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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.

Manager's Monthly Report

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