Outlook and Opportunities for Investing in Asia...
Transcript of Outlook and Opportunities for Investing in Asia...
Chou Chong, Investment Director
Aberdeen Asset Management
Outlook and Opportunities for Investing in
Asia Pacific: Attractive fundamentals with
potential long-term opportunities
February 9, 2012
Presentation to
Capital Link
Aberdeen Asset Management is the marketing name in the US for the following affiliated,
registered investment advisers: Aberdeen Asset Management Inc., Aberdeen Asset
Management Investment Services Ltd, Aberdeen Asset Management Ltd and Aberdeen Asset
Management Asia Ltd (collectively, the “Aberdeen Advisers”). Each of the Aberdeen Advisers
is wholly owned by Aberdeen Asset Management PLC. "Aberdeen" is a U.S. registered service
mark of Aberdeen Asset Management PLC
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Your presenter
Chou Chong, Investment Director
Aberdeen Asset Management Asia
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The Case for Investing in Asia-Pacific
• Debt levels of developed nations is unsustainable
• Economic woes troubling the West have changed the definition of “safe haven”
• Asian balance sheets are predominately healthy
• Growth increasingly driven by domestic demand affluence
• Not immune to Western downturn but resilient
• Strong Asia-Pacific fundamentals deserve 2nd look
Resilient economic potential, solid structural foundation, growing domestic demand and strong growth potential
3 3 Source: Bloomberg, CLSA Asia-Pacific Markets, end Dec11
A poor year for global stock markets Risk assets shunned amid flight to safety
Past performance is no guarantee of future results. For illustrative purposes only.
4 Source: Bloomberg, end Dec 11
Asia: No escape from risk aversion
Past performance is no guarantee of future results. For illustrative purposes only.
5 Source: MSCI, Bloomberg, end Dec 11
Most bourses in the red in 2011 Q4 was particularly turbulent as the West’s fiscal problems worsened
Past performance is no guarantee of future results. For illustrative purposes only.
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Total Risk Index*
0
1
2
3
4
5
6
7
8C
hin
a
Taiw
an
Sin
gapore
Indonesia
Thaila
nd
Phili
ppin
es
Hong K
ong
Mexic
o
Russia
Arg
entina
Chile
Mala
ysia
India
S.A
fric
aB
razil
Japan
Kore
a
Turk
ey
Czech
Cro
atia
Slo
vak
Pola
nd
Austr
alia
Sw
itzerlan
Rom
ania
Germ
any
NZ
Austr
ia
Bulg
aria
Sw
eden
Fin
land
US
Hungary
Norw
ay
Fra
nce
Canada
UK
Neth
erland
Denm
ark
Italy
Belg
ium
Gre
ece
Spain
Port
ugal
Irela
nd
Safe haven no more Most of the risk is now in the “rich world”
Source: UBS, end Dec 2010. *The Total Risk Index assesses countries on the following criteria: credit trends, loan/deposit ratios, debt levels, current account
balances, exports and FX reserves. For illustrative purposes only.
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Non-financial sector debt as % of GDP
Balance sheets in Asia are healthier
For illustrative purposes only.
Source: “The real effects of debt” Stephen G Cecchetti, M S Mohanty and Fabrizio Zampolli – OECD and national data - simple average of data across 18 OECD
countries, Bank for International Settlements, Sept 2011. .
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Projected government debt
• Dramatic increase in developed country government debt
• Asia’s policymakers have much more flexibility to manage growth vs. Europe, US and
Japan
Less debt increase Most debt increase
0
50
100
150
200
250
300
PK BR ID PH CH IN KR MX ZA VN TH TW MY AdvG-20
US UK JP
Gro
ss D
eb
t a
s %
of
GD
P
2007 (pre crisis) 2009 2015(F)
Projections are offered as strategy goals and are not referenced to past performance. Projections are not guaranteed and actual events or results may differ
materially. For illustrative purposes only.
Source: IMF, World Economic Outlook Database, as of Sep 11
Governments in Asia are solvent – unlike in The West
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For illustrative purposes only
Source: Bloomberg, Dec 11
Asia’s growth is resilient
Real GDP growth (%)
2010 1Q11 2Q11 3Q11
China 10.4 9.7 9.5 9.1
Hong Kong 7.0 7.5 5.3 4.3
India 8.5 7.8 7.7 6.9
Indonesia 6.1 6.5 6.5 6.5
Japan 4.0 -1.0 -1.1 0.0
Korea 6.2 4.2 3.4 3.4
Malaysia 7.2 5.2 4.3 5.8
Philippines 7.6 4.6 3.4 3.2
Singapore 14.5 9.4 1.0 6.1
Taiwan 10.9 6.2 5.0 3.4
Thailand 7.8 3.2 2.7 3.5
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Asia is being re-rated
Country S&P Credit rating 2011 S&P Credit rating 2006
Singapore AAA AAA
Hong Kong AAA AA-
Taiwan AA- AA-
China AA- A-
Malaysia A A+
South Korea A+ A+
Thailand A- A
India BBB- BB+
Philippines BB+ BB+
Indonesia BB+ BB
For illustrative purposes only.
Standard & Poor’s Credit ratings are expressed as letter grades that range from ‘AAA’ to ‘D’ to communicate the agency’s opinion of relative level of credit risk.
Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
Source: Standard and Poor's, Long Term Local Currency Debt Ratings, Apr 2011.
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Asia’s central bank reserves are enormous
Central Bank Assets (US$bn)
386
306 285 260 238
165129 110
7547 42
0
100
200
300
400
500
600
700
800
900
1000
China Taiwan South Korea Hong Kong India Singapore Thailand Malaysia Indonesia Philippines USA Australia
Post Asian financial crisis in 1997; strengthening of country fundamentals and increasing foreign reserves
Substantial capacity to provide a stabilising influence on domestic capital markets and to limit volatility in currencies
Projections are offered as strategy goals and are not referenced to past performance. Projections are not guaranteed and actual events or results may differ
materially. For illustrative purposes only.
Source: Bloomberg, data as at end Dec 11, except for US and India (as of 20 Jan 12)
3000
3181
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GDP (PPP) share of world total, 2011E
Source: IMF, Sep 2011
Contribution to global GDP growth (%)
Source: IMF, Sep 2011
The world’s new growth driver China expected to contribute to approximately one-third of global growth in
2011
China
14%
India
6%
Other emerging
and developing
economies
29%
Advanced
economies
51%
Projections are offered as strategy goals and are not referenced to past performance.
Projections are not guaranteed and actual events or results may differ materially. For illustrative
purposes only.
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Structural shift underway Asia is rebalancing growth towards domestic demand
Projections are offered as strategy goals and are not referenced to past performance. Projections are not guaranteed and actual events or results may differ
materially. For illustrative purposes only.
Source: CEIC, HSBC, Jan 12
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Total dependency ratios (%)
Positive demographics…
Projections are offered as strategy goals and are not referenced to past performance. Projections are not guaranteed and actual events or results may differ
materially. For illustrative purposes only.
Source: United Nations, World Population Prospects, 2010.
40
50
60
70
80
90
100
1950 1965 1980 1995 2010 2025 2040 2055 2070 2085 2100
Japan Europe US Asia
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Rise in Asian middle class Growth in disposable incomes (%)
For illustrative purposes only.
Source: World Bank, Euromonitor, US Census Bureau, CLSA Asia-Pacific Markets, Oct 2011.
… and rising affluence will underpin its economies
(m)
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For illustrative purposes only.
Source: UBS, Soufun, Jan 12
Projections are offered as strategy goals and are not referenced to past
performance. Projections are not guaranteed and actual events or results may
differ materially. For illustrative purposes only.
Source: Deutsche Bank, National Audit Office, Jan 12
China is slowing Property and banking sectors are key concerns
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For illustrative purposes only.
Source: Bloomberg, Dec 11
For illustrative purposes only.
Source: Bloomberg, Dec 11
Beijing shifts gears Cut in reserve requirements suggest growth is now priority
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Elsewhere in Asia, governments have policy options
too Cooling growth and inflation has allowed monetary easing; India the
exception
For illustrative purposes only.
Source: Bloomberg, Dec 11
For illustrative purposes only.
Source: Bloomberg, Dec 11
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Room for fiscal stimulus Unlike the West, governments (ex Japan) are living within their means
For illustrative purposes only.
Source: CEIC, UBS estimates, Jan 12
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Projections are offered as strategy goals and are not referenced to past performance. Projections are not guaranteed and actual events or results may differ
materially. For illustrative purposes only.
Source: UBS Quantitative Research, MSCI, IBES, Jan 12
Businesses have understandably turned cautious Earnings estimates suggest soft 2012 with rebound in 2013
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But corporate fundamentals remain firm
Projections are offered as strategy goals and are not referenced to past
performance. Projections are not guaranteed and actual events or results may
differ materially. For illustrative purposes only.
Source: CLSA Asia-Pacific Markets, Jan 12 Source: Bloomberg, Dec 11
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Valuations are attractive
For illustrative purposes only.
Source: Bloomberg, Dec 11
Market sell-off is providing opportunities for Aberdeen to add to
quality names at attractive prices
Aberdeen’s Outlook for Asia Pacific
• Asian balance sheets are predominantly healthy
• Growth increasingly driven by domestic demand and rising affluence
• Asia not immune to Western downturn but…
• Asia-Pacific economies possess:
- resilient economic potential
- solid structural foundation
- growing domestic demand
- intra-regional trade
- strong growth potential
• Aberdeen’s strategy is unchanged – we will maintain focus on well-run
companies with sustainable business models, solid finances and regard for
minority shareholders
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Investment philosophy and approach
• We believe that, over the long term, share prices reflect underlying business
fundamentals
• We identify ‘best ideas’ at reasonable valuations via company visits
• Risk is investing in a poor quality company and/or overpaying, and not
benchmark-relative
• Emphasis on collective wisdom of team, not stars
We do not trade, but invest for the long term – and only in companies that
we
understand and can value.
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Investment process
Risk controls
Quality
Pass or fail?
Potential
revisit
Portfolio
constructio
n
Monitor
Company visit note
Watch list/
review
Aberdeen
universe
Price
Cheap or
expensive?
• Use model
portfolio
• Filter for
mandate
• Refine
weightings
• Compliance
checks
Step 1 Step 2 Step 3
Total
univers
e of
stocks
• Desk research: pre-screen of candidate companies
• No quantitative filters
• Many stocks eliminated over time or self-excluding due to
size/structure
• Regular revisits of key index stocks not held
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Focus on enhancing value over long term
• Aberdeen disregards short-term market noise
• Being right in long term matters more than buying early
• Buying is only the beginning, not end, of company research
• We continue to monitor stocks and evaluate against market movements
• Portfolio turnover is mainly topping up/top slicing of existing holdings
• Actual company name turnover is kept low
• Instinctively contrarian
We are owners of companies rather than buyers of stocks; we spread risk
not by buying more stocks but by constructing a portfolio that invests in
many different businesses
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Aberdeen Asia Pacific fund management team
Gerald Ambrose*
Evan Cheah
Mohd Najman Md Isa
Bharat Joshi
Jolynn Kek
Abdul Jalil Rasheed ̂
Andrew San
Head of Asian Equities
Tokyo Singapore Hong Kong Bangkok Kuala Lumpur
Keita Kubota
Kwok Chern Yeh*
Sandy Lim
Flavia Cheong
Chong Yoon-Chou
Kristy Fong
Gan Ai Mee
Andrew Gillan
Mark Gordon-James
Pruksa Iamthongthong
Adrian Lim
Louis Lu
Thomas Reeves
David Smith
James Thom
Christopher Wong
Hugh Young*
Boo Siew Yan, Cheng Hui
Fang, Felicia Lee, Ng Ai Hua,
Emerald Rosasillfiani, Tan
Shuyun, Eunice Toh, Jace
Zeng Mon
Central Dealers:
Rebecca Ang, Richard Ang,
Linda Mangsud, Derek
McCole*
Nicholas Chui
Frank Tian
Kathy Xu
Nicholas Yeo*
Orsen Karnburisudthi
Ratanawan
Saengkitikomol
Adithep Vanabrisksha*
Sutatip Premruthai
Central Dealer:
Jira Vereewattanasak
* Head of desk
^ CEO of Aberdeen Islamic
Asset Management Sdn Bhd
Investment support staff in
italics
Sydney
Mark Daniels
Michelle Lopez
Robert Penaloza*
Andrew Preston
Camille Simeon
Natalie Tam
Chhai Ung
Kenneth Akintewe
Scott Bennett
Marisa Loh
Adam McCabe
Anthony Michael*
Suhaila Suboh
Tan Chew May
Tan Wah Yong
Yueh Ee Leen
Dealers (Currency):
Mark Khoo, Ambrose Tan
Pongtharin Sapayanon*
Supakorn Tulyathan
Ben Brandon-King
Hong Li Min
Kang Puay Ju*
Kok Jing Tai
Glyn Nelson
Vida Tandean
Hugh Young
Includes affiliated
persons operating
under an inter-
company
agreement.
Source: Aberdeen
Asset Management,
16 Jan 12
Nick Bishop
Stuart Dear
Robert Franklin
Garreth Innes
Amy Mangan
Victor Rodriguez*
Gerard Sheehan
Justin Tyler
Dealers:
Michael Moen, Jane Tiftis
Satoshi Hisanaga
Edmund Goh
Jeremy Teng
Property
Asia Pacific Fixed
Income
Asia Pacific Equity
Multi-Asset Peter Elston
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Aberdeen’s Asia-Pacific Closed-End Funds for US
Investors Fund Investment Objective Website
Aberdeen Asia-Pacific Income
Fund, Inc.
“FAX”
Current income through investments primarily in Asian
and Australian debt securities www.aberdeenfax.com
Aberdeen Australia Equity Fund,
Inc.
“IAF”
Long-term capital appreciation through investments
primarily in equity securities of Australian companies
listed on the Australian Stock Exchange Limited*
www.aberdeeniaf.com
Aberdeen Emerging Markets
Telecommunications and
Infrastructure Fund, Inc.
“ETF”
Long-term capital appreciation by investing primarily in
equity and debt securities of emerging markets
telecommunications and infrastructure companies;
approximately 50% of the fund invested in Asia-Pacific
www.aberdeenetf.com
Aberdeen Global Income Fund,
Inc.
“FCO”
High current income by investing primarily in global fixed
income securities; approximately 40% invested in
Australia and New Zealand*
www.aberdeenfco.com
Aberdeen Indonesia Fund, Inc.
“IF”
Long-term capital appreciation and income as a
secondary objective by investing primarily in Indonesian
securities
www.aberdeenif.com
The Asia Tigers Fund, Inc.
“GRR”
Seeks long-term capital appreciation by investing
primarily in Asian equity securities. www.aberdeengrr.com
The India Fund, Inc.
“IFN”
Seeks long-term capital appreciation by investing
primarily in Indian equity securities www.aberdeenifn.com
The Singapore Fund, Inc.
“SGF”
Capital appreciation through investment in equity
securities issued by Singapore and ASEAN-based
companies
www.aberdeensgf.com
Investors should consider a fund’s investment objectives, risks, charges and expenses carefully before investing. A
copy of the prospectus for Aberdeen Australia Equity Fund, Inc. and Aberdeen Global Income Fund, Inc. that contains
this and other information about the fund may be obtained by calling 866-839-5205. Please read the prospectus
carefully before investing. Investing in funds involves risk, including possible loss of principal.
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Competitive advantage
• Dedicated investing in Asia since 1985
• Experienced and cohesive team
• Robust investment process
- Disciplined, replicable and consistent
- Always meet and interview a company before investing
• Proprietary research/visit note gives deeper insights, differentiates us from
peers
• Independence: Not compelled to own stocks that fail our screens
• Long track record
• Genuine team effort
Important: Past performance is not indicative of future results.
The above is strictly for private circulation and information purposes only and should not be considered as an offer, or solicitation, to deal in any of
the investments mentioned herein. Aberdeen Asset Management Inc. ("Aberdeen") does not warrant the accuracy, adequacy or completeness of
the information and materials contained in this document and expressly disclaims liability for errors or omissions in such information and materials.
Any research or analysis used in the preparation of this document has been procured by Aberdeen or its affiliates for their own use and may have
been acted on for their own purpose. The results thus obtained are made available only coincidentally and the information is not guaranteed as to
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financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially.
The reader must make his/her own assessment of the relevance, accuracy and adequacy of the information contained in this document and make
such independent investigations, as he/she may consider necessary or appropriate for the purpose of such assessment.
Closed end funds have a one-time initial public offering and then are subsequently traded on the secondary market through one of the stock
exchanges. The investment return and principal value will fluctuate so that an investor’s shares may be worth more or less than the original cost.
Shares of closed end funds may trade above (a premium) or below (a discount) the net asset value (NAV) of the fund’s portfolio. There is no
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heightened for emerging market investments.
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