Jan. 2010
Main Drivers for China Stock Market
Bin HU, Ph.D. CFA Head of BNY Mellon Asset Management, China CEO Designate of BNY Mellon Western FMC(proposed)
Main Drivers for China Stock Market 1. 2. 3. 4. 5. 6.
Driver 1: Liquidity Driver 2: Valuation Driver 3: Market sentiment Driver 4: Corporate events An Example BNY Mellon China JV
1.1 Main Driver: Liquidity 40.00 CSI300_RTN
30.00
20.00
10.00
0.00
(10.00)
(20.00)
(30.00)
3
Liquidity Variable
1. 2 Liquidity – New Loan 40.00
300
CSI300_RTN 30.00
NEWLOANADJYOY 250
200 20.00 150 10.00 100 0.00 50 (10.00) 0
(20.00)
(30.00)
4
-50
-100
2 Main Driver: Valuation 40.00
CSI300_RTN 30.00
20.00
10.00
0.00
(10.00)
(20.00)
(30.00)
5
Valuation Variable
3.1 Main Driver: Sentiment 50.00
40.00
30.00
20.00
10.00
0.00
(10.00)
(20.00)
(30.00)
(40.00) 6
CSI300_RTN
Sentiment Variable
3. 2 Sentiment – Mutual fund cash position 40.00
45 CSI300_RTN
MFCASH(-1) 40
30.00 35 20.00 30
10.00
0.00
25
20
15 (10.00) 10 (20.00) 5
(30.00)
7
0
4 Corporate event: Asset injection/Second rights offering Performance after SRO Announcement Consumer Discretionary 4%
9.0% 8.0%
Bio-health care 6%
7.0%
Average Excess Return
SRO Industry Breakdown Others 11%
Equippments 6%
6.0% 5.0%
Banking 5%
4.0%
Real Estate 24%
Materials 30%
Manufacturing 14%
3.0% 2.0% 1.0% 0.0% T+1
T+2
T+3
T+4
T0: Announcement day
8
T+5
T+6
T+7
T+14 T+21 T+28
From 1/2008 to 10/2009, the amount of A share SRO accumulated to 255.8 billion RMB
5 An example Sany Heavy Industry (SH. 600031) (Engineering Machinery) Performance Macro Analysis: 1.Gov’s 4 trillion yuan incentive program 2.Well positioned to leverage the positive FAI (Fixed Assets Investment) trend
Sector Position:
200.0%
Leading firm in engineering machinery sector in China
180.0% 160.0% 140.0% 120.0%
Event Analysis: 1. Asset injection opportunity from shareholder 2. Management team promises to lock up its stake
Ratio Analysis: 1.Historic lower valuation ratios 2. Sustainable margin growth drivers
100.0% 80.0%
60.0% 40.0% 20.0%
Return: 171% Excess Return to CSI 300 Index: 78% Excess Return to Industry: 34% 9
0.0% 2008-12-31 2009-01-14 2009-02-02 2009-02-12 2009-02-24 2009-03-06 2009-03-18 2009-03-30 2009-04-10 2009-04-22 2009-05-05 2009-05-15 2009-05-27 2009-06-10 2009-06-22 2009-07-02 2009-07-14 2009-07-24 2009-08-05 2009-08-17 2009-08-27 2009-09-08 2009-09-18 2009-09-30 2009-10-20 2009-10-30 2009-11-11
Bought at 14.00 yuan on Dec 31, 2008 Sold at 31.00 yuan on Nov 13, 2009
CSI 300 Index
Construction Machinary Index
Sany
6.1 BNY Mellon China JV BNY Mellon • First bank at US, first stock listed at NYSE • Only institution with credit rating upgraded during financial crisis (S&P) • US’s only AAA bank (Moody’s)
• Locations in 34 countries • Leading global asset management firms with AUM around a trillion US dollars
51% WS
Bronze, Silver, Gold
49% What do we do?
W - WS/Winner
M - Mellon
Entrepreneurship, Success, Teamwork, Integrity 10
Who are we?
What does this mean?
6.2 Investment Team Quantitative Research
Fundamental Research
Bin Hu, CFA, Ph.D., CEO (13 yrs experience) • 10 yrs with BNY Mellon Asset Management
Yibo Zhao, CFA, QFII PM (7 yrs experience)
• PM, Coefficient Global, Standish (San Francisco)
• Senior Analyst, First Trust Fund (Shanghai)
• Investment Manager, Martin Currie (Shanghai)
• Senior Quant Analyst/VP, Standish (Boston) Haida Ni, Quantitative Analyst (4 yrs experience) • Quant/Risk Analyst, Morgan Stanley, Citigroup (NYC) • Masters in Statistics, RIT
David Xue, Analyst (5 yrs experience) • HSBC Global Investment Bank (HK) • PhD in Finance, Kellogg School, Northwestern Univ.
Jack He, Risk Management (10 yrs experience )
Yan Luo, Analyst (3 yrs experience)
• Risk Management, Maple Securities and Hess (NYC)
• Blackrock China JV (Shanghai)
• Masters, MIT
• MBA, MIT
Zheng Ning, Junior Data Analyst (1yr experience)
Haibo Zhang, CFA, Analyst (6 yrs experience)
• Programmer, East China Software Testing Center
• Research Analyst, MorningStar
• Master of Computer Science, USTC, China
11
• MBA, Vanderbilt Univ.
(Shenzhen)
6.3 Where are we? SWFC
12
Join us? Please e-mail: Bin.Hu@bnymellon.com