Asia: Growth and Income

The global environment is changing

Protectionism

Geopolitical tension

Rising interest rates

Re-think your Asia strategy with a total return approach

% Dividend Return

% Price Return

163
165
127
115
92
18
73
76

China

Asia ex Japan

Europe

U.S.

Breakdown of total returns (2001-2017)*

US Dollar returns. Europe (MSCI Europe Index), Asia ex Japan (MSCI Asia ex Japan Index), U.S. (MSCI USA Index), China (MSCI China Index). Time period: 1/1/2001-31/12/2017. Past performance is no guarantee of future results. It is not possible to invest in an index.

Source: MSCI, Matthews Asia

Annual Performance for the 12-month period ended 30 June (%)

MSCI China Index
MSCI Japan Index
MSCI Europe Index
MSCI USA Index
2018 0.00 0.00 0.00 0.00
2017 0.00 0.00 0.00 0.00
2016 0.00 0.00 0.00 0.00
2015 0.00 0.00 0.00 0.00
2015 0.00 0.00 0.00 0.00
2018 2017 2016 2015 2014
MSCI China Index 0.00 0.00 0.00 0.00 0.00
MSCI Asia ex Japan Index 0.00 0.00 0.00 0.00 0.00
MSCI Europe Index 0.00 0.00 0.00 0.00 0.00
MSCI USA Index 0.00 0.00 0.00 0.00 0.00

* US Dollar returns. Europe (MSCI Europe Index), Asia ex Japan (MSCI Asia ex Japan Index), U.S. (MSCI USA Index), China (MSCI China Index). Time period: 1/1/2001-31/12/2017. Past performance is no guarantee of future results. It is not possible to invest in an index.

Source: MSCI, Matthews Asia

Why Asia dividends?

Asia's dividend pool is approaching the size of Western markets

$281
bn
Asia ex Japan Asia
$327
bn
Europe Europe
$454
bn
U.S. US

2018 dividends by index members as of December 2017; Europe (Bloomberg European 500 Index), Asia ex Japan (MSCI Asia ex Japan Index), U.S. (S&P 500 Index). It is not possible to invest in an index.

Source: MSCI, S&P, Bloomberg

Asia has shown the fastest dividend growth over the past 15 years…

0.0%

Europe

0.0%

U.S.

0.0%

Asia ex Japan

0.0%

China

Compound annual growth rate (CAGR) based on index constituents of Europe (Bloomberg European 500 Index), Asia ex Japan (MSCI Asia ex Japan Index), U.S. (S&P 500 Index), China (MSCI China Index). Time period: 31/12/2002 - 31/12/2017, excluding those that are no longer in existence as of calendar year 2017. It is not possible to invest directly in an index.

Sources: FactSet Research Systems, MSCI, S&P, Bloomberg

Reforms are driving a change in dividend culture in China

$8bn $114bn
1998 2017

Aggregate dividend payments by Chinese companies

Excluding A-share market. There is no guarantee that companies will maintain or grow their dividend pay-out ratio, or pay dividends.

Source: FactSet Research Systems, Matthews Asia

Dividends may show important signals about a company's health by providing…

A lens through which we seek to identify high-quality, financially healthy companies.
A better indicator of business performance than reported accounting earnings growth.
Extra incentives for company management to be more disciplined in their returns.

Time to look beyond established hunting grounds

Balance stable dividend payers with dividend growers

Dividend payers

Often found in mature industries, such as telecoms, utilities, infrastructure assets and consumer staples.

Dividend growers

Often small to mid-cap companies that occupy strong market positions in areas that cater to the growing middle class, such as consumption, services and health care.