June 2009
Markets & Economic Overview
Asian equities rose sharply in May, buoyed by the seemingly benign results of the US bank
stress tests, hopes that India’s Congress Party election victory would speed up economic reform
and tentative signs that the global recession may be abating. Notably, small cap equities
outperformed the broader market.
Inflation in China, India and Singapore eased in April. Central banks in Indonesia, the Philippines
and Sri Lanka lowered interest rates but others in the region kept rates steady.
First-quarter GDP figures were disappointing: Thailand slid into recession, Taiwan contracted
at record pace, but India and Indonesia expanded. Hong Kong will spend HK$16.8 billion to
lift its economy.
In politics, Indonesian president Yudhoyono’s Democrat Party claimed victory in the
parliamentary elections, while Pyongyang drew sharp criticism worldwide for conducting
nuclear and missile tests.
Portfolio news
Over the month, we sold AEON Thana after its strong run. We also took advantage of the
sharp rise in Hong Kong Catering’s share price to divest our holding, given its poor operating
fundamentals.
In corporate news, AEON Co. reported better-than-expected first-quarter results despite the
tough operating environment.
Strategy and outlook
Looking ahead, the sheer weight of liquidity may help to maintain the recent rally’s
momentum, despite the still uncertain outlook for both economic growth and corporate
earnings. Any global economic recovery is likely to be drawn out, given the structural problems
that persist in the West and China’s inability to compensate quickly enough for the collapse in
demand for Asian exports. As such, we expect a pullback at some stage. But we remain positive
about Asia’s long-term prospects, because of its better fundamentals with respect to debt
levels and latent demand.
Source: Monthly Factsheet Aberdeen Asset Managers Limited