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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 2008


Markets & Economic Overview

Asian equities fell in June, led by India. The continued escalation of food and fuel prices renewed fears over corporate earnings. This was compounded by the ongoing credit crisis, negative US economic data, and despite this the Federal Reserve's decision to hold interest rates steady. First-quarter growth remained healthy in most countries, but Singapore reported declining exports to the US and Europe. Inflation rose to record highs across the region. Many central banks raised interest rates, although China, India and Taiwan chose to hike bank reserve requirements instead. In contrast, Thailand opted to hold interest rates steady. In politics, Thai prime minister Samak Sundaravej survived a no-confidence vote and a similar motion against Malaysian prime minister Abdullah Badawi was dropped.

Portfolio news

The Company bought its own shares at a discount from the open market for cancellation. We also topsliced Hong Kong power utility CLP. With the proceeds, we added to Jardine Strategic, ST Engineering and Standard Chartered Bank. In portfolio news, UOB is buying a 15.38% stake in Chinese lender Evergrowing Bank for RMB780m

Outlook and strategy

We expect equity markets to stay volatile. Sentiment remains captive to deteriorating economic growth and worsening corporate earnings. Central bank policy does not appear to have kept up with inflation, while government moves to cut energy subsidies will likely increase price pressures in the short term. With markets broadly back to levels last seen 12 months ago, consolidation is well underway. But market support schemes that were mooted recently would represent a backward step. Having been concerned about the bubble in certain markets (notably China) and, in a general sense, having been unexcited about valuations across the region for a couple of years, our appetite is starting to be whetted after the recent sharp falls, all the more so as we have few concerns about our holdings. Our investments in aggregate boast strong balance sheets and responsible management teams


Source: Monthly Factsheet Aberdeen Asset Managers Limited

2 May 2008, Asian Pacific Equities Update


Hugh Young, Managing Director of Aberdeen Asset Management Asia Ltd



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Hugh Young