July 2010
Market Review
Asian small cap equities outperformed their larger counterparts, which 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 and New Zealand raised interest rates.
In politics, Chinese regulators warned of rising bad debt from the banking sector’s exposure
to property; Taiwan signed a trade pact with Beijing that will see lower tariffs and increased
market access for services; and in Australia, Julia Gillard became the first female prime minister
after she ousted Kevin Rudd.
Portfolio review
During the month, we trimmed Kansai Nerolac and Godrej Consumer Products following their
strong run, and used the proceeds to add to Asia Satellite, Cebu and M.P. Evans.
In corporate news, Oversea-Chinese Banking Corporation increased its stake in Bank OCBC
NISP to 81.9% after it bought out International Finance Corp. CDL Hospitality Trust raised
S$196 million from a private placement, while Pacific Basin Shipping bought back US$2 million
of its convertible bonds. Hong Kong Economic Times reported decent full-year results amid the
economic recovery.
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