July 2010
Market Review
Asian equity markets ended mixed in June on ongoing concerns that Europe’s austerity drive
may affect the global recovery. China’s move to de-peg the renminbi from the US dollar
provided some respite.
Economic data stayed positive but there were signs that growth may start to slow, particularly
in China, where the pace of manufacturing output decelerated.
Inflation advanced further in China, India, Korea and Indonesia but most central banks
continued to hold interest rates steady. Only Taiwan raised interest rates.
In politics, Chinese regulators warned of rising bad debt from the banking sector’s exposure to
property and Taiwan signed a trade pact with Beijing that will see lower tariffs and increased
market access for services.
Portfolio Review
There were no major changes to the portfolio in June.
In portfolio-related news, Samsung Electronics will invest US$3.6 billion in its US plant to take
advantage of a global recovery in demand for consumer electronics. Swire Pacific is buying
Cathay Pacific’s remaining 15% stake in Hong Kong Aircraft Engineering Company for HK$2.62
billion, or at a 20% premium. ST Engineering’s marine arm, ST Marine, and its local partner
were awarded a S$66.5 million contract to design and construct a waste management facility
in Brunei.
Outlook
Economies appear at a crossroads, with leading indicators pointing to slower growth. Even
China, the world’s engine room, is experiencing a deceleration, although growth remains
positive for now. Clouding the outlook further is the slew of austerity measures being
introduced in Europe. Such fiscal prudence at a time when final private demand is still weak
risks pushing the world back into recession.
Hence, we remain cautious but are confident that our holdings, which are characterised by
their solid balance sheets, experienced management, and sound business practices, will remain
resilient and able to weather the challenges that lie ahead.
Source: Monthly Factsheet Aberdeen Asset Managers Limited