August 2010
Market Review
Most Asian stock markets rose in July, backed by upbeat economic data and corporate results,
along with positive stress test results for European banks, which outweighed fears of a doubledip
recession.
Economic growth was uneven in the region. China’s second-quarter growth decelerated;
whereas Singapore registered record growth and Korea’s expansion exceeded expectations.
Inflation remained a threat and Korea, New Zealand, Malaysia and Thailand responded with
interest rate hikes. In India the rate rise was higher than anticipated. Conversely, Sri Lanka cut
interest rates.
In politics, Australia set its general election for late August. Hong Kong approved its first
minimum wage bill, while agreeing with China to lift restrictions on using the yuan. Meanwhile,
India will start conducting banking sector stress tests every six months.
Portfolio Review
During the month, we initiated a position in Lafarge Malayan Cement, the country’s largest
domestic cement player, given its market position and strong dividend yield. We also topped up
Australian insurer QBE Insurance, on share price weakness. Its share price fell after the company
downgraded its profit expectations because of rising claim liabilities and a fall in investment
returns, which we had anticipated but do not consider detrimental to the insurer’s
long-term attractiveness.
In portfolio-related news, rejigging within Swire Pacific ended with the group owning 75%
of HAECO after failing to garner sufficient shareholder support. Swire also delivered very
respectable first-half results.
Outlook
While the global economy did not suffer a severe relapse, the recovery in the West remains
fragile, with deep structural problems are still unresolved. In Asia, leading indicators have
undoubtedly started to signal slower growth after the sharp rebound, but governments have
sufficient reserves to pump prime should the situation demand. Although we maintain a
cautious outlook, we are confident that our holdings, which are characterised by solid balance
sheets, experienced management and sound business practices, will be able to meet whatever
challenges lie around the corner.
Source: Monthly Factsheet Aberdeen Asset Managers Limited