Momentum likely to fade in second half of 2010, making stock picking increasingly important

Asian markets rallied strongly last year, spurred by government stimulus measures and liquidity-driven buying. While this trend is likely to carry through into the first half of 2010, Aberdeen Asset Management believes that the second half of 2010 will be altogether more challenging.


The key risks are in the timing of governments as they exit unorthodox stimulus strategies and what happens as monetary policy tightens across the region in response to rising inflation, according to Adam McCabe, Senior Portfolio Manager on the fixed income.

He believes that the consequences of any mis-step could be huge and predicts policy-makers would rather wait too long than do the opposite and risk a ‘double-dip’ recession. Easy money is leading to the risk of asset bubbles, for example in various property markets across Asia, and elsewhere across emerging markets as policy makers maintain loose monetary policy.

Although rising interest rates are outwardly negative for bonds, Aberdeen sees selective opportunities because not every development appears priced in.

“We are long Asian currencies generally, with any short term periods of USD strength providing an entry point for our preferred trades in the Korean won, Indonesian rupiah and Indian rupee. We also find relative value in Asian investment grade bonds versus US and European investment grade bonds. And Asian banks in particular look cheap versus European and US banks, leading us to take an overweight position on financials,”
Mr Adam summarised.

His theme of greater discrimination was echoed by Kwok Chern-Yeh, Investment Manager on the Asian equity team, who says stock-picking will gain in importance as buying momentum fades.

“We’re seeing investors start to pay more attention to company fundamentals. It’s really not yet clear how the recent pick-up in earnings may have been flattered by the inventory bounce and cost-cutting. Valuations suggest the markets are due for a pull-back. The trouble is the weight of money coming in, or waiting to do so, remains considerable and may lead to new highs in the near term.”

Mr Kwok Chern-Yeh affirmed Aberdeen style was to focus on defensive, cash rich names with strong franchises. BHP Billiton and Hindustan Lever, for example, were new additions to its model regional portfolio in 2009.

Mr.Chaikaseam Vadhanasiripong , Head of Funds Distribution, Aberdeen Asset Management Company Limited said “Overall Aberdeen anticipates more subdued asset market returns in 2010 versus 2009 because global recovery will be constrained by G3 delevering, ensuring that export levels won’t return to pre-crisis levels for a long time. It foresees growth in emerging market economies leading that of developed economies over the next three to five years, and Asia in turn leading emerging markets

The company aims to offer an outstanding pure asset management business that is well-diversified by territory, channel, and product. Our investment expertise is the management of client portfolios in equities and fix income from a fundamental perspective. This forms the basis of our core investment competence. Our business direction is to build long-term relationships with our clients and partners through strong performance and first-class client service”

For Thailand, Aberdeen will continue to reinforce our position as the leader in equity funds, especially FIF funds, by providing superior products, services, and direct accessibility to our fund managers from around the globe. Also, we've launched several services such as Monthly Investment Plan, Multi-redemption accounts, Internet Online Channel redesign to provide more convenient and to enhance clients' experience.

Mr. Chaikaseam added “For new business opportunities, we intent to develop our investment capability and distribution platforms in order to enter new markets and segments where we may have a competitive and sustainable edge. Last but not least, we will continue to educate investors on fundamental-driven long term investment approach via articles, interviews, mass media, and public seminars.”
About Aberdeen Asset Management Group

Aberdeen Asset Management manages over US$232.2 bn* of third party assets from its offices around the world. At Aberdeen, asset management is our sole business. We operate independently and only manage assets for third parties, allowing us to focus only on their needs, without conflicts of interest. Our clients access our investment expertise across the three asset classes: equities, fixed income and property. We package our skills in the form of segregated and pooled products across borders. We invest worldwide and follow a predominantly long-only approach, based on fundamentally sound investments – we do not chase market fads.