January 2010
Markets & Economic Overview
Asian markets rose 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 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 in December.
In other portfolio-related news, Oversea-Chinese Banking Corporation and United Overseas
Bank said they have little exposure to Dubai World. Separately, Taiwan Mobile secured
conditional approval from Taiwan’s Fair Trade Commission to acquire cable TV provider Kbro,
while Taiwan Semiconductor Manufacturing Company invested US$193 million in solar cell
maker Motech Industries through a private placement.
Strategy & 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
Japan and 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