Presentation Michael Tjoajadi

8/3/2019 Presentation Michael Tjoajadi

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Investment in Emerging EquitiesIs there still more to go?

Michael Tjoajadi

For Professional Investors only.


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11

-3

-2

-1

0

1

2

3

4

5

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Growth contribution from the OECD countries Growth contribution from emerging markets

Global growth

Forecast GDP growth a two speed recovery

Source: IMF, Consensus Economics, Schroders, August 2011Please refer to the forecast risk warning in the important information

Emerging countries account for two thirds of global growth

y/y%

Last USrecession

Asiacrisis

Baseline forecasts


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2

Trend GDP growth estimates for world economyby region

Emerging economies expected to continue to grow much faster thandeveloped economies

0%

1%

2%

3%

4%

5%

6%

7%

8%

Worl

d

Adva

nced

econ

omies US

Euroz

one

Japa

n

Deve

loping

econ

omies As

ia

Latin

Ame

rica

Easte

rnEu

rope

Midd

leEa

st

Sub-S

ahara

nAfric

a

10 year historic trend, 1998 - 2008 Model-generated trend, 2010-2020

Source: UBS estimates, September 2010Regions are mentioned for illustrative purposes only and should not be viewed as a recommendation to buy/sell.

The data includes some forecasted views. We believe that we are basing our expectations and beliefs on reasonableassumptions within the bounds of what we currently know. There is no guarantee that any forecasts or opinions will berealized. Opinions obtained from third parties have been obtained from sources we consider to be reliable.

GDP Growth

2010 2020 (f) pa

Developed 1.3%

Emerging 5.0%


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3

16

20

24

28

32

36

40

1990 1992 1993 1994 1995 1996 1997 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2011

US Emerging Markets

EM & US consumption as a % of global consumption

EM consumption overtook US consumption in 2008

Source: JPMorgan, Data as at June 2011.Historical trends are not necessarily indicative of future trends.

%


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4

Emergence of BRICs middle class

Source: Euromonitor, Morgan Stanley Research. As at June 2011.* Includes Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal and Spain,Slovakia and Slovenia.The data includes some forecasted views. We believe that we are basing our expectations and beliefs on

reasonable assumptions within the bounds of what we currently know. There is no guarantee that any forecasts oropinions will be realized.Countries are mentioned for illustrative purposes only and should not be viewed as a recommendation to buy/sell.

Household Disposable Income over US$10,000

No. of Households in Millions

0

50

100

150

200

250

300

350

400

450

500

1

991

1

992

1

993

1

994

1

995

1

996

1

997

1

998

1

999

2

000

2

001

2

002

2

003

2

004

2

005

2

006

2

007

2

008

2

009

20

10e

20

11e

20

12e

20

13e

20

14e

20

15e

20

16e

20

17e

20

18e

20

19e

20

20e

BRICs Euro Area* US

BRICs consumer has become a driving force in the global economy


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5

4

6

810

12

14

16

18

20

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

Developed Markets Emerging Markets (Incl Asian NICs)

Investment spending trends

Investment spending as percentage of global GDP, 1980-2016F

Investment spending is higher in the emerging than the developed worldand is set to continue growing

Sources: IMF Forecast and Citi Investment Research and Analysis. Data as at April 2011

%

Forecast


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6

0

2

4

6

8

1012

14

16

18

20

22

24

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

U.S. China

Emerging economies trade trends

Source: BCA Research as at June 2011

*Includes Brazil, Chile, Turkey, Taiwan, Korea, Thailand, Singapore, Malaysia, Indonesia, Philippines and IndiaCountries are mentioned for illustrative purposes and should not be viewed as a recommendation to buy/sell.

%

Share of emerging markets* exports

Declining importance of the US to global growth


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7

36

38

40

42

4446

48

50

52

54

2000 2002 2004 2006 2008 2010 2012

Exports to Emerging Markets* Exports to G7

Chinese exports

Source: BCA Research as at June 2011

*Includes non-Japan Asia, Africa, Latin America and RussiaExport percentages are mentioned for illustrative purposes.

%

As a % of total Chinese exports

China exports more to GEMs than G7


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8

Government debt

G-20 vs. Emerging countries: General government debt ratios

Who is more likely to default?

Source: World Economic Outlook (WEO), September 22, 2009, The state of public finances cross -country fiscalmonitor, IMF, November 3, 2009 and UBS, Haver, as at June 2011

The data includes some forecasted views. We believe that we are basing our expectations and beliefs onreasonable assumptions within the bounds of what we currently know. There is no guarantee that any forecasts oropinions will be realized.Historical trends are not necessarily indicative of future trends.

0

20

40

60

80

100

120

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Advanced G-20 economies Emerging G-20 economies

%


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USD, billions

Current account balances indicate appreciation of Emergingcurrencies

Structural (and unsustainable?)

-500

-400

-300

-200

-1000

100

200

300

400

US Euro area Newlyindustrialised

Asian economies

Japan Emerging markets

Source: World Economic Outlook Database (April 2011), IMFNewly industrialized Asian economies are composed of 4 countries: Hong Kong SAR, Korea,Singapore, and Taiwan Province of China


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10Source: Schroders.

Climbing a mountain of worries

EmergingMarkets

overheating?

China hardlanding?

GlobalLiquidity

+US$

Developedeconomies

GDPGrowth

EuroCrisis

Cyclical Peak


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1111

0

12

3

4

56

7

8

910

11

12

60 65 70 75 80 85 90 95 00 05 10

4.0

4.5

5.0

5.5

6.0

6.5

US savings as % of disposable income

Ratio: Net worth of US households/ disposable income (inverted), rhs

Source: Thomson Datastream, 20 September 2011.

% Ratio

Weak real income plus de-leveraging equals softconsumerUS net worth and savings


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Corporate cash flow

Source: Schroders, Thomson Datastream, 6 September 2011

-3.0-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.51.0

1.5

2.0

2.5

3.0

51 56 61 66 71 76 81 86 91 96 01 06 11

US total internal funds minus fixed investment as a % ofGDP

%

-40

-30

-20

-10

010

20

30

40

96 98 00 02 04 06 08 10

Japan machinery orders ex volatile orders

Germany capital goods

US durable good orders ex defence capital

y/y%, smoothed (3-month moving average)

Business capex orders

The great hope - corporate spendingCash flow surges capex accelerates


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1313

94

95

96

97

98

99

100

101

102

08 09 10 11

US total civilian employment US real GDP level

Source: Thomson Datastream, 6 September 2011.

US GDP and jobs

Still waiting for a recovery in jobs

Index (Base 100 = 15/02/2008)


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14

011

0

-3

6

-4 -4

0

16

8

54

83

96

-27

34

-49

33

-60

-40

-20

0

20

40

60

80

100

120

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Liquidity

1Source: Morgan Stanley Research, Emerging Portfolio Fund Research. Data to 31 st August 2011. Both US and non-US domiciled funds. All dedicated EM: GEM, Asia ex Japan, LatAm, EMEA2Source: CEIC, UBS estimates. Selected countries: Malaysia, Indonesia, Korea, Mexico, Poland and Turkey.3Source: Factset, MSCI.*Goldman Sachs estimates that developed markets institutional asset managers hold 6% in EM equities within theirtotal equity portfolios. (Global Economics Paper No:204 as at Sep 2010)Historical trends are not necessarily indicative of future trends. There is no guarantee that any forecasts will berealized, and opinions may change.

US$ Billions

Foreign share of local market cap (selectedcountries)2

All Dedicated EM Equity Flows1

20%

22%

24%

26%

28%

30%

32%

34%

M

ar-00

A

ug-01

F

eb-03

A

ug-04

J

an-06

Jul-07

J

an-09

J

un-10

13.6%

23.7%

June 30, 2011GEMs MSCI Weight3

MSCI AC World

MSCI AC World ex-US

Record inflows in 2010 but still underowned*


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What could undermine the GEMS story?

Short/Medium term:

Eurocrisis

Economic Growth

Developed

Emerging

Liquidity/$

China hard landing

We believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of

what we currently know.

Longer term:

Social unrest caused bylack of trickle down

Commodity supplyinhibiting growth potential

Lots to worry about


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PIGIS* cant fly

Source: Schroders.*Portugal, Ireland, Greece, Italy and Spain


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Emerging banks are not significantly exposed to Greecex

Selective reporting banks exposure to Greece,Ireland, Portugal, Italy (end 2010, $mn)

Source: Citi Investment Research and Analysis, BIS, as at July 14, 2011

France Germany UK US Chile India TurkeyWorldTotal

Total Exposure/Foreign Claims 3,074,681 2,940,334 3,866,503 3,154,137 3,433 44,561 23,605 25,153,260

Exposure to Greece, Ireland, Portugal, Italy 505,863 350,834 240,032 100,283 24 759 608 1,677,768

Greece/Ireland/Portugal/Italy Exposure(% total) 16.5% 11.9% 6.2% 3.2% 0.70% 1.70% 2.58% 6.67%

Exposure to Greece 56,740 33,974 14,060 7,318 0 22 107 145,783

Greece Exposure (% total) 1.8% 1.2% 0.4% 0.2% 0.00% 0.05% 0.45% 0.58%

Exposure to Italy 392,577 162,285 66,387 36,749 24 370 439 867,283

Italy Exposure (% total) 12.8% 5.5% 1.7% 1.2% 0.70% 0.83% 1.86% 3.45%


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-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2007 2008 2009 2010 2011

Y/Y GDP growth

Germany Austria Finland

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2007 2008 2009 2010 2011

Y/Y GDP growth

Greece Spain Ireland Italy Portugal

18

Europe: Growth divergenceTwo speed economy

Source: Eurostat, Datastream. Data up to June 2011. Updated: 20/07/2011


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The Euro crisis

Source: Thomson Datastream, 9 September, picture from BBC

Can you deflate your way out of a debt crisis?

7

8

9

10

11

12

13

14

15

16

17

98 00 02 04 06 08 10

Greece unemployment rate (% of labour force)

%


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2020

The Euro crisis

Source: Financial Times, Getty pictures

Buddy can you spare100 billion?


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0%

5%

10%

15%

20%

25%

Morocco

Egypt

Turkey

Poland

Hungary

CzechRepub

RussiaFed

SouthAfrica

Peru

Chile

Brazil

Colombia

Mexico

India

China

Indonesia

Thailand

Korea

Philippines

Malaysia

GEMS exports to PIGIS* (% of total exports) byregion

PIGIS are not important for emerging economiesSource: Citi Investment Research and Analysis, Haver, IMF as at July 2011.Taiwan exports to Greece N/A.*Portugal, Ireland, Greece, Italy and Spain

EMEA Average 11.2% Asia Avg 2.3%LATAM Avg 4.6%


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Public debt and fiscal balance as a percentageof GDP for EM and DM in 2010

Fiscal position and level of government debt much better in EmergingMarkets

Source: JP Morgan, Economics Team estimates, as at June 2011Countries are mentioned for illustrative purposes and should not be viewed as a recommendation to buy/sell.

We believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of whatwe currently know.

Japan

Euro area

France

Italy

Spain

Ireland

Portugal

UK

Brazil

Peru

Malaysia

Thai

Poland

Turkey

DM

US

Germany

Greece

AustraliaEM

Mexico

China

India

Indonesia

Korea

Phil

Czech Hungary

Russia

S Africa

-14

-12

-10

-8

-6

-4

-2

0

2

0 50 100 150 200 250

Fiscal Balance (%GDP)

Public Debt (%GDP)


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-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%50%

60%

Brazil

Chile

China

Co

lombia

Czech

Egypt

H

ungary

Ind

onesia

Israel

Korea

M

alaysia

Mexico

Peru

Phil

ippines

Poland

Russia

S

.Africa

Taiwan

T

hailand

Turkey

UBS PPP estimates Big Mac Index (Economist)

Emerging currency valuations

Source: UBS, Bloomberg, June 2011

Countries are mentioned for illustrative purposes only and should not be viewed as a recommendation to buy/sell.There is no guarantee that any forecasts will be realized, and opinions may change.

EM currencies still cheap

Overvalued

Undervalued


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China hard landing?

Economy slowing from peak levels, but still strong

Credit growth slowing to around trend growth

Food inflation peaking, but core inflation rising

Property price increases slowing, but still positive andaffordability in line with trend

Fiscal situation good leaving room for further stimulus ifnecessary

Conclusion China slowing but hard landing very unlikely


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Global Equities Outlook: The greatrebalancing Soft patch or double dip?

The Positives Reversal of the impact of Japan on global supply chain

Global liquidity / Postponement of normalization of monetary policiesin DM given soft patch/ Coordinated effort

EM growth still strong

Companies are in good shape (strong cash flow)

Survival of the fittest

Softer global growth should provide relief to EM fiscal policies (andinflation)

Valuations are attractive

Equities under owned


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Source: SchrodersThe opinions stated in this presentation include some forecasted views. We believe that we are basing our expectationsand beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee

that any forecasts or opinions will be realized.

Challenges:

Will the Confidence crisis turn into a new economic crisis? Short time foraction.

The short and the medium term dilemmas: deleveraging in a low growthenvironment. Fiscal discipline, credibility and growth

Lack of leadership / election cycles and diverging interests (US and

Europe)

Adapting to the new normal in a bipolar world: picking the next winners

in a low DM growth / thirsty EM world

Altering global competitiveness (US vs Europe, EM vs DM):

Healing in an environment of deleveraging, low growth and currency volatility

Europe:

Peripheral Europe and banking system

Nationalism and fiscal integration

Global Equities Outlook: The greatrebalancing Soft patch or double dip?


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Dj vu? One year onincreasing fears ofdouble dipOil shock and Japanese earthquake hit growth

Manufacturing Purchasing Managers Index

Source: Schroders, Markit PMI, NBER (National Bureau of Economic Research), September2011. BRICs: Brazil, China, India & Russia.

GDP weights based on nominal GDP in USD from IMF.

25

30

35

40

45

50

55

60

65

70

07 08 09 10 11

US UK EZ Japan BRICs

Index

Output expanding

Output contracting


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Macro outlook - summary

Recession risks remain, but we continue to expect a better H2 for global growth asimpact of Japans earthquake and commodity price shocks unwind.

Corporate sector remains in good shape worldwide, indicating stronger capex, M&Aand (eventually) jobs.

Euro crisis set to continue until greater support is approved and in place (increasedEFSF, eurobonds). Default by Greece remains likely.

Subject to Congress, latest Obama package should boost US growth in 2012.Contrast with Europe where fiscal policy is tightening.

Monetary policy on hold US, UK and Eurozone in 2012

Emerging markets growth has moderated, but policy moving to neutral as inflationfears fade

More generally, in the post financial crisis economy interest rates are ineffective ashouseholds de-leverage - growth is weaker, making activity more vulnerable toshocks e.g. oil and Ag price surge

Much of the flow adjustment has taken place in the private sector (runningsurpluses), issue now is government deficits


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Indonesia Equity Market Outlook 4Q11


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JCI was the best performing market before sell-off

ETF volatilities affect JCI volatilities as well

Foreign selling US$1.7bn over the past 2 months and turns into net outflowof US$700m YTD

JCI Victim of its success

Source: Bloomberg as of Sept 26, 2011

Weak 1M JCI performance JCI index down 10% over pastmonth


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JCI is now trading on 2011E PE of 13x and 2012E PE of 11x, much morereasonable in our view

Earnings growth is strong and we expect 3Q results to be in line

Accelerating growth story over the next decade

JCI Valuation is now more attractive

Regional PE comparison Regional EPS growth comparison

Source: Bloomberg (26 September 2011) Source: Bloomberg (26 September 2011)

11.3

11.811.9

13.4

11.0

10.610.4

10.0

11.0

12.0

13.0

14.0

I ndonesia I ndia Mala ysia S inga pore China P hi llipines Thai la nd Hongk ong

(x)

Average: 11.3x

16.1

14.1

20.1

13.6

11.810.8

8.6

19.9

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

I nd on es ia C hi na I n di a Th ai la nd P hi lli pi ne s H on gk on g M ala y si a S in ga po re

(%)

Average: 14.4%


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Foreign ownership of government bonds and SBI at US$31bn (32% of total)

Estimates another Rp40tr of short-dated bonds and bills due by end 2011

Forex reserves adequate at US$122bn

However, at times policymaker slow to supply USD liquidity

Risk 1 Bond outflows pressuring IDR

Source: Citi Investment Research, DMO, Bloomberg Source: Bloomberg, DMO, UBS Research

Foreign bond holdings 21% of foreignreserves


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Inflation at 4.8% in Aug is low on a historical basis

Core inflation up in Aug but partly due to higher gold and education costs

Possible hike in electricity tariff and reduction of fuel subsidy in 2012E

But lower commodity prices help to contain inflation

Risk 2 Inflation should be under control

Source: Central Bureau of Statistics Source: CEIC

Inflation still manageable Core inflation to ease


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Indo corporates have low gearing of 30% as at Dec 2010

Average gross debt to EBITDA of Indonesian corporates at only 1x

Indo corporates USD debt exposure limited except mining and plantationcompanies

Banks USD lending is manageable

Risk 3 IDR weakness but muted impact

Source: UBSSource: Bank Indonesia, Central Bureau of Statistics

YTD Currencies vs USDGross debt/EBITDA


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China accounts for 10% of total exports hence manageable impact

Cash cost of CPO at 40% of current spot price

Cash cost of coal miners at 50% of current spot price providing buffer fordecline in prices

Gearing of listed plantation companies and coal miners relatively low

Risk 4 Lower commodity prices less impactthan feared

Source: Deutsche Bank, CEIC estimatesSource: Deutsche Bank, CEIC estimates

Less export contribution from ChinaIndos GDP growth beta toUS


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Indonesia should be less affected of US and Europe slowdown

Exports only 25% of GDP - the second lowest in Asia after India

Net reliance on exports 2% of GDP

Low dependence on US and the European economies

Growth driver 1 Domestic-driven economy

Source: Citi Investment ResearchSource: Citi Investment Research

Exports as % of GDPAsias Exports by destination


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FDI inflows at all time high US$5.1bn in 2Q11 up 60% yoy

Domestic investments very strong investment loans up 30% yoy

When utilisation rates reach 70%, capex cycle to accelerate

Growth driver 2 Robust investments

Source: CEIC, Citi Investment ResearchSource: BKPM (Investment Coordinating Board)

Record High Investments Manufacturing Utilisation Rate


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Consumer confidence, retail sales index at high levels

Car sales up 14% yoy in 8M11 despite Japans supply interruption

Cement sales up 13% yoy in 8M11

Property marketing sales up 48% in 1H11

Growth driver 3 Robust consumption

Source: Citi Investment Research, CEICSource: Citi Investment Research, CEIC

Strong consumer confidence index Strong retail sales index


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GDP per capita reaching US$3,000, the highest ever

Mininum wage increase of 10-15% per annum

Debt level at low level versus its regional peers

Household debt at 11% of GDP hence room to leverage

Growth driver 4 Room to leverage

Source: Citi Investment Research, CEICSource: Citi Investment Research

Rising income per capitaUnderleveraged economy

0%

5%

10%

15%

20%

25%

30%

2003 2004 2005 2006 2007 2008 2009 2010F

To ta l loan/GDP Consumer loan/GDP


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Indo public sector debt/GDP is at very healthy level

Government plans to reduce subsidies 10% increase in power tariff in2012E

Capex spendings to increase by 19% yoy to record level

But fuel subsidies remain high less of a problem if crude oil price remains

low

Growth driver 5 Healthy fiscal condition

Source: CEIC, Government

Low public sector debt/GDP

I i f i


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Important information

The information in this presentation is based on management forecasts and reflects prevailing conditions and our views as

of this date, all of which are accordingly subject to change. In preparing this presentation, we have relied upon andassumed, without independent verification, the accuracy and completeness of all information available from public sourcesor which was provided to us by or on behalf of the potential investor or which was otherwise reviewed by us. All opinionsor estimates contained in these documents are entirely SIM Indonesia judgement as of the date of this document and aresubject to change without notice.

Past performance is not necessarily a guide to future performance. You should remember that the value of investments cango down as well as up and is not guaranteed. Exchange rate changes may cause the value of the overseas investments torise or fall.

The information contained in this document is provided for information purpose only and does not constitute any solicitationand offering of investment products. Potential investors should be aware that such investments involve market risk andshould be regarded as long-term investments.

Derivatives carry a high degree of risk and should only be considered by sophisticated investors.

This material is issued by PT. Schroder Investment Management Indonesia and has not been reviewed by the Bapepam.

Schroder Investment Management Indonesia

Gedung Bursa Efek Indonesia

Tower 2, lantai 31

Jend. Sudirman, Jakarta

Telephone +62 21 51510101 Fax +62 21 5150505

Presentation Michael Tjoajadi

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