why martin currie for japan?

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WHY JAPAN NOW?
Keith Donaldson
Director, Japan
WHERE DID IT ALL GO WRONG?
600
500
400
300
200
100
0
85
86
87
88
89
90
91
92
93
94
MSCI Japan
MSCI World
Source: Datastream. As at 31 December 2005.
95
96
97
98
99
00
01
02
03
04
05
14 year bear market
Banking
crisis
14 year bear market
Deflation
14 year bear market
Unwind
14 year bear market
Income
correction
14 year bear market
THEN AND NOW
Post bubble problems
Land price*
Bank sector performance**
400
1600
350
1400
300
1200
250
1000
200
Topix Banks
Topix
800
150
600
100
400
50
200
Mar-05
Mar-04
Mar-03
Mar-02
Mar-01
Mar-00
Mar-99
Mar-98
Mar-97
Mar-96
Mar-95
Mar-94
Mar-93
Mar-92
Mar-91
0
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
*Source: Japan Real Estate Institute. As at 30 November 2005. ** Source: Datastream. As at 31 December 2005.
THEN AND NOW
Price deflation is the bear
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0
-0.50
-1.00
85
86
87
88
89
CPI % change
90
91
92
93
94
95
96
97
98
99
Martin Currie estimate
Source: Datastream. As at 31 December 2005.
00
01
02
03
04
THEN AND NOW
Unwind
1000
500
Bn ¥
0
-500
-1000
-1500
-2000
-2500
1997
1998
Banks
1999
2000
2001
2002
Insurance companies
Source: Tokyo Stock Exchange. As at 31 October 2005.
2003
2004
2005
to date
THEN AND NOW
Corporate restructuring ended – now investing again
Capacity*
ROE**
12.0
10.0
Denial
8.0
Growth 6.0
Bull market
Correction
4.0
2.0
0.0
-2.0
-4.0
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
*Source: METI and KBC. As at 31 December 2005. **Source Daiwa. As at 31 December 2005.
THEN AND NOW
Tightening labour market
1.6
1.4
1.2
0.8
0.6
0.4
0.2
Source: Ministry of Health, Labour and Welfare. As at 30 November 2005.
Mar-05
Mar-04
Mar-03
Mar-02
Mar-01
Mar-00
Mar-99
Mar-98
Mar-97
Mar-96
Mar-95
Mar-94
Mar-93
Mar-92
Mar-91
Mar-90
Mar-89
0
Mar-88
Job offers:
applicants
1
OUTLOOK
Economy

Consumption

Capex

Corporate change

Financial system

Supply and demand

Reform

WHY MARTIN CURRIE FOR JAPAN?
JAPAN INVESTMENT TEAM
Keith Donaldson:
Director
26 years’ investment experience
17 years’ experience of Japan
John-Paul Temperley:
Director, Japanese linguist
8 years’ experience of Japan
John Millar:
Director
11 years’ experience of Japan
Kevin Troup:
Director
10 years’ experience of Japan
Michael Thomas:
Director, team leader
30 years’ experience of Japan
16 years at Martin Currie
Katy Marchbank-Smith:
Investment analyst
3 years’ experience of Japan
Michael McNaught-Davis:
Director
17 years’ experience of Japan
Eri McKenna:
Japan investment research co-ordinator
Japanese national
As at 31 December 2005.
OUR COMPETITIVE ADVANTAGES

Proven and experienced team
 Independence of mind

Dynamic decision-making

Collaboration
 Size and location advantage

Big enough to get quality service

Investment team in one location

Ideal time zone – reflect on Tokyo,
react to Wall Street
INVESTMENT UNIVERSE
Japan equity universe
Research universe
Topix
33 sectors
1,643 stocks
Research focus
65-75 stocks
700 stocks
Other
2,057 stocks
200 to
300 stocks
Total
3,700 stocks
Japan core
Japan Alpha
30-40 stocks
Filter on:
Liquidity
(>$2m of average
daily turnover)
Market cap >$300m
Filter on:
Relevance to
top-down analysis
Select for portfolios on:
Fundamental analysis
Company meetings
Team discussion
Valuation screens
Technical analysis
INVESTMENT PROCESS
Top-down
Macro analysis
Market structure
Regulatory environment
Looking for top line growth
Bottom-up
Prospects for top line growth
Technical overlay
Supply/demand
Competitive advantage
Attractive stage in margin cycle
Focused management
Financial strength
Valuation
Entry/exit points
LONG-TERM PERFORMANCE RECORD
Martin Currie Japan Fund
Martin Currie Japan Fund – Out-performance versus the Topix
+21.3
+20.4
+16.4
+11.8
+7.9
+5.9
+0.2
+1.6
+7.1
+4.7
+6.5
+6.2
+3.3
+0.9
+0.5
-1.7
1989* 1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
-4.2
2004
2005
Past performance is not a guide to future returns. Source: Lipper Hindsight. Bid-bid basis with gross income reinvested over calendar years to 31 December 2005
(£). Net of fees performance has been grossed up internally using a fee rate of 1.25% to 31 May 2002 and 1.50% going forwards. *From 14 September 1989.
SUMMARY
 The bear market is over
 The economic backdrop is positive
 We have an experienced and well resources team
 We have a proven, tried and tested investment process
REGULATORY INFORMATION
Martin Currie Investment Management Limited (MCIM) has issued and approved this presentation in its capacity as investment adviser.
MCIM is referred to throughout as ‘Martin Currie’. MCIM is authorised and regulated by the Financial Services Authority and is a member of
the Investment Management Association. Registered in Scotland (no 66107), registered address Saltire Court, 20 Castle Terrace, Edinburgh,
EH1 2ES.
The presentation may not be distributed to third parties and is intended only for the attendee. The presentation does not form the basis of, nor
should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose
of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.
The information contained in this presenter has been compiled with considerable care to ensure its accuracy. But no representation or
warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this
presentation for its own use. It is provided to you only incidentally, and any opinions expressed are subject to change without notice.
Past performance is not a guide to future returns. Markets and currency movements may cause the value of investments and income from
them to fall as well as rise and you may get back less than you invested when you decide to sell your investments. There can be no assurance
that you will receive comparable performance returns, or that investments will reflect the performance of the stock examples, contained in this
presenter. Movements in foreign exchange rates may have a separate effect, unfavourable as well as favourable, on the gain or loss otherwise
experienced on an investment.
Funds which invest in one country carry a higher degree of risk than those with portfolios diversified across a number of markets.
Investment in the securities of smaller and unquoted companies can involve greater risk than is customarily associated with investment in
larger, more established, companies. In particular, smaller companies often have limited product lines, markets or financial resources and their
management may be dependent on a smaller number of key individuals. In addition, the market for stock in smaller companies is often less
liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock. Proper
information for determining their value, or the risks to which they are exposed, may not be available.
Investment in derivative instruments, including futures, options or contracts for differences, carries a high risk of loss, the markets in these
investments being very volatile. A relatively small adverse market movement may result not only in the loss of the original investment but also
in unquantifiable further loss exceeding any margin deposited. Warrants often involve a high degree of gearing so that a relatively small
movement in the price of the security to which the warrant relates may result in a disproportionately large movement, unfavourable as well as
favourable, in the price of the warrant.
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