Aberdeen New Dawn Investment Trust PLC

Outlook – an update from our investment manager, James Thom – 22 May 2020

The outlook for Asia will remain challenging for some time due to the covid-19 pandemic. A global recession appears increasingly likely as widespread containment measures hinder demand and disrupt supply dynamics. Meanwhile, financial conditions are tightening. All this will weigh on corporate earnings. That said, because parts of Asia were the earliest to suffer the impact of the virus, they are likely to be among the first to bounce back and we are already seeing some encouraging signs of this in China, the region's key economic engine. Elsewhere Asian economic and corporate fundamentals are well positioned to withstand the shock thanks to strong reserves and healthy balance sheets, while policymakers have room to roll out more fiscal support and ease monetary policy. But how long it will take for conditions to normalise is yet unclear.

With volatility expected to persist, we are regularly engaging with our companies to check how they are responding to the evolving situation. Broadly, we remain confident about the companies we hold. Their robust balance sheets, manageable debt levels and healthy cash flow should buffer them through this difficult period. Moreover, their competitive advantages and market leadership position them well to capitalise on potential industry consolidation arising from the exit of financially weaker rivals as well as structural growth opportunities that are still intact. Nonetheless, staying disciplined is crucial. We are consistently assessing the viability of our holdings' prospects, along with their ability to cope with tighter liquidity. We take comfort in that our companies have solid balance sheets and they have endured similar disruptions in the past. We believe that the fundamentals of our invested companies remain intact, even as the market has been indiscriminate during this sell-off; and we intend to be opportunistic amidst the uncertainty.