All information correct as at 31 December 2014
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THE INVESTOR
A
sian equities have been relatively
buoyant in a year characterised by
monetary policy divergence.The US
Federal Reserve ended its asset-purchase
programme as its economic recovery
found rmer footing. In contrast, Europe
and Japan boosted stimulus e orts in the
face of economic stagnation. Political
change sparked hopes of stability in
Thailand and reform in India and
Indonesia; all three markets were notable
performers in the year to date. China did
well, despite weaker macroeconomic
numbers.The market rallied following the
central bank’s rst interest rate cut in two
years. Conversely, Malaysia was a ected
by plummeting oil prices, while South
Korea lagged on concerns over export
competitiveness as the yen weakened.
Many of these themes will remain relevant
in the near term.An eventual US interest
rate hike may reignite market volatility,
but this should be mitigated by loose
monetary policy in Japan and Europe.
Investor attention is also likely to remain
riveted on oil price developments.With
OPEC’s decision to maintain the level of
production, oversupply is expected to
suppress prices well into 2015. Ultimately,
however, cheaper oil represents an
opportunity for policymakers to dismantle
expensive fuel subsidy schemes that have
put pressure on national budgets. India,
Indonesia and Malaysia have already made
progress on this front.
U
S markets continued their upward
climb during the month of December,
with nine of the 10 major economic sectors
posting positive returns.The St. James’s
Place NorthAmerican fund performed
well in the quarter. Strength was seen in
the industrial and consumer staples sectors,
while the energy and nancial sectors lagged.
Within the consumer staples sector, Coty
Inc. was the top performer.The beauty-
products maker has recently sought to
expand sales in LatinAmerica through a
partnership withAvon Products Inc.The
company also announced a $200 million
cost-savings programme which, together
with its strong free cash- ow generation, can
provide exibility for selective acquisitions,
as well as returning money to shareholders.
Within the energy sector, Halliburton
Company was the worst performer, partly in
response to dropping oil prices and partially
due to the company’s announcement of its
agreement to buy the smaller, oil-service
competitor Baker Hughes. Our team
believes that the increased complexity of oil
extraction bodes well for technologically
advanced service businesses.We believe
Halliburton is well positioned to bene t
from this trend.As always, we continue
to focus our time on gaining a deeper
understanding of businesses and industries.
With a global perspective and long-term
horizon in mind, the team stays true to
our investment philosophy, focusing on
understanding high-quality companies.
Jamie Cumming
Hugh Young
Howard Gleicher
THE INVESTOR CENTRE
ABERDEEN ASIA
Far East
Interest rates set to rise in US as
economy continues recovery
ARISTOTLE
North American
Industrial and consumer staples
sectors show strength in quarter
ABERDEEN
Ethical
Oil price developments to focus
investor attention well into 2015
Webelieve that the
endof stimuluspolicies
isn’t abad thing
Our teamstays true
toour investment
philosophy
Cheaper oil represents
anopportunity for
policymakers
J
H
H
L
ooking ahead in 2015, the anticipated
shift in US monetary policy will be
closely watched. Underlying this is the
expectation that the US will recover faster
than other major economies, which will
allow the Federal Reserve to raise interest
rates in mid-2015.This would be the rst
time that the US central bank has raised rates
since 2006 and represents the‘normalisation’
of US monetary policy following the end
of quantitative easing.We believe that the
end of stimulus policies isn’t a bad thing. It
will drain markets of speculative capital and
signal a return to investment fundamentals
and the search for quality.The divergence
of US central bank policy from that of the
European Central Bank and the Bank of
Japan, where further stimulus measures
are considered, has turned the spotlight on
the attractiveness of the dollar (and assets
denominated in the currency).A stronger
dollar and higher interest rates may mark the
end of the benign investment environment
that has been a hallmark of much of the
post- nancial crisis era. However, it would
be wrong to conclude that a stronger dollar
is automatically bad for emerging market
stocks as the correlation is, at best, casual.
Instead of capitalising on market themes, we
remain focused on investing in fundamentally
sound and well-managed businesses for the
long term at reasonable valuations.
