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Aberdeen Asian Smaller Companies Investment Trust PLC

 

Objective

The investment objective of the Company is to maximise total return to Shareholders over the long term from a portfolio of smaller quoted companies (with a market capitalisation of up to approximately US$750m at time of investment) in the economies of Asia and Australasia, excluding Japan.

Manager's Monthly Report

September 2008


Markets & Economic Overview

Asian equities remained volatile in August with market performance mixed across the region. Inflation continued to climb despite the recent retreat in the price of crude oil and other commodities. Central banks in India, Korea and Indonesia raised key interest rates. For the second quarter, economic growth shrank in Hong Kong and slowed in Singapore and Thailand. Forecasts were lowered in Taiwan and the Philippines. Malaysian opposition leader Anwar Ibrahim was sworn in as a member of parliament after he won a by-election by a wide margin. At the time of writing, Thai prime minister Samak Sunderavej has declared a state of emergency following weeks of street protests.

Portfolio news

We initiated a position in Hong Kong's Public Financial and topped up United Plantations. Conversely, we top-sliced Korean Reinsurance. Quarterly earnings for Malaysia's AEON Credit were positive despite the high inflationary environment, helped by an improvement in operating profits from its retail and property management arms. On the other hand, Korean Reinsurance's performance was weighed down by appraisal losses from equity investments, while Singapore's Wheelock Properties' profits fell on poorer sales at two of its projects; nonetheless, we are comfortable because the company has a strong balance sheet and good cash flow.

Strategy and outlook

Looking ahead, we expect market sentiment to be swayed by the still unfolding crisis in the credit markets, as major financial institutions face massive write-downs. On a brighter note, the threat of inflation within the region appears to be diminishing, with commodity prices having peaked. However, that may be a symptom of slowing growth – which brings its own challenges. With much of the developed world on the cusp of recession, the likelihood of coordinated monetary response has increased. Interest rate cuts will make little difference if credit conditions remain tight. We are, therefore, cautious in our outlook, although with equity markets consolidating we see opportunities to add to the portfolio. The caveat is that corporate earnings growth is expected to flatten. Our holdings have performed relatively well so far and we are confident that they will weather the downturn, given their strong management and robust balance sheets.


Source: Monthly Factsheet Aberdeen Asset Managers Limited

30 September 2008, Podcast: Hugh Young of Aberdeen


Hugh Young, managing director of Aberdeen Asset Management Asia, talks to the Times about the major differences he sees between the major Asian super powers of Chinese and India. To listen play podcast.



(Opens in new window)

Hugh Young

Awards

  • Winner of best Asia - Pacific Investment Trust, Money Observer 2006
  • Highly recommended, Moneywise Investment Awards 2006