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.
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
In May, we exited Hong Kong Exchanges and Clearing on valuation grounds following the rapid
rise in its share price.
In other portfolio-related news, Taiwan Semiconductor Manufacturing Company’s profits
exceeded expectations, lifted by a rebound in sales due to increased orders from mainland
China, as well as by the weaker currency. The chipmaker may invest in alternative energy as
it searches for new long-term growth drivers. Singapore lenders United Overseas Bank and
Oversea-Chinese Banking Corporation’s operating profits held up well and their provisioning
policies have been conservative in anticipation of tougher times ahead.
Strategy & 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