 6.8 1.3 9.8 10.3 17.5 53.8 23.5 -11.2 17.7
J.P. Morgan 2015 11.7 19.7 19.8 12.2 10.0 15.0 15.3 29.7 19.8 -1.2 15.2
Median 10.5 20.4 6.0 2.5 12.0 22.0 6.4 21.0 4.6 8.4 18.8
Median 16.3 11.8 24.1 -3.7 23.6 69.5 12.5 61.9 6.0 7.9 486.2
2014 15.2 12.2 21.1 -3.9 39.6 73.4 NM -5.4 36.9 NM NM
J.P. Morgan 2015 17.0 14.0 12.5 31.3 8.7 33.3 77.8 8.4 32.6 201.7 NM
Median 19.6 10.3 28.3 -14.4 34.2 69.5 17.1 35.9 6.6 -4.8 3960.6
Median 13.6 10.8 14.4 NA 18.2 -23.8 14.2 18.1 17.9 -2.4 NA
2014 21.0 -40.4 12.2 NA 14.0 -23.8 52.0 34.3 13.2 -3.1 NA
J.P. Morgan 2015 7.7 13.3 7.6 3.8 1.3 24.9 12.5 10.2 7.4 -4.9 NA
Median 15.2 10.7 14.4 NA 15.2 -23.8 28.6 18.7 16.5 -2.8 NA
Median -
2014 -
J.P. Morgan 2015 -
Median 7.4 14.2 15.2 7.4 3.5 11.2 10.2 27.0 -13.4 0.6 5.8
Median -
2014 -
J.P. Morgan 2015 -
Median 4.8 -8.1 2.5 72.1 6.9 NA NA NA -22.1 42.3 -7.2
EPS Growth Consensus 2014 2015 11.5 14.0 9.2 9.9 21.9 16.6 -15.1 64.6 50.2 8.8 73.4 33.3 NM 63.8 -11.3 4.3 38.2 35.4 NM 220.0 NM NM EPS Growth Consensus 2014 2015 20.3 8.0 -42.5 12.2 12.2 7.6 NA 6.6 11.9 -2.6 -23.8 24.9 30.2 59.2 35.1 11.2 12.5 6.2 -3.4 -2.2 NA NA EPS Growth Consensus 2014 2015 3.5 14.6 26.3 30.9 14.3 19.3 8.0 26.4 10.0 13.5 10.9 45.1 -6.2 20.2 24.7 15.0 -16.1 6.5 -71.9 42.6 98.2 -7.6 EPS Growth Consensus 2014 2015 -1.3 6.5 -13.0 43.3 2.5 16.6 61.8 5.0 2.4 10.7 NA NA NA NA NA NA -34.9 17.6 42.3 -11.5 -6.4 -13.3
India Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Malaysia Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Thailand Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Mexico Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Turkey Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Source: I/B/E/S, MSCI, J.P. Morgan estimates. Note: Average earnings growth calculated based on earnings aggregate of MSCI constituents. Consensus numbers are used for stocks not covered by JPMorgan under J.P. Morgan forecasts calculation. Median numbers are for the year 2014.
7
Weight (%) 100 6.7 11.0 12.6 18.8 8.9 5.7 21.8 7.5 2.9 4.0 Weight (%) 100.0 9.3 9.5 4.5 34.4 2.3 13.4 0.0 4.3 10.6 11.7 Weight (%) 100.0 4.3 9.2 19.9 36.4 3.5 5.1 0.0 10.3 9.7 1.5 Weight (%) 100.0 9.2 24.5 0.0 17.9 1.0 10.5 0.0 17.1 19.7 0.0 Weight (%) 100.0 4.6 15.2 4.4 48.8 0.0 12.4 0.0 4.7 9.9 0.0
EPS Growth Consensus 2014 2015 15.7 16.1 18.5 15.7 19.9 16.9 9.0 15.3 18.7 18.0 17.5 20.8 23.8 17.3 12.9 12.9 19.4 16.3 26.9 19.0 12.4 10.3
Median 13.8 13.1 15.1 8.3 11.6 18.5 21.9 16.6 4.7 46.4 6.7
2014 13.9 13.4 16.6 5.8 13.4 20.5 9.5 17.4 22.2 49.2 4.3
J.P. Morgan 2015 17.6 12.4 17.0 12.2 21.0 23.2 17.4 12.7 31.5 34.9 7.4
Median 17.3 17.9 17.4 11.0 17.2 18.5 28.9 12.4 20.0 21.3 12.0
Median 7.6 6.4 13.7 10.4 8.1 19.3 14.5 NA 6.6 -5.3 0.5
2014 7.1 11.8 10.3 30.2 3.9 19.3 8.8 NA 11.0 -1.1 8.3
J.P. Morgan 2015 8.8 8.5 5.6 17.5 8.8 28.3 14.5 NA 4.6 3.8 5.2
Median 7.4 6.4 11.0 10.2 6.6 17.5 7.0 NA 4.6 1.0 -6.8
Median 9.4 7.8 18.3 7.7 12.7 21.5 -0.9 NA 1.3 -1.0 0.4
2014 12.5 8.1 106.8 9.3 10.3 21.4 -11.4 NA 4.3 38.0 0.4
J.P. Morgan 2015 14.0 14.6 36.4 14.3 10.7 19.7 18.3 NA 12.1 20.6 3.4
Median 10.0 7.8 17.0 10.9 8.2 21.5 -2.4 NA -4.0 3.4 11.5
Median -
2014 -
J.P. Morgan 2015 -
Median 5.8 7.5 10.0 NA -14.9 14.6 1.4 NA 19.1 12.3 NA
Median -
2014 -
J.P. Morgan 2015 -
Median 3.7 15.7 5.0 1.0 -1.7 NA 13.2 NA 16.1 34.6 NA
EPS Growth Consensus 2014 2015 2.8 9.2 2.6 13.1 8.3 8.5 12.4 11.4 0.6 8.3 17.5 24.5 2.8 11.5 NA NA 7.7 9.2 4.0 8.2 0.9 6.0 EPS Growth Consensus 2014 2015 9.5 13.6 -1.9 13.3 109.5 35.4 6.4 8.1 7.8 12.2 21.4 19.7 -11.2 17.8 NA NA -2.1 16.4 44.7 27.4 11.5 1.0 EPS Growth Consensus 2014 2015 -1.8 19.1 8.8 16.9 8.4 13.0 NA NA -19.4 21.0 14.6 21.8 -3.3 12.2 NA NA -21.6 118.8 12.3 2.8 NA NA EPS Growth Consensus 2014 2015 -1.6 18.0 13.6 17.6 -47.1 27.5 1.0 14.5 -0.5 19.2 NA NA 8.8 22.0 NA NA 29.5 0.4 14.4 11.0 NA NA
Updated as of 10 September 2014
Emerging Markets Equity Strategy
J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Monitoring the Trend in Country EPS Forecasts (2014 and 2015) Emerging Markets (EM)
World
EM Asia 2
115
115
110 110
2015
2015
100
105
95
2014
Jul-13
Dec-13
May-14
Sep-14
80 Feb-13
Jul-13
Dec-13
May-14
85 Feb-13
Sep-14
2014
100
Sep-14 2
90 Feb-13 22
115
105 2015
Dec-13
May-14
80 Feb-13
Sep-14 2
20
90 2014 80
Jul-13
Dec-13
May-14
Sep-14
2014
95 Feb-13
Jul-13
Dec-13
Sep-14
85 Feb-13
Dec-13
May-14
Sep-14
105
115
2014
100
105 2014
2014
90
May-14
Jul-13
Russia
125 2015
95
100
70 Feb-13
110
135
2015 105
Sep-14
2015
India 2
100
May-14
100
South Africa 110
Dec-13
110
2014
Taiwan 120
110
2015
85
22
Jul-13
Korea
90
Jul-13
75 Feb-13
95
2014
95
May-14
Sep-14
100
90 80
May-14
120
105
100 105
Dec-13 Brazil
2015
Dec-13
Jul-13
110
110
Jul-13
80
China 115
110
2014
85
90
EM Latin America
2015
90
2014
95
85
2015
95
100
95
2014
90
70 Feb-13
105
2015
100
100
90 Feb-13
2110
110
105
105
EM Europe
2115
Jul-13
Dec-13
95
2015
95
May-14
85 Feb-13
Sep-14
Source: I/B/E/S Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December. EPS figures are normalized, starting at 100 on base date Feb 2013 for ease of comparison. These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where adjustments are made for exceptional items.
8
Jul-13
Dec-13
May-14
Sep-14
90 Feb-13
Jul-13
Dec-13
May-14
Updated as of 3 September 2014
Sep-14
Emerging Markets Equity Strategy
J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Monitoring the Trend in Country EPS Forecasts (2014 and 2015) Mexico
Turkey
115
2
110 2015
100
2015
2014
90
75
85
70 Feb-13
80 Feb-13
Jul-13
Dec-13
May-14
Sep-14
95
May-14
Sep-14
115
Jul-13
Dec-13
May-14
70 Feb-13
Sep-14
100
Dec-13
May-14
Sep-14
95 Feb-13
Jul-13
Dec-13
2014
2
120
100
110 95
2015
2014
60
May-14
Sep-14
40 Feb-13
C
80 Feb-13
Jul-13
Dec-13
May-14 C
2
145 2015
2014
45 25
50 Dec-13
Sep-14
65
70 2015
May-14
85
80
85
Dec-13
105
90 2014
Jul-13
125
100
90
85
Greece
Hungary
Czech. Republic
2014
90
75 Feb-13
Sep-14
2015
95
80 May-14
Jul-13
Dec-13
May-14
Sep-14
Sep-14
2
100
85
2014
90
May-14
105
2015
95
100
Dec-13 Poland
90
2014
Jul-13
110
105
105
Jul-13
75
100
105
Jul-13
85 Feb-13
110
110
2015
95
80
115 2015
110
85
Thailand
115
120
2014
90
Philippines
Indonesia
75 Feb-13
100
90
Dec-13
2015
105
2014
95
Jul-13
2
110
2015
90
80
80
120 115
100
2014
95
85
85 Feb-13
105
105 100
95
Chile 2
110
110
105
Malaysia
115
5 Feb-13
Jul-13
Dec-13
May-14
Sep-14 Updated as of 3 September 2014
9 Source: I/B/E/S Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December. EPS figures are normalized, starting at 100 on base date Feb 2013 for ease of comparison. These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where adjustments are made for exceptional items. Countries earnings revisions are in local currencies term whereas APxJ regions earnings revisions is in US $ terms
Sep-14
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected] 11 September 2014
Monitoring the Trend in Sector EPS Forecasts (2014 and 2015) Emerging Markets 115
110
110
105 100 95 90 80 Feb 13
95
95 90
85 Dec 13
May 14
Sep 14
80 Feb 13
Jul 13
Financials
110
Dec 13
May 14
Sep 14
55 Feb 13
2014 Jul 13
Dec 13
2014
May 14
Sep 14
105
95
60 Feb 13
Dec 13
May 14
Sep 14
70 Feb 13
Dec 13
May 14
Sep 14
2015
110
70 Jul 13
Dec 13
May 14
Sep 14
May 14
Sep 14
90 Feb 13
2014
Jul 13
Dec 13
May 14
Sep 14
Utilities 120 115
2015
110
2015
105 100
2014
80
65
115
85 Feb 13
Jul 13
Jul 13
Information Technology
90
90
75
85 Feb 13
100
100 2015
Sep 14
2015
Telecom
95
May 14
80
2014
110
105
Dec 13
120
110
90
Materials 115
85
Jul 13
Industrials
105
2014
90
75 Feb 13
100
95
Jul 13
Sep 14
110 100
2014
90 80 Feb 13
May 14
2015
115
2015
100
Dec 13
2015
95
2014
Health Care 120
120
100
85
2014
85 Jul 13
2015
105
100
2014
105
115
2015
105
2015
Energy
Consumer Staples
Consumer Discretionary
115
2014
95 Jul 13
Dec 13
May 14
Sep 14
90 Feb 13
Source: I/B/E/S
Jul 13
Dec 13
Updated as of 3 September 2014
Notes: The dashboard aims to show changes in earnings expectations. All year ends are for December. EPS figures are normalized, starting at 100 on base date Feb 2013 for ease of comparison. These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where adjustments are made for exceptional items. Sector earnings revisions are in US$
10
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599,
[email protected]
11 September 2014
USA*
Emerging Markets*
EMF EMEA*
EMF LATAM*
EMF Asia*
Korea
Taiwan
China
India
Malaysia
Indonesia
Thailand
Philippines
Value: PE Matrices for Countries and Sectors
Consumer Discretionary
16.9
12.3
17.9
20.8
10.2
7.6
15.6
11.2
14.6
15.7
15.7
21.8
32.9
Consumer Staples
16.4
20.9
19.5
20.1
22.2
20.5
21.2
22.5
32.9
21.0
21.4
23.0
27.1
Energy
14.4
7.4
4.8
10.3
10.4
10.4
25.3
10.3
11.6
16.7
15.0
9.5
NA
Financials
13.3
9.4
10.5
12.0
8.4
NA
11.8
5.9
16.3
12.6
11.8
11.1
19.8
Health Care
15.9
21.5
19.9
19.1
22.2
16.2
37.6
21.7
26.2
44.3
31.8
35.7
NA
Industrials
15.2
15.4
13.1
21.5
14.6
16.1
24.4
10.8
21.0
15.2
14.5
28.8
17.2
Information Technology
14.7
12.2
NA
18.3
12.1
8.1
12.8
24.6
18.2
NA
NA
NA
NA
Materials
16.5
12.6
11.9
11.9
13.3
14.1
18.9
8.7
11.8
15.0
14.9
11.2
NA
Telecommunication Services
14.0
15.3
12.9
15.5
16.6
24.1
18.6
16.3
19.5
22.9
18.2
23.6
19.4
Utilities
15.6
11.9
10.9
11.3
12.5
NA
NA
13.2
12.0
14.2
12.6
16.2
14.6
Market Aggregate
16.0
11.0
9.1
13.1
11.4
9.9
13.7
9.3
16.6
15.3
14.6
13.1
19.2
Sector Neutral**
14.7
11.0
10.7
14.3
11.3
10.6
15.4
10.0
16.2
14.8
14.0
13.7
15.3
South Africa*
Poland*
Turkey*
Greece*
UAE*
Qatar*
EMF LATAM*
Brazil*
Mexico*
Chile*
Consumer Discretionary
17.9
NA
18.2
25.1
11.7
15.8
NM
NA
20.8
17.5
28.0
19.9
Consumer Staples
19.5
20.2
16.6
19.9
24.9
NA
NA
NA
20.1
18.5
22.6
17.3
Energy
4.8
4.0
10.1
11.7
9.7
NA
NA
NA
10.3
10.0
NA
17.3
Financials
10.5
4.7
12.1
14.7
8.6
NA
16.8
15.5
12.0
11.0
16.1
12.1
Health Care
19.9
NA
20.6
NA
NA
NA
NA
NA
19.1
21.4
16.4
NA
Industrials
13.1
NA
13.1
NA
10.0
NA
25.8
13.9
21.5
22.7
21.7
20.3
Information Technology
NA
NA
NA
NA
NA
NA
NA
NA
18.3
18.3
NA
NA
Materials
11.9
9.7
13.3
13.6
10.3
30.1
NA
NA
11.9
7.6
36.0
20.1
Telecommunication Services
12.9
8.7
15.4
39.0
10.5
15.9
NA
20.4
15.5
21.1
14.6
12.6
Utilities
10.9
7.1
NA
11.3
NA
10.6
NA
13.7
11.3
9.2
NA
15.7
Market Aggregate
9.1
4.7
13.8
13.9
10.0
-
17.3
15.7
13.1
11.0
19.6
15.7
Sector Neutral**
10.7
7.2
13.0
15.2
10.7
12.0
13.6
13.2
14.3
13.0
15.0
14.6
12-month forward PE
EMF EMEA*
Russia*
12-month forward PE
Source: IBES, MSCI, J.P. Morgan estimates. Note: PEs are derived from bottom-up calculations of each individual MSCI constituents using JPM estimates for covered stocks and IBES estimates for the rest. * Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. IBES Estimates are not available for Morocco, Jordan, Peru and Colombia. **Sector neutral PE are calculated by using sector weights of MSCI EM and sector PE of respective markets (MSCI EM sector PE used where country sector does not exist) 11
Updated as of 10 September 2014
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599,
[email protected] 11 September 2014
Value: Distribution Tables for PE, PBR, DY and RoE 2014E: Price to Earnings Ratio (x) Global* USA* Europe* Japan* Emerging Markets* China Brazil* Korea Taiwan South Africa* India Russia* Mexico* Malaysia Greece UAE Qatar Chile* Indonesia Turkey* Thailand Poland* Czech Republic* Egypt* Philippines Hungary*
Weighted Average 15.7 17.3 15.3 15.6 11.9 10.1 12.1 11.0 14.4 14.9 18.7 4.7 22.4 16.2 18.2 17.1 18.4 15.8 11.3 14.4 14.7 13.4 23.5 21.1 12.1
2014E: Dividend Yield (%) Weighted Average Global* 2.6 USA* 2.1 Europe* 3.6 Japan* 2.1 Emerging Markets* 2.8 China 3.2 Brazil* 4.0 Korea 1.3 Taiwan 2.9 South Africa* 3.2 India 1.5 Russia* 5.3 Mexico* 1.4 Malaysia 3.2 Greece 1.0 UAE 2.3 Qatar 3.7 Chile* 2.6 Indonesia 2.5 Turkey* 3.0 Thailand 3.0 Poland* 3.9 Czech Republic* 5.4 Egypt* 2.1 Philippines 2.1 Hungary* 3.2
Min 2.8 7.1 6.0 5.5 2.8 3.9 4.4 6.4 5.0 7.8 4.5 2.8 9.9 9.5 14.2 12.3 11.5 11.6 8.3 7.6 9.2 8.8 11.5 9.8 14.1 10.7
Min 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 0.0 0.6 0.0 0.7 2.0 0.0 0.0 0.7 0.0 0.0 4.8 0.0 0.5 1.5
Lower 12.7 14.3 12.9 12.4 11.4 8.8 11.1 11.6 13.1 11.3 13.8 4.4 19.1 12.9 14.6 13.9 13.4 13.6 13.9 10.2 11.6 11.2 13.3 11.1 16.1 11.0
Quartiles Median 16.1 17.1 16.0 15.7 15.5 12.3 16.8 15.6 15.6 14.4 18.6 6.7 24.2 17.1 17.6 15.5 14.5 18.7 16.2 11.0 16.9 15.9 15.0 12.4 20.6 11.2
Lower 1.2 0.6 2.1 1.2 1.2 1.3 1.6 0.4 2.1 2.2 0.6 3.1 0.3 2.1 0.0 1.3 2.9 1.7 1.4 1.5 1.4 1.5 5.2 0.0 0.9 2.5
Quartiles Median 2.2 1.7 3.1 1.7 2.3 2.5 3.3 1.1 3.4 3.6 1.2 4.5 1.0 2.7 1.0 2.3 3.5 3.0 2.0 2.1 2.8 2.8 5.6 1.3 1.6 3.5
2014E: Price to Book Value Ratio (x) Higher 21.0 21.8 19.9 21.1 22.2 18.4 22.0 24.0 21.0 17.7 29.4 11.0 27.0 22.4 22.3 27.0 19.8 22.8 24.0 12.3 31.9 17.9 17.0 19.3 26.5 14.5
Higher 3.6 2.8 4.3 2.4 3.7 3.9 4.9 1.7 4.5 4.5 1.9 5.8 1.9 3.7 2.1 3.6 3.9 3.8 2.8 4.4 3.8 4.6 6.2 4.1 1.9 3.8
Max 518.9 518.9 99.7 80.9 398.2 86.5 48.9 143.9 171.7 92.2 110.0 23.2 48.1 52.3 48.9 40.0 398.2 39.0 60.2 31.6 67.3 35.8 19.0 26.3 37.3 17.8
Global* USA* Europe* Japan* Emerging Markets* China Brazil* Korea Taiwan South Africa* India Russia* Mexico* Malaysia Greece UAE Qatar Chile* Indonesia Turkey* Thailand Poland* Czech Republic* Egypt* Philippines Hungary*
Weighted Average 1.9 2.4 1.7 1.2 1.5 1.5 1.5 1.1 1.9 2.5 2.9 0.5 2.8 2.1 1.1 2.1 2.6 1.6 3.3 1.5 2.1 1.4 1.5 1.8 3.0 0.8
Min 0.1 0.3 0.1 0.5 0.2 0.3 0.2 0.4 0.7 0.4 0.6 0.2 1.3 0.7 0.5 1.8 1.4 0.7 1.1 0.8 0.9 0.4 1.3 0.8 1.3 0.7
Lower 1.2 1.6 1.2 0.9 1.1 1.0 1.1 0.9 1.2 1.6 1.4 0.5 2.4 1.5 1.0 2.0 1.7 1.4 2.4 1.2 1.4 0.9 1.5 0.9 2.1 0.7
Quartiles Median 1.9 2.7 2.0 1.3 1.8 1.3 1.7 1.1 1.6 2.5 2.9 0.8 3.1 2.0 1.1 2.1 2.5 1.8 3.5 1.5 2.2 1.6 1.7 0.9 2.9 0.8
Higher 3.2 4.3 3.2 1.7 3.2 2.4 4.1 1.7 2.6 4.2 5.3 1.7 3.6 2.7 1.8 2.8 3.2 2.6 4.5 2.9 5.0 2.1 1.8 2.0 4.0 1.1
Max 50.5 50.5 29.8 11.6 48.6 11.4 16.3 11.1 10.1 17.7 43.1 6.2 15.7 40.2 3.1 3.5 3.9 3.3 48.6 12.1 20.1 10.2 1.9 3.0 8.4 1.3
Max 11.7 11.5 11.5 4.3 11.7 9.2 11.7 6.9 8.6 10.1 5.0 8.3 4.1 7.5 3.5 4.7 6.7 6.0 6.6 10.1 6.2 7.1 6.8 8.2 5.0 4.1
2014E: Return on Equity (%) Weighted Average Global* 12.4 USA* 14.4 Europe* 11.2 Japan* 7.8 Emerging Markets* 12.7 China 15.2 Brazil* 12.3 Korea 10.1 Taiwan 13.5 South Africa* 17.4 India 16.5 Russia* 11.7 Mexico* 12.5 Malaysia 13.2 Greece UAE 11.5 Qatar 15.2 Chile* 8.9 Indonesia 22.2 Turkey* 13.8 Thailand 15.6 Poland* 9.5 Czech Republic* 11.4 Egypt* 9.0 Philippines 15.0 Hungary* 7.3
Min -10.9 0.6 1.5 1.3 -10.9 2.4 -4.4 0.8 0.6 0.4 1.4 5.3 -4.6 3.3 -10.9 7.0 0.8 2.6 5.8 4.7 1.4 -6.7 9.2 3.2 7.3 6.2
Lower 7.9 9.6 8.2 6.2 8.1 8.9 7.6 4.8 7.3 12.9 10.7 10.3 9.3 9.4 -1.3 8.6 11.8 7.9 16.4 11.6 11.5 5.7 10.1 6.2 11.3 6.8
Quartiles Median 12.3 15.4 12.7 8.4 12.6 12.7 13.0 7.6 10.6 18.3 15.7 12.8 12.6 12.6 3.8 11.7 14.3 10.6 21.8 14.7 15.2 10.6 11.0 9.2 14.3 7.4
Higher 18.5 21.9 18.3 10.8 18.5 17.1 22.4 11.9 16.9 23.4 21.7 21.8 15.6 14.5 12.7 16.6 18.2 13.2 24.5 19.6 19.3 12.4 11.8 16.9 18.7 7.4
Max 354.0 261.7 151.4 47.2 354.0 34.2 82.3 27.6 42.5 101.0 105.8 38.3 65.2 179.3 14.6 20.0 24.3 21.7 110.7 38.3 116.3 30.8 12.6 24.6 25.0 7.4
Source: Datastream, IBES, MSCI, J.P. Morgan estimates. Note: Weighted average numbers based on aggregate of MSCI constituents. Consensus numbers are used for stocks not covered by J.P. Morgan. * only consensus numbers are used 12
Updated as of 10 September 2014
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected] 11 September 2014
Value: Demand Classification: MSCI Emerging Markets Index Composition by Countries Domestic Demand
Global Capex
Global Consumer
Global Price Takers
Total
EM Domestic Demand Sector Absolute and relative (vs EMF) Index
China
15.7
0.4
0.4
2.9
19.4
India
3.5
1.5
0.1
1.8
6.8
Indonesia
2.4
0.0
0.1
0.1
2.6
Korea
6.0
2.7
4.6
1.6
14.9
Malaysia
2.9
0.1
0.1
0.6
3.8
Philippines
1.1
0.0
0.0
0.1
1.2
Taiwan
4.1
3.4
3.4
1.1
11.9
MSCI Emerging Markets Free Index
400
100
Absolute (lhs)
350
90
300
80
250
Relative to EM (rhs)
200
70
150
60
100
50
50 0 Jan 90
Oct 96
Jul 03
Apr 10
40
EM Global Capex Sector Absolute and relative (vs EMF) Index 1400
500
Absolute (lhs)
1200
420
Thailand
1.8
0.0
0.0
0.5
2.3
1000
340
Asia Czech Republic
37.6
8.1
8.6
8.5
62.9
800
260
0.2
0.0
0.0
0.0
0.2
Egypt
0.2
0.0
0.0
0.0
0.2
Hungary
0.1
0.0
0.0
0.1
0.2
Greece
0.6
0.0
0.0
0.0
0.7
600 400
100
200 0 Jan-90
Poland
1.3
0.0
0.0
0.3
1.6
Russia
1.6
0.0
0.0
3.2
4.8
960
South Africa
5.8
0.0
0.0
1.5
7.4
840
Turkey
1.5
0.0
0.0
0.1
1.6
UAE
0.5
0.1
0.6
Qatar
0.5
0.1
0.6
EMEA
12.5
0.0
0.1
5.4
17.9
Brazil
7.9
0.1
0.1
3.0
11.1
Chile
1.4
0.0
0.0
0.0
1.4
Colombia
0.7
0.1
0.0
0.2
1.0
Mexico
4.4
0.4
0.1
0.4
5.3
380
Peru
0.2
0.0
0.0
0.2
0.4
310
LatAm
14.6
0.6
0.2
3.9
19.2
Total
64.7
8.7
8.9
17.7
100.0
20 Oct-96
Jul-03
-60
Apr-10
EM Global Consumer Sector Absolute and relative (vs EMF) Index 300
Absolute (lhs)
250
720
200
600 480 360
150
Relative to EM (rhs)
100
240
50
120 0 Jan-90
Oct-96
Jul-03
Apr-10
0
EM Global Price Taker Sector Absolute and relative (vs EMF) Index 450
240 170
115 100
Absolute (lhs)
85 70
Relative to EM (rhs)
55
100
40
30
25
-40 Jan-90
Source: Datastream, MSCI. J.P. Morgan. MSCI emerging markets companies have been classified in five categories. Of the five categories, Global Consumer/Capex (Tech-Hardware) weighting equally divided between Global consumer and Global Capex. 13
180
Relative to EM (rhs)
Oct-96
Jul-03
Apr-10
Updated as of 10 September 2014
10
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Value: Equities relative to Bonds Relative outperformance of equities versus bonds by country (%) Country Brazil Chile China Colombia Czech Hungary India Indonesia Malaysia Mexico Peru Poland Russia South Africa Thailand Turkey Taiwan Philippines Korea Romania
1-month
3-month
6-month
12-month
36-month
0.3 2.3 2.2 0.8 7.3 9.7 5.5 0.4 1.5 2.8 -0.4 8.0 7.0 -0.6 4.2 -0.5 4.1 5.6 -0.7 0.4
3.4 -1.0 9.9 1.8 7.0 -5.1 4.5 2.7 -1.3 4.6 -0.5 0.1 2.3 -1.4 7.6 -5.0 5.4 5.4 -4.2 -0.9
16.2 5.8 14.1 7.9 12.8 5.4 15.9 8.4 0.5 12.9 3.8 2.7 12.2 3.8 17.2 19.7 13.0 3.5 -2.5 11.1
-4.7 -3.0 7.2 -5.8 21.3 -22.1 22.6 10.3 3.3 1.0 2.7 3.3 0.8 13.7 5.2 -0.1 19.9 17.7 -5.4 17.5
20.5 -7.4 25.2 17.5 12.5 -9.3 53.9 28.2 31.5 37.8 -14.2 29.6 4.1 69.2 41.5 45.6 35.3 75.9 14.2 NA
36-month annualised 6.4 -2.5 7.8 5.5 4.0 -3.2 15.5 8.6 9.6 11.3 -5.0 9.0 1.3 19.2 12.3 13.3 10.6 20.7 4.5 NA
J.P. Morgan's GBI - EM bond indices track local currency government bonds issued by emerging economies. The indices are easily replicable and represent the local bond portfolio that can be accessed by an international investor. For more information on these indices please visit www.morganmarkets.com or contact Gloria Kim at
[email protected] The table shows the difference between the MSCI equity benchmark returns in local currency and the GBI - EM benchmark returns for each country. Positive numbers indicate outperformance by equities.
Relative value of equities versus bonds by country Country Brazil Chile China Colombia Czech Hungary India Indonesia Malaysia Mexico Peru Poland Russia South Africa Thailand Turkey Taiwan Philippines Korea Romania
Generic 10 years 11.5 4.8 4.3 7.0 1.2 4.6 8.5 8.2 4.0 5.9 5.2 3.0 9.6 8.2 3.7 9.0 1.6 4.4 3.1 4.2
Bond Maturity (years) 8.7 4.4 6.2 6.7 6.7 5.0 11.4 11.8 6.1 9.6 11.5 4.3 5.8 12.5 6.2 5.1 7.2 13.2 8.0 3.9
Bond Yield To Maturity 9.1 3.9 4.2 5.8 1.1 3.7 8.7 8.3 3.9 5.8 5.5 2.6 9.3 8.1 3.3 8.9 1.6 4.9 3.0 3.5
Earnings Yield
Dividend Yield
9.1 6.4 10.7 5.0 7.1 10.0 6.0 6.8 6.6 5.1 4.3 7.2 21.3 7.2 7.6 10.0 7.3 5.2 10.1 NA
4.1 2.7 3.4 2.7 5.2 3.7 1.6 2.6 3.3 1.5 1.1 4.1 6.0 3.5 3.2 3.2 3.2 2.3 1.3 NA
Source: Bloomberg, J.P. Morgan, DataStream, MSCI, IBES Note: GBI-EM Bond Maturity and Yield to Maturity are used for each country.
DDM Implied Growth 12.3 6.9 6.3 8.3 -1.5 4.8 11.7 11.1 6.1 8.6 8.1 2.6 12.9 10.4 5.9 10.7 1.9 6.9 6.2 NA 14
For 'DDM Implied Growth', we use a dividend discount model based on expected payout ratios for 2008 (except Colombia and Peru where we use current trailing payout ratio) Perpetual Implied Growth Rates are calculated based on the Gordon Growth Model: G= R - D/V G= Implied Growth Rate R= Required Growth Rate (Risk free rate + Equity Risk Premium) D= Index Dividend V= Index Value Note: Equity risk premium of 4%. Risk free rates are 10year benchmark or nearest equivalent.
Updated as of 10 September 2014
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Economic Forecasts: Changes in Real GDP Forecasts US Euro Japan China Brazil S Korea Taiwan South Africa India Russia Mexico Malaysia Chile Indonesia Turkey Thailand Poland Czech Republic Peru Colombia Philippines Hungary Qatar UAE Greece
Real GDP Growth (% Y/Y) J.P. Morgan Consensus 2014E 2015E 2014E 2015E 2.1 3.0 2.1 3.0 0.8 1.8 1.0 1.5 0.9 1.4 1.1 1.2 7.3 7.3 7.4 7.2 0.2 1.5 0.8 1.6 3.6 4.0 3.6 3.8 3.8 3.7 3.5 3.6 1.4 3.0 1.7 2.7 5.3 6.5 4.7 5.4 0.5 1.0 0.3 1.2 2.7 3.8 2.6 3.8 5.8 4.7 5.7 5.3 1.9 3.1 2.9 3.8 4.9 5.3 5.2 5.6 3.0 4.0 3.3 3.7 1.1 4.2 1.5 4.1 3.0 3.2 3.2 3.4 2.8 2.8 2.5 2.6 3.3 5.5 4.5 5.5 5.0 4.5 5.0 4.8 6.0 6.4 6.3 6.5 3.3 2.6 2.9 2.5 1.8 2.4 5.9 6.3 2.0 2.7 4.1 4.2 0.3 1.7
Change in Forecasts Past 3 months (%) J.P. Morgan Consensus 2014E 2015E 2014E 2015E 0.1 0.1 -0.4 -0.1 -0.4 -0.2 -0.1 0.0 -0.4 0.0 -0.3 -0.1 0.1 0.1 0.1 0.0 -1.1 -0.3 -1.0 -0.4 -0.3 0.1 0.0 0.0 0.3 -0.1 0.3 0.1 -0.4 -0.2 -0.7 -0.3 0.0 0.0 0.0 0.0 0.0 -0.8 -0.6 -0.7 -0.2 0.0 -0.4 0.0 0.3 -0.4 0.5 0.3 -1.0 -1.1 -0.5 -0.5 0.0 -0.4 -0.1 -0.2 1.1 0.0 1.0 0.2 0.0 0.0 -0.2 0.0 -0.1 0.0 0.0 -0.1 0.0 0.0 0.4 0.0 -1.7 0.0 -0.8 -0.1 0.3 0.0 0.5 0.2 0.0 0.0 -0.1 0.0 0.3 0.1 0.7 0.3 -0.4 -0.1 0.4 0.2 0.0 0.0 0.1 0.1 0.1 0.1
2014E GDP Growth in EM: J.P. Morgan and Consensus Forecasts 5.5
Consensus EM growth forecast
4.9 4.6
J.P. Morgan EM growth forecast
4.3 4.0 Jan-13
Apr-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
2Q15E 3.0 na 2.2 7.2 na 4.0 3.6 3.3 7.5 0.8 4.0 4.0 3.9 5.5 6.1 4.2 3.5 2.4 5.0 5.5 6.6 2.5 -
Inflation (% Y/Y) 2014E 2015E 1.5 1.9 1.3 0.6 0.4 2.9 2.6 2.2 6.2 6.3 1.3 1.5 0.8 1.4 5.8 6.1 10.1 8.5 6.8 7.2 3.8 4.1 2.1 2.7 1.8 4.0 7.0 5.7 7.5 9.0 2.2 2.6 0.9 0.2 1.4 0.9 2.8 3.0 2.0 2.8 2.9 4.2 1.7 0.1 3.8 4.4 2.3 2.6 -
Consensus Forecasts for 2014E GDP growth in EM and DM
5.8
5.2
3Q14E 1.0 1.0 2.0 7.6 0.1 4.7 na 2.3 4.0 0.8 3.9 4.0 0.4 5.0 1.2 na 2.0 3.1 6.5 4.0 5.7 2.0 -
Economic Momentum GDP SAAR 4Q14E 1Q15E 3.0 3.0 na na 2.5 1.1 7.4 7.1 2.6 1.1 4.0 4.0 4.2 3.8 3.3 2.9 4.7 5.9 1.0 0.5 3.7 3.6 5.5 5.0 4.5 2.9 4.5 5.2 0.8 4.1 4.0 4.2 2.8 3.5 3.0 4.3 9.5 5.5 4.0 5.0 5.7 6.6 2.5 3.0 -
Sep-14
5.8 5.6 5.4 5.2 5.0 4.8 4.6 4.4 4.2 4.0 Jan-13
2.10
EM consensus growth forecast (LHS)
2.00 1.90 1.80
DM consensus growth forecast (RHS)
1.70 1.60
Apr-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
1.50
Sep-14
Updated as of 10 September 2014
Source: J.P. Morgan estimates, Bloomberg Note: Consensus estimates for Jordan, Egypt, Pakistan and Israel sourced from WES and Morocco from EIU 15
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Economic Forecasts: Policy Rate Trends and Forecasts Country Official interest rate Developed Markets United States Federal funds rate Euro Area Refi Rate Japan Overnight Call Rate Latin America Brazil SELIC overnight rate Mexico Repo rate Chile Discount rate Europe, Middle East and Africa Czech Republic 2-week repo rate Hungary 2-week deposit rate Poland 7-day intervention rate Russia Rep Rate South Africa Repo rate Turkey Intbnk O/N EM Asia China 1-year working capital Korea Overnight call rate Indonesia BI rate India Repo rate Malaysia Overnight policy rate Philippines Reverse repo rate Thailand 1-day repo rate Taiwan Official discount rate
Policy Rate
3Q'13
4Q'13
1Q'14
2Q'14
Current
3Q'14F
4Q'14F
1Q'15F
2Q'15F
Last Change
0.125 0.50 0.05
0.125 0.25 0.05
0.125 0.25 0.05
0.125 0.15 0.05
0.125 0.05 0.05
0.125 0.05 0.05
0.125 0.05 0.05
0.125 0.05 0.05
0.125 0.05 0.05
16 Dec 08 (-87.5bp) 4 Sep 14 (-10bp) 5 Oct 10 (-5bp)
3Q 15 (+25bp) 3Q 18 (+20bp) On hold
9.00 3.50 5.00
10.00 3.50 4.50
11.00 3.50 4.00
11.00 3.00 4.00
11.00 3.00 3.50
11.00 3.00 3.25
11.00 3.00 3.00
11.00 3.00 3.00
11.00 3.00 2.75
2 Apr 14 (+25bp) 6 Jun 14 (-50bp) 14 Aug 14 (-25bp)
On hold 4Q 15 (+25bp) 11 Sep 14 (-25bp)
0.05 3.60 2.50 5.50 5.00 6.50 5.51 6.00 2.50 7.25 7.50 3.00 3.50 2.50 1.88
0.05 3.00 2.50 5.50 5.00 7.75 5.55 6.00 2.50 7.50 7.75 3.00 3.50 2.25 1.88
0.05 2.50 2.50 7.00 5.75 10.00 5.61 6.00 2.50 7.75 8.00 3.00 3.50 2.00 1.88
0.05 2.30 2.50 7.50 5.50 8.75 5.59 6.00 2.50 7.50 8.00 3.00 3.50 2.00 1.88
0.05 2.10 2.50 8.00 5.75 8.25 5.58 6.00 2.25 7.50 8.00 3.25 4.00 2.00 1.88
0.05 2.10 2.50 8.00 6.00 8.25 5.59 6.00 2.25 7.50 8.00 3.50 4.00 2.00 1.88
0.05 2.10 2.00 8.00 6.00 8.25 5.63 6.00 2.25 7.50 8.25 3.50 4.00 2.00 1.88
0.05 2.10 2.00 7.75 6.25 8.25 5.64 6.00 2.25 7.50 8.25 3.50 4.00 2.25 2.00
0.05 2.10 2.00 7.50 6.50 8.25 5.64 6.00 2.25 7.50 8.25 3.50 4.00 2.50 2.00
1 Nov 12 (-20bp) 22 Jul 14 (-20bp) 3 Jul 13 (-25bp) 25 Jul 14 (+50bp) 17 Jul 14 (+25bp) 17 Jul 14 (-50bp)
On hold 4Q 15 (+20bp) 4Q 14 (-50bp) 1Q 15 (-25bp) 18 Sep 14 (+25bp) On hold
7 Jul 12 (-31bp) 14 Aug 14 (-25bp) 12 Nov 13 (+25bp) 28 Jan 14 (+25bp) 10 Jul 14 (+25bp) 11 Sep 14 (+25bp) 12 Mar 14 (-25bp) 30 Jun 11 (+12.5bp)
On hold On hold On hold 4Q 14 (+25bp) 18 Sep 14 (+25bp) 1Q 15 (+25bp) 1Q 15 (+12.5bp)
Change in policy rates
Next Change
Emerging Markets Policy rates 16
India Malaysia China Japan Taiwan Chile Thailand Indonesia Korea Poland Czech S Africa EU Philippines Brazil USA Mexico Hungary
Change from 05 - 07 avg
Forecast Change for now to 4Q 14
12
Nominal Policy Rates
8
4
Real Rates
0
-4 -550
-450
-350
-250
-150
-50
50
150
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
Updated as of 10 September 2014
Source: J.P. Morgan Economics, Bloomberg. Bold figures on next column indicate tightening.
16
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Economic Forecasts: Currency Movements and Forecasts Euro (EUR) 1.72
Japansese Yen (JPY)
J.P. Morgan forecast: end Sep 14: 1.34 end Dec 14: 1.30 end Mar 15: 1.28
1.52
J.P. Morgan 1.32 Consensus 1.12 Jan 05
120
Aug 07
Apr 10
Nov 12
Jun 15
J.P. Morgan
110
1,300 Consensus
90
70
60 Jan 05
Aug 07
7.8
2.8 2.6 2.4
7.4 Consensus
6.6
Mar 10
Nov 12
Jun 15
J.P. Morgan forecast: end Sep 14: 2.30 end Dec 14: 2.35 end Mar 15: 2.45
J.P. Morgan Mar 10
Nov 12
J.P. Morgan
Jun 15
2.0
Aug 07
J.P. Morgan
58.0
Aug 07
Mar 10
Nov 12
Jun 15
J.P. Morgan forecast: end Sep 14: 60.00 end Dec 14: 60.00 end Mar 15: 60.50
Nov 12
Jun 15
2.8
38.0 Jan 05
2.6 Jan 05
Mar 10
Nov 12
Jun 15
Consensus
Nov 12 ))
Jun 15
Source: Datastream, J.P. Morgan estimates, Bloomberg.
8.0
Consensus
6.0 Aug 07
Mar 10
Nov 12
Jun 15
5.0 Jan 05
Aug 07
Mar 10
Nov 12
Consensus
44
J.P. Morgan forecast: end Sep 14: 32.50 end Dec 14: 33.00 end Mar 15: 33.00
42 40 38 36
J.P. Morgan
34 32 J.P. Morgan
30 28
Aug 07
Mar 10
Nov 12
Jun 15
26 Jan 05
Consensus Aug 07
Mar 10
Nov 12 (
J.P. Morgan forecast: end Sep 14: 2.20 end Dec 14: 2.20 end Mar 15: 2.15
Jun 15
Thai Baht (THB)
J.P. Morgan forecast: end Sep 14: 3.17 end Dec 14: 3.20 end Mar 15: 3.23
Turkish Lira (TRY)
J.P. Morgan
J.P. Morgan
7.0
3.4
3.0
Jun 15
9.0 Consensus
3.6
42.0 Aug 07
12.0 11.0
4.0
46.0
Nov 12
10.0
20 Jan 05
3.2
2.5 2.4 2.3 2.2 2.1 2.0 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 Jan 05
13.0
32
50.0
Consensus
South African Rand (ZAR)
J.P. Morgan
3.8 Consensus
J.P. Morgan
J.P. Morgan forecast: end Sep 14: 11.00 end Dec 14: 10.75 end Mar 15: 11.00
Malaysian Ringgit (MYR) J.P. Morgan
54.0 Consensus
Jun 15
14.0
J.P. Morgan forecast: end Sep 14: 36.43 end Dec 14: 36.78 end Mar 15: 36.86
Indian Rupee (INR) 62.0
Nov 12
24
1.4 Jan 05
66.0
Mar 10
28
1.6
Polish Zloty (PLN) 4.1 J.P. Morgan forecast: 3.9 end Sep 14: 3.10 3.7 end Dec 14: 3.19 3.5 end Mar 15: 3.20 3.3 3.1 2.9 2.7 2.5 2.3 2.1 1.9 Jan 05 Aug 07 Mar 10 S ((
40 36
Consensus
Mexican Peso (MXN) 15.5 J.P. Morgan forecast: 14.9 end Sep 14: 13.00 14.3 end Dec 14: 12.90 13.7 end Mar 15: 13.10 13.1 12.5 11.9 11.3 10.7 10.1 9.5 Jan 05 Aug 07 Mar 10
800 Jan 05
37 J.P. Morgan forecast: 36 end Sep 14: 30.70 35 end Dec 14: 30.80 34 end Mar 15: 30.80 33 32 31 30 29 28 27 Jan 05 Aug 07 Mar 10
Russian Ruble (RUB)
1.8
6.2 Aug 07
Consensus
900
2.2
7.0
5.8 Jan 05
1,000
Brazilian Real (BRL)
J.P. Morgan forecast: end Sep 14: 6.20 end Dec 14: 6.15 end Mar 15: 6.15
8.2
J.P. Morgan
1,200 1,100
J.P. Morgan forecast: end Sep 14: 102 end Dec 14: 106 end Mar 15: 107
Chinese Yuan Renminbi (CNY) 8.6
J.P. Morgan forecast: end Sep 14: 1000 end Dec 14: 1000 end Mar 15: 995
1,500 1,400
100
80
Taiwan Dollar (TWD)
South Korean Won (KRW) 1,600
Jun 15
)
Consensus
J.P. Morgan
Aug 07 C
Mar 10
(C(
Nov 12 ) )
Jun 15
17
Updated as of 10 September 2014
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Economic Forecasts: Currency Movements and Forecasts Hungarian Forint (HUF)
2,500 2,300
Jun 15
3 0 -3 -6
Aug 07
Mar 10
Nov 12
-12
Jun 15
Source: Datastream, J.P. Morgan estimates, Bloomberg. The expected % Gain vs USD for ARS is -28%
ARS
-9
Consensus
MXN
1,700 1,500 Jan 05
Nov 12
TWD
Jun 15
Mar 10
BRL
Nov 12
Aug 07
THB
Mar 10
Jun 15
Expected % Gain vs USD till Dec 2014 (J.P. Morgan)
J.P. Morgan
2,100
Nov 12
IDR
Aug 07
Mar 10
6
1,900 Consensus
40
Aug 07
EUR
44
36 Jan 05
Jun 15
J.P. Morgan forecast: end Sep 14: 1850 end Dec 14: 1875 end Mar 15: 1900
2,700
J.P. Morgan
48
Nov 12
CNY
52
Mar 10
Consensus
2.4 Jan 05
TRL
J.P. Morgan forecast: end Sep 14: 43.50 end Dec 14: 44.00 end Mar 15: 44.25
56
Aug 07
13 Jan 05
Colombian Peso(COP)
Philippine Peso (PHP) 60
2.7
15
PHP
Jun 15
J.P. Morgan
2.9
MYR
Nov 12
Consensus
17
JPY
Mar 10
3.4 3.2
19
ILS
Aug 07
Consensus
J.P. Morgan forecast: end Sep 14: 2.81 end Dec 14: 2.83 end Mar 15: 2.84
3.7
21
KRW
7,500 Jan 05
23
RUB
8,500
25
CZK
9,500
Peruvian Nuevo Sol (PEN)
J.P. Morgan forecast: end Sep 14: 20.67 end Dec 14: 21.15 J.P. Morgan end Mar 15: 21.33
INR
Consensus
J.P. Morgan
HUF
10,500
260 247 234 221 208 195 182 169 156 143 130 Jan 05
Czech Koruna (CZK)
COP
11,500
J.P. Morgan forecast: end Sep 14: 235 end Dec 14: 238 end Mar 15: 238
ZAR
J.P. Morgan forecast: end Sep 14: 11900 end Dec 14: 11900 end Mar 15: 12000 J.P. Morgan
PLN
Indonesian Rupiah (IDR) 12,500
Updated as of 10 September 2014
18
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected] 11 September 2014
Economic Forecasts: Credit Risk External (2013E)
China Brazil Korea Taiwan South Africa India Russia Mexico Malaysia Chile Indonesia Poland Turkey Thailand Czech Republic Peru Egypt* Colombia Philippines Hungary Greece Emerging Asia Emerging Europe Latin America
Fiscal Position
Current Account
Foreign
External Debt
2013
2014F**
2014E
2014E
2013
2014F**
2013
2014F**
(US$bil) 3993 378 368 423 42 291 466 191 127 40 111 76 113 159 57 65 17 1 81 32 0.8 5553 803 724
%GDP 2.1 -3.6 6.1 11.3 -5.8 -1.7 1.6 -1.8 3.8 -3.8 -3.6 -1.8 -7.9 -0.7 -1.1 -4.5 na -3.3 4.5 3.7 na 2.2 -0.9 -2.4
%GDP 1.8 -3.6 5.8 11.0 -5.1 -2.3 3.4 -2.3 4.7 -1.7 -3.0 -2.1 -5.8 1.5 0.2 -5.0 na -3.8 2.7 2.5 na 2.1 0.3 -2.6
(US$bil) 809 492 418 146 148 476 720 226 60 104 363 363 376 86 105 52 na 73 61 152 na 2275 1903 1199
%GDP 8 22 29 28 41 36 36 17 18 41 31 66 45 23 54 25 na 18 22 111 na 15 48 22
% GDP -2.1 -3.3 0.9 -1.8 -4.0 -4.6 -0.3 -2.3 -4.0 -0.7 -2.4 -4.3 -1.2 -3.4 -2.9 0.8 na -1.2 -1.4 -2.2 na -2.0 -2.0 -2.9
% GDP -2.1 -3.7 1.0 -2.0 -4.0 -4.1 0.6 -3.5 -3.5 -2.0 -2.5 -3.5 -2.1 -2.8 -2.9 -0.2 na -1.2 -2.0 -3.0 na -1.5 -1.7 -2.9
% GDP 23 68 36 41 43 67 14 44 57 13 26 58 36 47 48 19 na 32 41 80 na 27 29 42
% GDP 21 69 35 41 45 68 15 46 57 13 27 50 35 48 49 17 na 32 39 80 na 27 28 43
500 400
EMBI Asia Spreads and Yields 9.0
400
8.0
350
300
7.0
200
6.0
100
5.0 Mar-13
Spread (L)
Sovereign Ratings (Long Term Foreign Debt)
Public Sector Debt
Reserves
EMBI Global Spreads and Yields
0 Sep-12
Fiscal Deficit
Sep-13
Mar-14
Yield
4.0 Sep-14
Action O/L changed to stable, Affirmed O/L changed to stable, Affirmed Upgrade, O/L changed to stable Affirmed, O/L stable Downgrade, O/L (-) Affirmed, O/L stable Affirmed, O/L stable Upgrade, O/L stable Affirmed, O/L stable Affirmed, O/L stable Affirmed, O/L stable Affirmed, O/L stable Downgrade, O/L (-) Affirmed, O/L stable Affirmed, O/L stable Upgrade, O/L (+) Affirmed, O/L (-) O/L changed to (+), Affirmed Upgrade, O/L changed to (+) Affirmed, O/L stable -
550 5.7 5.2
250
4.7
200
4.2
150
3.7 Mar-13
Spread (L)
Sep-13
Mar-14
Yield
S&P Date Apr-16-13 Oct-02-13 Aug-27-12 Oct-09-13 Nov-25-13 Nov-26-12 May-16-12 Feb-05-14 Jun-07-12 Oct-29-13 Jul-16-12 Oct-04-11 Apr-04-14 Jun-02-14 Jul-19-13 Aug-16-12 Jul-25-13 Jul-08-13 Oct-03-13 Aug-15-13 -
Rating AABBBA+ AABBB (-) BBB- (-) BBB- (-) BBB+ AAABB+ ABB+ (-) BBB+ AABBB+ BBBB BBB BB -
EMBI Europe Spreads and Yields
6.2
300
100 Sep-12
Moody's Rating Aa3 Baa2 Aa3 Aa3 Baa1 (-) Baa3 Baa1 A3 A3 Aa3 Baa3 A2 Baa3 (-) Baa1 A1 Baa2 (+) Caa1 (-) Baa3 (+) Baa3 (+) Ba1 (-) -
3.2 Sep-14
7.0
450 400 350 300 250 200 100 Sep-12
Mar-13
Spread (L)
Sep-13
Source: Bloomberg, J.P. Morgan. Source: Bloomberg, J.P. Morgan. Source: Bloomberg, J.P. Morgan. Source: CEIC, J.P. Morgan estimates, Moody's, Standard & Poor's, Bloomberg * Data from World Economic Outlook for April 2010 for Current Account data, ** F denotes forecast. Note: Forex reserves as of August 2014 or latest available data. 19
Mar-14
Yield
600
7.0
500
6.0 5.0
350
3.0 Sep-14
7.5
550 450
4.0
150
Date Nov-29-13 Mar-24-14 Sep-24-13 May-26-14 Dec-20-13 Nov-08-13 Apr-25-14 Dec-19-13 Nov-20-13 Dec-16-13 May-02-13 Feb-07-14 May-23-14 May-22-14 Jan-24-14 Aug-19-13 May-16-14 Apr-29-14 May-08-14 Mar-28-14 -
EMBI Latin America Spreads and Yields 8.0
500
Action Affirmed, O/L stable Downgrade, O/L stable Affirmed, O/L stable Affirmed, O/L stable Affirmed, O/L (-) Affirmed, O/L (-) Downgrade, O/L (-) Upgrade, O/L stable Affirmed, O/L stable Affirmed, O/L stable O/L changed to stable, Affirmed Affirmed, O/L stable Affirmed, O/L (-) Affirmed, O/L stable Affirmed, O/L stable Upgrade, O/L stable Affirmed, O/L stable Affirmed, O/L stable Upgrade, O/L stable O/L changed to stable, Affirmed -
6.5
400
6.0
300
5.5
250 200 Sep-12
Mar-13
Spread (L)
Sep-13
Mar-14
Yield
5.0 Sep-14
Source: Bloomberg, J.P. Morgan. Updated as of 10 September 2014
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Perspective: Emerging Markets' Balance Sheets No. of Companies 118 63 85 89 37 58 18 25 36 17 24 18 21 14 2 2 3 8 14 2 7
China Brazil Korea Taiwan South Africa India Russia Mexico Malaysia Chile Indonesia Turkey Thailand Poland Czech Republic Peru Egypt Colombia Philippines Hungary Greece
Debt/Equity 0.67 0.61 0.28 0.41 0.41 1.02 0.38 0.77 0.63 0.69 0.39 0.67 0.78 0.25 0.60 0.25 0.71 0.38 0.72 0.38 0.88
Debt/Assets 0.28 0.29 0.17 0.21 0.21 0.37 0.24 0.33 0.31 0.32 0.22 0.30 0.35 0.15 0.27 0.18 0.29 0.23 0.32 0.20 0.34
Debt/Mkt. Cap 0.96 1.03 0.29 0.20 0.17 0.40 0.81 0.38 0.32 0.26 0.13 0.45 0.40 0.29 0.52 0.14 0.67 0.41 0.25 0.40 0.68
Asset Turnover 0.84 0.45 0.87 1.06 0.84 0.75 0.48 0.74 0.47 0.63 0.84 1.20 1.20 1.17 0.38 0.45 0.26 0.37 0.40 1.02 0.65
Current Ratio 1.04 1.57 1.37 1.21 1.47 1.23 1.38 1.25 2.08 1.14 1.88 1.43 1.43 1.37 1.16 3.37 1.57 1.07 1.40 1.46 0.94
Interest Coverage 7.5 3.9 10.8 13.6 6.0 4.7 12.1 4.6 6.3 5.6 14.5 6.4 5.7 9.7 9.8 24.6 2.8 4.7 5.1 6.3 2.9
Altman Z Score 2.9 3.8 4.7 5.0 5.3 5.7 3.4 5.1 4.7 2.7 7.6 4.4 4.7 3.4 3.1 4.2 2.5 3.4 3.7 4.2 3.8
Debt to Equity Ratios Quartile Distribution Chart (x) 4.0 3.5 3.0 2.5 2.0 1.5 1.0
Greece
Colombia
Egypt
Philippines
Peru
Czech Republic
Hungary
Poland
Indonesia
Turkey
Chile
Thailand
Malaysia
India
Russia
Mexico
China
Brazil
Taiwan
South Africa
0.0
Korea
0.5
Source: Datastream, Bloomberg, J.P. Morgan. Updated as of January-14 Note: 1. All ratios are calculated from latest financial reports available ex Banks, Insurance and Diversified financials sector and calculations are based on weighted average of companies in the MSCI EMF universe. For Altman z-score, its application on company level is such that a score of less than 1.8 indicates bankruptcy likely, between 1.8-2.7 bankruptcy likely within 2 years and more than 3 most likely safe from bankruptcy. For market as a whole, the ratio is a weighted average of companies' z-score, thereby giving a general quality of companies in the market. 2. For the debt to equity distribution chart, each box indicates quartile levels and markets with values exceeding the scale are indicated by the open-ended top box. The diamond indicates weighted average for each market. 3. Quartile Distribution Charts: each quartile is separated by a line, with the exception of the top quartile which is subdivided in order to show the top decile of companies, shaded in blue. Markets with values exceeding the scale are indicated by the open-ended top box. The diamond indicates the weighted mean for each market. 20
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
September 11, 2014
Perspective: Demographics and Key Economic Statistics Population and Demographics Population Age 2013 Growth Dependency Ratio* million %YoY Young Old USA China Brazil Russia India Mexico Korea Indonesia Turkey Poland Taiwan Colombia Thailand South Africa Greece Malaysia Egypt Philippines Chile Peru Czech Rep. Hungary MSCI EM
Gross Enrollment Ratio Secondary**
US$ billion
2013
Nominal GDP Per capita (US$)
10 year CAGR*** Total Per capita (%) (%)
Real GDP 10 year CAGR*** Total Per capita (%) (%)
318
1.0
na
na
98
16,801
52,883
4.2
3.3
1.7
0.8
1361 200 141 1267 118 49 248 76 39 23 47 70 52 11 30 84 98 18 31 11 10 3,984
0.5 0.8 -0.3 1.4 1.0 0.1 1.2 2.1 0.0 0.3 1.2 0.6 1.2 -0.3 2.0 2.0 1.8 0.9 1.5 0.2 -0.2
0.3 0.4 0.2 0.5 0.5 0.3 0.4 0.4 0.2 0.3 0.5 0.3 0.5 0.2 0.5 0.5 0.6 0.4 0.5 0.2 0.2
0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.3 0.1 0.1 0.1 0.1 0.1 0.2 0.2
81 106 89 63 91 97 81 82 97 na 97 78 94 109 69 72 85 90 91 91 101
9252 2195 2094 1823 1265 1207 842 832 521 491 391 390 355 327 310 298 290 275 215 196 131 26,835
6801 10983 14804 1440 10700 24614 3393 10875 13509 20987 8293 5543 6865 29013 10337 3539 2951 15663 6949 18652 13229 5,949
18.8 14.8 17.1 11.8 6.1 6.5 13.6 10.6 9.2 4.7 15.6 10.6 7.7 5.4 11.6 13.9 13.8 14.0 13.4 7.9 4.6 12.8
18.2 13.7 17.4 10.1 4.5 6.2 12.4 9.1 9.1 4.3 14.2 9.8 6.5 5.1 9.6 11.3 11.8 12.9 11.6 7.6 4.8 13.2
10.2 3.7 4.0 7.7 2.6 3.6 5.8 4.8 4.0 3.9 4.7 3.8 3.4 -1.1 5.0 4.5 5.3 4.8 6.6 2.5 0.8
9.6 2.7 4.3 6.2 1.1 3.4 4.6 3.4 3.9 3.5 3.5 3.0 2.2 -1.4 3.1 2.2 3.5 3.7 4.9 2.2 1.0
Source: CEIC, Datastream, Bloomberg, US Census Bureau, World Bank, IMF, UNESCO, J.P. Morgan estimates * Age dependency ratio defined as dependents to working-age population. ** Gross Enrollment Ratio is defined as pupils enrolled in a secondary level, regardless of age expressed as a percentage of the population in the relevant official age group *** 10-year CAGR for period 2003-2013, in local currency. Data for Gross enrollment is for 2011 or as of latest data available
21
Updated as of January 2014
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Perspective: Global Emerging Capital Markets MSCI EMF Index Total Market Cap
Estimated Free Float
Companies
Average Daily Turnover
US$ Bn 1637 976 689 872 431 951 379 499 367 258 295 140 182 149 153 136 63 127 119 42 17 29 13 8525
(%) 50 64 73 54 73 30 59 40 44 42 33 50 37 41 32 30 46 20 20 43 60 32 63 50
Number 141 103 101 73 50 68 30 22 43 30 29 24 25 20 20 14 10 10 9 3 4 3 3 835
US $ Mn 3370 2670 1943 2393 830 1471 458 948 311 221 573 207 1128 78 118 61 123 100 284 114 16 20 26 17462
China Korea Taiwan Brazil South Africa India Mexico Russia Malaysia Indonesia Thailand Poland Turkey Chile Philippines Colombia Greece Qatar UAE Peru Egypt Czech Republic Hungary Total
AC World Index Market Capitalisation
% of Emerging Market Trading Volume % 19.3 15.3 11.1 13.7 4.8 8.4 2.6 5.4 1.8 1.3 3.3 1.2 6.5 0.4 0.7 0.3 0.7 0.6 1.6 0.7 0.1 0.1 0.1 100
Markets Concentration Weighting in MSCI EMF
Stocks constituting 75% of Country Market Cap
Stocks constituting 75% of Country Market Cap
Market Capitalisation
Issues
(%) 19.4 14.9 11.9 11.0 7.4 6.8 5.3 4.8 3.8 2.6 2.3 1.7 1.6 1.4 1.2 1.0 0.7 0.6 0.6 0.4 0.2 0.2 0.2 100
Number 37 31 32 21 18 24 11 9 18 12 14 9 12 10 12 8 6 6 6 2 2 3 2
(%) 26 30 32 29 36 35 37 41 42 40 48 39 48 50 60 57 60 60 67 67 50 0 100
US$ Bn 26.5 na na 43.6 14.8 2.3 76.4 56.8 7.1 46.4 na 14.8 na 14.7 28.7 19.3 na na na 12.5 1.5 na 1.4 366
Number 29 na na 25 na na 34 9 5 31 na 6 na 19 16 10 na na na 8 2 na 1 192
MSCI Regional Market Capitalisation
Emerging Markets 11% Japan 7% Developed Asia 5% Developed Europe 23%
J.P. Morgan EMBI Global
EM Latin America 19% North America 54% EM Europe and Middle East 18%
EM Asia 63%
Top 8 versus Rest of Emerging Markets India 7% Mexico 5%
China 19%
Russia 5%
Rest of EM 19% Korea 15% Taiwan 12%
Brazil South Africa 11% 7%
Source: MSCI, J.P. Morgan.
Updated as of 10 September 2014
22
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
11 September 2014
Perspective: MSCI Emerging Market Index Composition by Country and Sector
Source: MSCI, J.P. Morgan.
4.6 0.8 2.7 0.1 0.2 0.0
0.1 2.1 0.6 0.5 0.2
1.0 1.7 1.3 0.2 0.1
3.8 1.8
1.3 9.0
3.2 8.1
2.1 10.5
0.1 0.2
2.5 5.2 6.9 1.5
1.3 0.5
0.5 1.3 1.2 0.5 0.2 0.2 0.2
16.1
4.1 0.7 0.5 0.1 0.2
0.2
0.1 0.1 0.1 0.7 0.5 0.6 0.1
0.5 0.1 0.1
0.1 2.0
1.2 6.5 23
0.0
0.4
0.4 16.4
1.4 1.4 0.9 0.2 0.2 0.2 2.8 8.4
2.3 0.2 0.5 0.2 0.4 0.4 0.2 0.2 4.4 1.0 0.4 0.2 0.1 0.1 0.0
0.8 0.3
0.1
0.0
0.1 2.0 0.3 1.0 0.0
0.0 0.5 0.6
1.4 7.7
1.0 3.5
0.3 0.4 0.1 0.0 0.1 2.0 0.1 0.2 0.1
0.4 0.1
Total
1.2 1.7 0.3 0.4 0.5 0.1 0.1 0.3 4.7 0.2
Utilities
0.4 0.1 0.0 0.6 0.1 0.1 0.1
Telecom Services
6.9 2.3 2.1 1.3 1.3 0.9 0.8 0.5 16.1 2.1 0.8 0.8 0.9 0.2 0.1 0.1 0.4 0.4 0.4 6.1 3.8 0.9 0.2 0.4 0.2 5.6 27.8
Materials
Information Technology
Energy 2.8 0.2 0.1 0.9 0.2 0.1 0.5
Industrials
0.1 0.1
0.9 0.9 0.3 0.8 0.4 0.3 0.2 0.1 3.9 0.4 0.4 0.2 0.0
Health care
1.0 2.7 0.5 0.5 0.4 0.4 0.1 0.0 5.6 1.8
Estimated Free float : 50%
Financials
China Korea Taiwan India Malaysia Indonesia Thailand Philippines Asia South Africa Russia Turkey Poland Egypt Czech Republic Hungary Greece UAE Qatar EMEA Brazil Mexico Chile Colombia Peru LatAm Total
Consumer Staples
MSCI Emerging Markets Free Index
Total Market Capitalization (in billion US$): 8525 Consumer Discretionary
Number of Companies: 835
19.4 14.9 11.9 6.8 3.8 2.6 2.3 1.2 62.8 7.4 4.8 1.6 1.7 0.2 0.2 0.2 0.7 0.6 0.6 18.0 11.0 5.3 1.4 1.0 0.4 19.2 100.0
Updated as of 10 September 2014
Emerging Markets Equity Strategy Research
J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
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24
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
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25
Emerging Markets Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
J.P. Morgan Emerging Markets Strategy Team Chief Equity Strategists Adrian Mowat Pedro Martins Junior David Aserkoff
Asia and Emerging Market LatAm CEEMEA
(852) 2800 8599 (55-11) 4950-4121 (44-20) 7134-5887
[email protected] [email protected] [email protected]
Aditya Srinath Christian Kern Diego Celedon Developed Markets Dubravko Lakos-Bujas Mislav Matejka Jesper J Koll
ASEAN MENA Southern cone and Andean
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US Equity and Quantitative Strategy Global and European Equity Strategy Japan Equity Strategy
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Adrian Mowat Emy Shayo Bharat Iyer Aditya Srinath Scott Seo Hoy Kit Mak Anne Jirajariyavech Nur Cristiani Jeanette Yutan Alex Kantarovich Ayan Ghosh Alvin Kwock Economic & Policy Research Joyce Chang Luis Oganes Colin P Fenton Jahangir Aziz Vladimir Werning Sin Beng Ong Grace Ng Haibin Zhu Jiwon Lim Sajjid Z Chinoy Fabio Akira Gabriel Lozano Michael Marrese Sonja Keller Yarkin Cebeci Anatoliy A Shal Nora Szentivanyi Nicolaie Alexandru Rates Research Bert Gochet Jonny Goulden Holly Huffman
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Frontier Markets
Country Strategists
