Accessing ASEAN Markets

Geoff Howie Markets Strategist, Exchange

11May 2013 Investment Choices

. Private Investment share of GDP to moderately rise (+1.1%), while private savings rate to moderately fall (-1.8%) over next 5 years according to annual IMF Country Report*.

. Real Estate or Stocks?

– Over a ten year period ending March 2013, the average annualised return of the Urban Redevelopment Authority Property Price Index by residential type amounts to +6.4%.

– Over the same timeframe the average annualised return of the STI was +10.4% not including dividend distributions.

IMF Article IV Report – Singapore July 2012

SGX The Asian Gateway 1 ASEAN Market Highlights

. In the April 2013 IMF World Economic Outlook, GDP growth of ASEAN-5 was revised upwards versus downward revisions for United States, Europe, and .

. Alongside listing a number of stocks and trusts that generate a large percentage of their revenue in ASEAN neighboring states, SGX offer a number of ETFs that provide exposure to the performance of ASEAN equity indices.

. While the majority of the ETFs are US Dollar denominated, the majority of the stock offerings are denominated in the Singapore Dollar (SGD). Furthermore, the strong external position of reserves at 100% of GDP means Singapore is one of three countries in the world outside Europe & UK to maintain the highest sovereign rate by Fitch, S&P and Moody’s.

. Coinciding with increased physical trade flows between ASEAN and China, the largest IPO in Asia in the 2013 YTD has been a REIT which holds assets in Greater China and is managed by a wholly-owned subsidiary of Mapletree Investments.

SGX The Asian Gateway 2

ASEAN Growth Global Context

SGX The Asian Gateway 3 IMF 2013 Global Growth Forecast

+3.3%

. International Monetary Fund - World Economic Outlook, April 2013, ‘Hopes, Realities, Risks’ . World Output downwardly revised by 0.2%, 2012 Level was 3.2%, Forecast for 2014 is 4.0%.

SGX The Asian Gateway 4 IMF 2013: 1.2% Advanced World Growth Forecast

+1.9% -0.3%

Unemployment Rate 7.5% Unemployment Rate 12.1% Quantitative Easing Outright Monetary Transactions

. US and Europe both downwardly revised by 0.2% in April. US growth was 2.2% in 2012, Europe was -0.6%, forward estimate is 3.0% and 1.1% for US and Europe respectively.

SGX The Asian Gateway 5 IMF 2013: 7.1% forecast for Developing Asia Growth

The 2015 ASEAN Economic Community (AEC) with the freer flow of capital objective is the largest integration effort attempted in the developing world. +8.0%

Combined ASEAN GDP & Average Inflation (1998 – 2016E) Nominal G

Average Inflation Average Inflation Rate +5.7% 30.0 3.5

25.0 3.0 DP DP 2.5

20.0 Trillion ($US 2.0 15.0 Estimates 1.5

+5.9% 10.0

1.0

)

5.0 0.5 0.0 0.0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 . ASEAN-5 2013 Growth update was revised Upward by 0.3%, China was revised Average Inflation rate, average consumer prices (Annual percent change) down 0.1% and India was revised downwards by 0.2%. In 2012, China growth was 7.8%, India was 4.0% and ASEAN-5 was 5.1%. Nominal GDP (Trillions of U.S. dollars)

SGX The Asian Gateway 6 Common ASEAN growth drivers

. Strong domestic demand and consumer confidence . Investment and Infrastructure requirements . Growing wages and rising middle class . Further subsidization reforms +5.9% . Low Inflation and accommodative Monetary Policy

Nominal 35 30

25

GDP ($USTrillion) 20 15 10 5 0

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 United States Asia and Pacific Europe Developing Asia

SGX The Asian Gateway 7 ETF Application

SGX The Asian Gateway 8 An original ASEAN asset

. CIMB FTSE ASEAN 40 ETF is a non-SIP ETF that adopts a full replication strategy, that is the fund holds the physical underlying stocks. . Gained 18.2% in 2012, with a five year annualised return of 11.5% as of 28 March 2013. . The ETF was established as an ASEAN government initiative to position ASEAN markets as a regional asset class in Sep 2006. . This Index represents 40 of the largest stocks listed across Singapore, , Indonesia, Thailand and Philippines. . Of the 40 stocks that are held by the ETF, there are 19 different sectors as represented as categorised by the ICB.

SGX The Asian Gateway 9 Banks-heavy FTSE ASEAN 40 Index

. Banks make up the largest Supersector of the FTSE ASEAN 40 Index, accounting for 12 constituents and 41.4% of the Index weighting as of April 30, 2013. . Singapore's three locally-listed banks - DBS Group Holdings, Oversea-Chinese Banking Corp. and United Overseas Bank - accounted for half of Singapore's 11 stock - 36% weighting in the FTSE ASEAN 40 Index as of April 30.

Num 5Y YTD Total 1Y Total 5Y p.a. Div FTSE Index as of 30 April 2013 of 1Y Vol Total Retn Retn % Retn % Vol Yield Cons % FTSE Asian Banks Index 30 5.9 17.3 14.4 11.3 29.9 3.5 FTSE Bursa Malaysia EMAS - Banks 9 4.4 17.1 6.9 90 17.9 3.6 FTSE ST Banks Index 3 11.4 21.6 12.1 30.6 27.9 3.1 FTSE SET Banks Index 10 12.9 30.2 18.9 137.3 29 2.4

SGX The Asian Gateway 10 12 of 40 stocks listed on Singapore Exchange

Name Local Exchange ICB Sector Name Mkt Cap (S$m) Exchange Location Symbol

SINGAPORE TELECOM LTD Z74 Singapore Mobile Telecommunications 61,861 DBS GROUP HOLDINGS LTD D05 Singapore Banks 42,465 OVERSEA-CHINESE BANKING CORP O39 Singapore Banks 37,148 UNITED OVERSEAS BANK LTD U11 Singapore Banks 34,304 WILMAR INTERNATIONAL LTD F34 Singapore Food Producers 21,172 KEPPEL CORP LTD BN4 Singapore Oil Equip, Services & Distribution 19,149 GENTING SINGAPORE PLC G13 Singapore Travel & Leisure 18,092 JARDINE CYCLE & CARRIAGE LTD C07 Singapore General Retailers 17,163 CAPITALAND LTD C31 Singapore Real Estate Investment & Services 15,582 SINGAPORE TECH ENGINEERING S63 Singapore Aerospace & Defense 13,682 SINGAPORE AIRLINES LTD C6L Singapore Travel & Leisure 12,920 CITY DEVELOPMENTS LTD C09 Singapore Real Estate Investment & Services 10,284

SGX The Asian Gateway 11 11 of 40 stocks listed on Bursa Malaysia

Name Local Exchange ICB Sector Name Mkt Cap (S$m) Exchange Location Symbol

MALAYAN BANKING BHD 1155 Kuala Lumpur Banks 32,870

AXIATA GROUP BERHAD 6888 Kuala Lumpur Mobile Telecommunications 23,112

PUBLIC BANK BERHAD 1295 Kuala Lumpur Banks 23,102

CIMB GROUP HOLDINGS BHD 1023 Kuala Lumpur Banks 23,070

SIME DARBY BERHAD 4197 Kuala Lumpur General Industrials 22,816

PETRONAS CHEMICALS GROUP BHD 5183 Kuala Lumpur Chemicals 20,851

MAXIS BHD 6012 Kuala Lumpur Mobile Telecommunications 20,393

TENAGA NASIONAL BHD 5347 Kuala Lumpur Electricity 17,664

PETRONAS GAS BHD 6033 Kuala Lumpur Oil & Gas Producers 15,634

IOI CORPORATION BHD 1961 Kuala Lumpur Food Producers 12,814

GENTING MALAYSIA BHD 4715 Kuala Lumpur Travel & Leisure 8,412

SGX The Asian Gateway 12 Nine of 40 stocks listed on Indonesia Stock Exchange

Name Local Exchange ICB Sector Name Mkt Cap (S$m) Exchange Location Symbol

ASTRA INTERNATIONAL TBK PT ASII Indonesia Automobiles & Parts 36,932

BANK CENTRAL ASIA TBK PT BBCA Indonesia Banks 33,582

TELEKOMUNIKASI INDONESIA PER TLKM Indonesia Fixed Line Telco 29,886

BANK MANDIRI PERSERO TBK PT BMRI Indonesia Banks 29,416

BANK RAKYAT INDONESIA PERSER BBRI Indonesia Banks 28,912

UNILEVER INDONESIA TBK PT UNVR Indonesia Personal Goods 24,604

PERUSAHAAN GAS NEGARA PERSER PGAS Indonesia Gas, Water & Multiutilities 18,890

GUDANG GARAM TBK PT GGRM Indonesia Tobacco 12,482

UNITED TRACTORS TBK PT UNTR Indonesia Industrial Engineering 8,484

SGX The Asian Gateway 13 Six of 40 stocks listed on Stock Exchange of Thailand

Name Local Exchange ICB Sector Name Mkt Cap (S$m) Exchange Location Symbol

ADVANCED INFO SERVICE PCL ADVANC Bangkok Mobile Telecommunications 33,149

SIAM COMMERCIAL BANK PUB CO SCB Bangkok Banks 26,290

PTT EXPLOR & PROD PUBLIC CO PTTEP Bangkok Oil & Gas Producers 25,697

SIAM CEMENT PUBLIC CO LTD SCC Bangkok Construction & Materials 24,354

KASIKORNBANK PCL KBANK Bangkok Banks 21,088

BANGKOK BANK PUBLIC CO LTD BBL Bangkok Banks 17,696

SGX The Asian Gateway 14 Two of 40 stocks listed on Stock Exchange of Thailand

Name Local Exchange ICB Sector Name Mkt Cap (S$m) Exchange Location Symbol

SM INVESTMENTS CORP SM Philippines General Retailers 22,320

PHILIPPINE LONG DISTANCE TEL TEL Philippines Mobile Telecommunications 20,357

SGX The Asian Gateway 15 Core Satellite Strategy

. Portfolio Managers that wish to combine the benefits of a passive portfolio with their expertise or experience in specific sectors or market genre can adopt the Core Satellite strategy.

. Core Satellite Portfolio Management is comprised of: – a core portfolio, generally in the form of a passive investment that provides a comparable performance to an investment benchmark such as a stock market index or commodity price.

– a satellite portfolio, generally in the form of active investments in stocks and securities that provide portfolio alpha.

– in this context investment alpha refers to the return of these active investments, adjusted for their associated trading risks.

SGX The Asian Gateway 16

Two Year Raw Beta of FTSE ASEAN 40 Constituents

MAXIS BHD 0.40 ADVANCED INFO SERVICE-NVDR 0.43 TELEKOMUNIKASI INDONESIA PER 0.49 PUBLIC BANK BHD-FOREIGN MKT 0.56 UNILEVER INDONESIA TBK PT 0.57 SINGAPORE TELECOM LTD 0.57 SINGAPORE TECH ENGINEERING 0.65 SIME DARBY BERHAD 0.81 MALAYAN BANKING BHD 0.85 TENAGA NASIONAL BHD 0.86 PETRONAS GAS BHD 0.86 BANK CENTRAL ASIA TBK PT 0.93 SINGAPORE AIRLINES LTD 0.95 OVERSEA-CHINESE BANKING CORP 0.96 PTT EXPLOR & PROD PCL-NVDR 1.00 WILMAR INTERNATIONAL LTD 1.03 AXIATA GROUP BERHAD 1.03 UNITED OVERSEAS BANK LTD 1.04 DBS GROUP HOLDINGS LTD 1.04 DIGI.COM BHD 1.06 IOI CORPORATION BHD 1.11 PERUSAHAAN GAS NEGARA PERSER 1.12 KASIKORNBANK PCL-NVDR 1.15 SIAM CEMENT PCL-NVDR 1.16 PHILIPPINE LONG DISTANCE TEL 1.18 BANGKOK BANK PUBLIC CO-NVDR 1.18 PTT PCL-NVDR 1.23 SIAM COMMERCIAL BANK P-NVDR 1.25 ASTRA INTERNATIONAL TBK PT 1.31 GENTING SINGAPORE PLC 1.32 CIMB GROUP HOLDINGS BHD 1.33 CITY DEVELOPMENTS LTD 1.36 BANK RAKYAT INDONESIA PERSER 1.40 KEPPEL CORP LTD 1.41 MISC BHD 1.42 CAPITALAND LTD 1.52 BANK MANDIRI PERSERO TBK PT 1.52 GENTING BHD 1.53 NOBLE GROUP LTD 1.94 Source: Bloomberg Jan 2013 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00

SGX The Asian Gateway 17 Most liquid ASEAN ETFs after STI ETF in 2012

. The DB x-trackers MSCI Thailand TRN Index ETF (LG7) tracks the MSCI Thailand TRN Index, appreciated by 34.88% in 2012. The underlying index consist of 21 constituents, with a large weighting to the financials and energy sector of Thailand. . The DB x-trackers FTSE ETF (HD9) tracks the FTSE Vietnam TRN Index, appreciated 20.11% in 2012. The underlying index consists of 23 constituents, heavily weighted towards the financial sector of Vietnam. . The DB x-trackers MSCI Indonesia TRN Index ETF (KJ) tracks the MSCI TRN Indonesia Index, appreciated 2.78% in 2012. The underlying index consists of 25 constituents, with a large weighting to the financial and consumer discretionary sector of Indonesia.

SGX The Asian Gateway 18 Core Satellite: SPDR® GOLD SHARES

. Together, five countries of Developing Asia, India, China, Thailand, Vietnam and Indonesia accounted for half of the world’s gold bar and gold coin investments in 2012. . SPDR® GOLD SHARES trade the same way ordinary stocks do. SPDR Gold Shares represents an ownership interest in a Trust, the sole assets of which are gold bullion, and, from time to time, a portion of cash. . SPDR Gold Shares are intended to lower a large number of the barriers preventing investors from using gold as an asset allocation and trading tool. – Barriers include the logistics of buying, storing and insuring gold. In addition, lower minimum notional value relative to other gold markets make SPDR® GOLD SHARES (exchange code O87), accessible to most investors. . The CIMB FTSE ASEAN 40 ETF is cash-based with a management fee of 0.65%.

SGX The Asian Gateway 19

Education – Portfolio Combinations up to 2 May 2013

2013 2012 2011 2010 ETF Portfolio YTD Total Total Total Total Return Return Return Return

SPDR STI ETF (1000) +6.86% +21.00% -14.02% +12.46%

CIMB FTSE ASEAN 40 (200 & SGD adj) +9.19% +11.03% -3.57% +18.35%

SPDR Gold Shares ETF (20 & SGD adj) -10.38% -8.60% +21.92% +16.70%

Combined Portfolio Return +0.56% +7.91% +2.32% +15.63%

. STI, ASEAN & Gold: 2010 - 2012, annualised return +10.2% . Note this is purely and education example on diversification application with ETFs. Past performances do not guarantee future results. . SPDR STI ETF & SPDE Gold Shares are SIPs

SGX The Asian Gateway 20 Relevant Stocks and Trusts

SGX The Asian Gateway 21 Stocks & Trusts that generate ASEAN revenue

SGX Stock/Trust Market ASEAN (Excl 12 M Price . According to Bloomberg, there are Code Cap S$M SG) GEO Seg Chng % to Rev % 11 April 13 24 Mainboard stocks listed on SGX PARKSON RETAIL O9E 1,118 100 13.80% that maintain a market capitalisation TOTAL ACCESS-FRN B2W 9,495 100 20.80% FIRST RESOURCES EB5 2,954 100 -6.30% above S$50 million and have BUMITAMA AGRI LT P8Z 1,784 100 34.70% specifically reported that more than GALLANT VENTURE 5IG 1,351 100 -8.20% LIPPO MALLS D5IU 1,152 100 26.80% 80% of their revenue was generated YOMA STRATEGIC Z59 949 100 58.90% KENCANA AGRI F9M 356 100 -11.40% in one or more neighboring ASEAN RH PETROGAS LTD T13 310 100 4.10% states. INTERRA RESOURCE 5GI 234 100 36.50% GLOBAL PALM RESO K6J 76 100 -20.40% LION ASIAPAC LTD L08 75 99 -3.10% CONSCIENCE FOOD L1D 74 98 -11.40% . This is based on their most recent HEALTH MGMT INTL 588 72 97 18.40% financial year report and the table THAI BEVERAGE Y92 15,443 96 104.90% JB FOODS LTD Q0W 221 93 53.30% below details the revenue that was KHONG GUAN FLOUR K03 55 92 18.10% SINARMAS LAND LT A26 1,338 92 24.30% reported to be generated in ASEAN FIRST REIT AW9U 863 91 48.00% economies other than Singapore. JARDINE CYCLE & C07 18,287 91 9.60% RIVERSTONE HLDGS AP4 173 90 10.20% STRAITS TRADING S20 1,499 86 15.20% SEROJA INVESTMEN IW5 66 82 -23.20% INDOFOOD AGRI RE 5JS 1,692 82 -23.20%

SGX The Asian Gateway 22 ASEAN and China Interconnectiveness

. China & ASEAN are two of just three regions to see GDP double over 8 years.

. Both have different structural challenges. Rebalancing focus is raising Consumption in China, while focus is on raising investment in ASEAN.

. ACTFA is planned to grow to US$500 billion by 2015 making ASEAN China’s largest trading US$ Billion 2010 2011 2012 partner by value. China-ASEAN Trade Value 292.8 363.8 400.9

YOY change (%) 37.5 24.2 10.2

Source: China Daily

SGX The Asian Gateway 23 FTSE China Top Index

. There are a number of businesses in 2012 total returns: Singapore with revenue or assets ties to FTSE ST China Top Index +17.1% China. FTSE China A50 Index +14.6%

Stock SGX Mkt YTD Total 2012 Dvd Ind Code Cap Return Total Yld . The FTSE ST China Top Index (China ($m) (%) Return Top) represents the top 20 stocks within (%) the FTSE ST All Share Index by full HONGKONG LAND HOLDINGS H78 21555 0.08 58% 2.30 market capitalisation that either: LTD* WILMAR INTERNATIONAL LTD F34 21300 -0.01 -32% 1.52 – Derive at least half of their sales revenue NS8U 8903 0.09 38% 8.45 from Mainland China; or TR-U*

– Have at least half of their operational KEPPEL LAND LTD K17 6322 4.53 93% 2.93 assets located in Mainland China. YANGZIJIANG SHIPBUILDING BS6 3621 -1.56 11% 5.26 YANLORD LAND GROUP LTD Z25 2796 -4.34 59% 1.32 BIOSENSORS INTERNATIONAL B20 2073 0.41 -11% NA GRO COSCO CORP SINGAPORE LTD F83 1825 -6.32 5% 2.30 CAPITARETAIL CHINA TRUST AU8U 1289 5.47 56% 1.75 HYFLUX LTD 600 1182 12.96 8% 3.62

SGX The Asian Gateway 24 Possible capital market implications into 2020

. Growing infrastructure requirements and cross border trade growth with ASEAN has coincided with GDP growth in recent years. . On the Infrastructure side, according to the Asia Development Bank (ADB), there are 15 projects under the Master Plan of ASEAN Connectivity, of which six involve physical infrastructure. . ADB have estimated that ASEAN needs US$600 bn between 2010 and 2020 to build power, transport, water and sanitation and telecommunications infrastructure. Conventional methods to raise funds include government funding, foreign direct investment, public and private partnerships and capital markets. . REITs or Business Trusts can pay distributions to investors out of operating cash flows and can thus be an appropriate structure for an organisation with high initial capital expenditures with stable operating cash flows. The Business Trust structure is more suited for businesses with stable growth and cash flow, such as infrastructure and utilities businesses, vehicle leases and charters.

SGX The Asian Gateway 25

Recent Business Trust Highlights

. In 2012, the number of Business Trusts listed on SGX grew 30% with the listing of Ascendas Hospitality Business Trust, Far East Hospitality Business Trust and Religare Health Trust. . The combined full market capitalisation of the 13 Business Trusts listed on SGX currently amounts to S$18.6 billion. According to the MAS’s OPERA database, two Business Trusts, Global Telecommunications Infrastructure Trust and Croesus Retail Trust have lodged listing prospectuses. . A Business Trust is an alternative structure of a commercial operation which might otherwise be legally incorporated as company. Typically, a Business Trust holds and manages assets for the Trust beneficiaries. These assets can be related to property, infrastructure, utilities and shipping.

SGX The Asian Gateway 26 Objectives of the ASEAN Trading Link

. Mr Arjun Goswami (Head of Regional Current Members of the Trading Link: Cooperation of the Southeast Asia . Bursa Malaysia Department of ADB) on regional . Stock Exchange of Thailand infrastructure noted last year that "in the medium- to longer-term, improved . Singapore Exchange infrastructure would contribute to lowered costs of doing business, increased market accessibility and enhanced competitiveness."

. Similarly through cross border trading, the ASEAN trading link enhances accessibility of ASEAN assets, reduces entry costs for emerging brokers and promotes the ASEAN asset class.

SGX The Asian Gateway 27 How diverse are Singapore Stocks and Sectors?

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Utilities RE D & H RE D & H Utilities Utilities Telco Oil & Gas Healthcare Telco RE D & H 138.29% 41.90% 33.75% 65.22% 118.42% -36.78% 160.58% 64.60% 4.99% 56.04% Technology REITs Healthcare RE D & H Oil & Gas Cons Services Technology Industrials Healthcare Financial P 84.76% 30.84% 30.53% 54.54% 78.03% -43.39% 115.23% 25.58% 3.70% 36.84% E Basic R Cons Goods Cons Services Oil & Gas REITs STI Healthcare Cons Services REITs REITS Materials F 62.07% 23.37% 28.52% 41.45% 57.12% -49.17% 114.79% 17.63% -16.04% 36.67% O R Telco Healthcare Telco Financial Industrials Financial Cons Goods Oil & Gas STI Industrials M 55% 22.46% 20.53% 38.04% 39.55% -51.43% 103.20% 11.14% -17.04% 27.34% A Oil & Gas Telco Industrials Cons Goods Cons Goods RE D & H RE D & H REITs Oil & Gas Oil & Gas N C 54.76% 22.35% 17.95% 36.25% 22.12% -56.78% 89.94% 10.62% -17.40% 23.79% E Industrials STI Financial Cons Services Telco REITs Utilities STI Industrials STI F 53.01% 15.58% 14.99% 31.36% 21.61% -59.03% 81.38% 10.09% -18.57% 19.68% T Basic S Financial STI STI STI Technology Industrials Cons Goods Cons Services Utilities Materials E 46.41% 14.68% 14.04% 27.97% 18.74% -60.02% 76.35% 9.80% -18.83% 14.99% S Healthcare Cons Goods REITs Telco Cons Services Industrials Financial Technology Cons Goods Telco T 41.54% 12.32% 13.11% 25.09% 14.30% -60.08% 75.09% 9.56% -23.05% 8.55% Basic REITs Industrials Cons Services RE D & H Healthcare REITs RE D & H Financial Technology S Materials E 34.65% 10.35% 10.10% 24.99% 13.97% -60.15% 69.35% 6.36% -23.41% 4.44% C Basic T STI Cons Goods Industrials Financial Cons Goods STI Utilities RE D & H Cons Services Materials O 32.81% 2.48% 9.29% 19.20% 9.61% -63.28% 64.49% 4.62% -33.24% 4.43% R Basic Basic Basic RE D & H Oil & Gas Utilities Healthcare Healthcare Utilities Financial Materials Materials Materials I 27.51% 0.32% 2.22% 16.79% 9.43% -72.72% 58.85% 2.38% -40.47% 2.18% N D Financial Technology Technology Technology Technology Oil & Gas Cons Services Telco Technology Healthcare I 27.28% -29.75% -0.47% 10.01% 1.63% -73.17% 58.35% 0.01% -41.78% -4.13% C Basic Basic Basic E Cons Services Utilities Oil & Gas REITs Telco Utilities Cons Goods Materials Materials Materials S 18.75% -59.82% -11.69% 2.75% -2.59% -74.13% 21.87% -3.87% -45.12% -17.55%

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SGX The Asian Gateway 29 Thank you

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SGX The Asian Gateway 30