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