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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

January 2010


Markets & Economic Overview

Asian markets rose in December as economic data continued to improve across most of the region. Among the best performing markets were Taiwan and Korea, with their exports posting the first increase in more than a year. China’s recovery continued to gather pace in November on the back of brisk bank lending, while India posted a strong rebound in industrial activity, despite shrinking farm output caused by the poor monsoon. Inflation accelerated in China, India and Thailand. Most central banks kept interest rates at record lows. In policy news, Beijing stepped up measures to curb real estate speculation and reduce overcapacity in several industries. In India, policymakers plan to help finance infrastructure spending from the sale of shares in three state-owned power companies.

Portfolio news

During the month, we pared ABB India following its strong relative performance. In other portfolio-related news, Oversea-Chinese Banking Corporation and United Overseas Bank said they have little exposure to Dubai World. Korea’s Samsung Electronics reshuffled its top management in an ongoing reorganisation to streamline operations.

Outlook and strategy

Looking ahead, Asian markets may continue to rise, although it will be harder to make headway, given the strong performances posted in 2009. Recent corporate earnings growth has been driven by one-off factors, such as cost-cutting and inventory restocking, and a more fundamental improvement in profitability will be required if the rally is to be sustained. On the other hand, rising fiscal indebtedness will pressure governments of developed economies in Japan and the West to withdraw stimulus support, increasing the risk of policy mistakes. With the inherent imbalances in the global economy still not addressed, the likelihood of a global correction appears to have been carried over into 2010. In such an environment, we see our stock-picking approach as especially relevant. Our well-managed holdings are financially sound, and should emerge stronger, whatever the current headwinds.


Source: Monthly Factsheet Aberdeen Asset Managers Limited