August 2008
Markets & Economic Overview
Most Asian equities fell in July. Sentiment was affected by the deceleration in global growth,
high inflation and the collapse of US mortgage-lender IndyMac. India and China bucked the
downtrend: the former rose after the government survived a no-confidence vote, while the
latter was buoyed by moves to stabilise the market.
Second-quarter growth slowed as external demand and domestic consumption eased. Korea
led forecasts lower for the year.
While central banks in India, Indonesia, Thailand and the Philippines raised interest rates, the
majority kept rates unchanged. China opted to tighten controls to deter speculative inflows of
foreign capital. New Zealand was a notable exception, cutting interest rates instead.
In politics, Taiwan ties with mainland China continued to thaw, Korea and Thailand reshuffled
their cabinets, thousands of Malaysians protested the hike in fuel prices, and Anwar Ibrahim
faced new charges of sexual misconduct.
Portfolio news
During the month, we added to several holdings on price weakness, such as Singapore's ST
Engineering and Thailand's Siam Cement.
In other news, Samsung Electronics posted weaker-than-expected second-quarter results due
to declining margins in its semiconductor and digital media businesses. However, it was the
only profitable memory chip company, underlining its dominance as the sector's lowest
cost producer.
Swire Pacific unit HAECO Group will invest in a new RMB1bn maintenance centre in Sichuan,
while sister-company Cathay Pacific warned that higher fuel prices would likely hurt its
2008 results.
Outlook
The fallout from the slowdown in global growth and high inflation will continue to dominate
sentiment in regional stock markets. Political risks have risen too, as the strain of rising prices
feed a growing discontent. We believe that equity markets will continue to be volatile, in
the face of worsening corporate earnings. Central bank policy continues to lag the rapid rise
in prices, while attempts to remove subsidies face growing resistance. With many market
benchmarks back to levels last seen a year ago, we are starting to see opportunities again. We
have few concerns about our holdings, which have sound businesses and solid balance sheets.
Source: Monthly Factsheet Aberdeen Asset Managers Limited