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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

January 2010


Markets & Economic Overview

Asian small cap equities outperformed the broader asset class in December, as economic data continued to improve across most of the region. Among the best performing markets were Taiwan and Korea, with their exports posting the first increase in more than a year. China’s recovery continued to gather pace in November on the back of brisk bank lending, while India posted a strong rebound in industrial activity, despite shrinking farm output caused by the poor monsoon. Inflation accelerated in China, India, Sri Lanka and Thailand. Most central banks kept interest rates at record lows, but Australia raised rates for a third consecutive month. In policy news, Beijing stepped up measures to curb real estate speculation and reduce overcapacity in several industries. In India, policymakers plan to help finance infrastructure spending from the sale of shares in three state-owned power companies.

Portfolio news

There were no major changes to the portfolio over the month. In corporate results, Hong Kong’s Hung Hing Printing and Kingmaker reported decent interim earnings, while Malaysia’s AEON Credit and United Malacca’s quarterly results were in line with forecasts. Pos Malaysia’s nine-month results disappointed slightly because of lower revenues and interest income. Elsewhere, Jollibee divested two Taiwanese restaurants to focus on core brands in China.

Strategy and outlook

Looking ahead, Asian markets may continue to rise, although it will be harder to make headway, given the strong performances posted in 2009. Recent corporate earnings growth has been driven by one-off factors, such as cost-cutting and inventory restocking, and a more fundamental improvement in profitability will be required if the rally is to be sustained. On the other hand, rising fiscal indebtedness will pressure governments of developed economies in the West to withdraw stimulus support, increasing the risk of policy mistakes. With the inherent imbalances in the global economy still not addressed, the likelihood of a global correction appears to have been carried over into 2010. In such an environment, we see our stock-picking approach as especially relevant. Our well-managed holdings are financially sound, and should emerge stronger, whatever the current headwinds.


Source: Monthly Factsheet Aberdeen Asset Managers Limited