February 2010
Market Review
Asian markets fell in January, with sentiment hurt by fears about monetary tightening in China, along with proposed banking reforms and disappointing employment data in the US. Among the laggards were China, Hong Kong and Taiwan, whereas Indonesia bucked the downtrend.
China unexpectedly raised the proportion of deposits that banks must set aside as reserves in an attempt to curb bank lending. China temporarily stopped several banks from extending new loans, while raising the reserve requirements for the sector. India similarly hiked lenders’ reserve ratios. Most central banks in the region continued to keep interest rates unchanged, even though inflation started to creep higher.
Exports saw a spurt across most of the region, boosted by China’s sharp fourth-quarter GDP growth. Only Korea’s economic growth rate decelerated amid declining exports and domestic demand.
In politics, a religious row threatened to escalate in Malaysia after three churches were attacked by arsonists.
Portfolio Review
There were no major changes to the portfolio in January.
Our holdings posted largely positive results. Infosys’ quarterly profits were better than
expected, while Housing Development Finance Corporation’s net interest margin expanded.
Samsung Electronics benefited from stronger earnings from its semiconductor and LCD divisions. Elsewhere, PT Exploration and Production’s full-year profits fell less than expected, despite lower product prices and expenses related to the Montara oil spill.
Outlook
Looking ahead, it is uncertain how long the market correction will last. In the near term, sentiment appears highly sensitive to worries about the removal of fiscal stimulus and the start of the monetary tightening cycle. The faster regional economies recover, the more nervous investors will become. Given the extent of last year’s rally, however, such a pullback would be healthy as market valuations will realign with fundamentals and present buying opportunities.
As bottom-up stock pickers with a focus on quality, we are cautiously optimistic about the year ahead, believing that markets will become more discriminating after last year in which, generally, the shares of weaker companies performed best. Our focus will remain on well-run businesses that have good long-term prospects, emerging from the downturn in a stronger position than they entered it.
Tender Offer
On 15 January 2010 the Company announced that the special resolution authorising the Company to buy back up to 34,643,156 ordinary shares in connection with a Tender Offer was passed. A total of 62,862,548 shares were validly tendered under the Tender Offer. As a result, the Basic Entitlement of all shareholders who validly tendered their shares were accepted in full and excess tenders were satisfied to the extent of approximately 39.82 per cent. of the excess shares tendered.
34,643,156 Shares were repurchased by the Company at the Repurchase Price of 197.2794 pence per share and cancelled; this equated to 15 per cent. of the Company’s shares in issue at 10 November 2009. Following the implementation of the Tender Offer, the Company had 196,311,219 shares in issue.
Source: Monthly Factsheet Aberdeen Asset Managers Limited