All information correct as at 30 June 2014
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THE INVESTOR
A
t present, the current investment
environment seems to be dictated
by rotation. Investors have been
switching from developing to developed
markets and back again.The pursuit of
growth has been replaced by the search
for value and yield. Generally, the
rotational buying appears to be a healthy
response to excessive valuations, where
prices become disconnected from the
fundamental outlook.With regards to the
macroeconomic environment, investors
still lack clarity on the strength of the
recovery in the US economy and on the
direction of policy in Europe, where
disin ation and potentially de ation is a
risk.Withdrawing such massive stimulus
and returning to more normal monetary
conditions is proving a slow, grinding
process. Given that background, we expect
equity markets to encounter further
volatility over the medium term.
G
lobal equity markets continued
their slow upward trend in Q2 as
volatility continued to plunge. Monetary
policy remains accommodative as the
European Central Bank preannounced that
it will implement negative deposit rates
in its e ort to curb de ationary pressures.
Fed chair JanetYellen provided an upbeat
assessment of US economic prospects but
announced that decisions on interest rates
would be‘data dependent’ as economic
progress remains soft.The NorthAmerican
fund performed well – in line with the
benchmark in the quarter, yet well ahead
year to date. Our overweight position in
information technology was positive as was
security selection in healthcare.Weakness
was found in industrials as well as not
being in the best-performing IT stocks. In
healthcare, our long-time holding Covidien
was the object of a buyout o er from
competitor Medtronic.The o er was at a
29% premium to the previous day’s close
and we believe it provides shareholders of
both companies signi cant synergies.The
main detractor was eBay. Despite good
results, eBay’s stock price dropped after
management announced its decision to
repatriate as much as $9 billion of overseas
cash, which will cost the rm $3 billion
in foreign earnings tax charges. Going
forward, as always, we will continue to
focus our attention on individual businesses
and invest in the 40 or so companies that we
believe o er optimal value.
Jamie Cumming
Hugh Young
Howard Gleicher
THE INVESTOR CENTRE
ABERDEEN ASIA
Far East
Buoyant Asian equities but fears of
Chinese slowdown cause uncertainty
ARISTOTLE
North American
Slow rise for global equity markets
with upbeat outlook for the US
ABERDEEN
Ethical
Pursuit of growth is replaced by
search for value and yield
Beijing is likely to
continue on its
reformdrive
Wewill continue to
focus our attentionon
individual businesses
We expect equity
markets to encounter
further volatility
H
A
sian equities have been buoyant in
the past few months, partly because
of continued loose monetary policy
from major central banks. But ongoing
uncertainty persists, exacerbated by fears
of a sustained Chinese slowdown.Yet we
do not expect fresh stimulus measures.
Beijing is likely to continue on its reform
drive, while unveiling targeted spending
packages to maintain a balance between
growth and restructuring. In Japan, early
indications suggest consumption remains
fairly resilient despite a tax hike. Given
expectations that the central bank would
not be expanding monetary stimulus, all
eyes will be on prime minister ShinzoAbe’s
growth strategy. Regional politics is also
likely to continue exerting its in uence.
In India and Indonesia, hopes that pro-
business governments would be elected
have lifted markets. Indeed, India’s market
soared to new highs after the opposition
Bharatiya Janata Party surged to victory.
But although successful in his home state
of Gujarat, new prime minister Narendra
Modi has yet to be tested at the national
level.Thailand, meanwhile, has stayed
relatively resilient despite the military coup.
Businesses are functioning as usual and the
junta has imposed some order after months
of political impasse. But until civilian
rule returns, con dence could remain
shaky. Uncertainties notwithstanding,Asia
remains a compelling investment case.
