Skip to main content

Edinburgh Dragon Trust plc

 

Objective

The objective of Edinburgh Dragon Trust plc is to achieve long term capital growth through investment in the Far East. The company’s benchmark index is the MSCI All Country Asia (ex Japan) Index. Investments are made in stock markets in the region, with the exception of Japan and Australasia, principally in large companies. When appropriate, the trust will utilise gearing to maximise long term returns.

Peter Hames Edinburgh Dragon Trust plc


Manager's Monthly Report

June 2009


Markets & Economic Overview

Asian equities rose sharply in May, buoyed by the seemingly benign results of the US bank stress tests, hopes that India’s Congress Party election victory would speed up economic reform and tentative signs that the global recession may be abating. Inflation in China, India and Singapore eased in April. Central banks in Indonesia and the Philippines lowered interest rates but others in the region kept rates steady. First-quarter GDP figures were disappointing: Thailand slid into recession, Taiwan contracted at record pace, but India and Indonesia expanded. Hong Kong will spend HK$16.8 billion to lift its economy. In politics, Indonesian president Yudhoyono’s Democrat Party claimed victory in the parliamentary elections, while Pyongyang drew sharp criticism worldwide for conducting nuclear and missile tests.

Portfolio news

In May, we exited Hong Kong Exchanges and Clearing on valuation grounds following the rapid rise in its share price. Quarterly corporate results were mixed: India’s HDFC benefited from robust loan growth, improved asset quality and lower costs. In Singapore, Oversea-Chinese Banking Corporation’s non-interest income was boosted by one-off gains from its insurance subsidiary, but ST Engineering’s net profits fell, owing to the poor performance of its key aerospace division. Separately, Korea’s Samsung Electronics agreed to extend its flash memory chip licence with SanDisk by another seven years, while continuing to supply a portion of its output to SanDisk.

Outlook and strategy

Looking ahead, the sheer weight of liquidity may help to maintain the recent rally’s momentum, despite the still uncertain outlook for both economic growth and corporate earnings. Any global economic recovery is likely to be drawn out, given the structural problems that persist in the West and China’s inability to compensate quickly enough for the collapse in demand for Asian exports. As such, we expect a pullback at some stage. But we remain positive about Asia’s long-term prospects, because of its better fundamentals with respect to debt levels and latent demand.


Source: Monthly Factsheet Aberdeen Asset Managers Limited