Aberdeen New Dawn Investment Trust PLC

An update from our investment manager, James Thom – 28 July 2020

We are cautious about the near-term outlook for Asia, given the disconnect between equity prices and economic and corporate fundamentals. With the pace of recovery still highly uncertain, a pullback may be due. Governments are grappling with the delicate balancing act of re-opening economies while avoiding a resurgence in Covid-19 infections. Already, several countries have re-imposed curbs, and a return to widespread containment measures will surely stymie the fragile recovery. Complicating matters further is the spike in US-China tensions, with the rift broadening out from trade to other areas. Notably, we are paying close heed to the rivalry in technology, which could disrupt smartphone supply chains and delay the rollout of 5G networks. In such a climate, it is no surprise that the outlook for corporate earnings is muted. Many companies have lowered their profit forecasts, while dividend and capital spending cuts seem likely as well. 

Therefore, our focus remains on investing in companies with the quality to weather the current storms. We believe our holdings’ defensive traits, including balance sheet strength, visible revenue streams and healthy profit margins, will be invaluable. We also favour market-leading businesses with exposure to structural drivers of growth in Asia. This encompasses trends that have boomed during the pandemic, such as e-commerce and online activity, alongside longer-term shifts, including rising demand for healthcare and infrastructure. Thus, we will take advantage of market gyrations, putting capital to work in our highest-conviction positions while exiting names with declining prospects.