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THE INVESTOR
THE INVESTOR CENTRE
All information correct as at 31 March 2015
A
gainst the backdrop of uneven global
growth, investor sentiment will
continue to be swayed by central bank
decisions.The Chinese slowdown and
weak commodity prices have sparked
de ationary trends in both developed
and emerging economies. For now, most
nations are keeping monetary policy loose
to shore up growth, which should support
asset prices in the near term. Expectations
surrounding the timing of a US interest rate
hike remain in ux; given the strength of
the dollar, assumptions that the Fed’s policy
normalisation would begin in the middle
of the year are now being called into
question. In Europe, Greece’s debt crisis
has raised doubts about the long-term
sustainability of the euro, although this
has been partially mitigated by a nascent
economic recovery and ECB money-
printing.Tensions in Ukraine and the
Middle East could further destabilise
markets, while elections in the UK
and Israel, among others, could have
repercussions for their respective political
landscapes.At a corporate level, there
appear to be scant signs of an earnings
pick-up. Rather, the best-managed
companies are focusing on maintaining
margins and market share.This should
position them for an eventual rebound.As
always, we see investment opportunities
when share prices fall indiscriminately and
have taken market weakness as a chance to
add to our favoured holdings.
V
olatility returned to the US markets.
Strong gains in February were
sandwiched between weakness in January
and March, resulting in mixed returns for
the quarter.The St. James’s Place North
American fund performed very well in the
quarter. Leading the performance pack
was healthcare holding, Hospira. P zer
o ered to buy the company for $15 billion,
which was nearly a 40% premium on the
previous day’s closing price. Combined
with our investment criteria, P zer’s buy-
out intentions supported our decision to
liquidate our position in Hospira. Detracting
from performance was utilities holding, ITC
Holdings Corp.The company announced
fourth-quarter results in February that
disappointed short-term investors.Although
operating income rose to $278 million, from
$255.4 million on a quarter-over-quarter
basis,Wall Street was expecting more.
In our opinion, the company continues
to execute on its ve-year business plan,
investing in infrastructure while expanding
and diversifying its development portfolio.
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,
our team stays true to our investment
philosophy, which focuses on understanding
high-quality companies.
ABERDEEN ASIA
Far East
Positive momentum carried over from
last year as political concerns recede
ARISTOTLE
North American
Mixed returns for quarter as US
markets see return of volatility
ABERDEEN
Ethical
Support for short-term asset prices as
monetary policies are kept loose
Central banks are likely
tocontinuewithmore
easingmeasures
Leading the pack
was healthcare
holding, Hospira
There appears to
be scant signs of an
earnings pick-up
Jamie Cumming
Hugh Young
Howard Gleicher
A
sian equities have started 2015 well.
Despite faltering economic growth,
concerted e orts by major central banks
worldwide to ease monetary policy
have helped markets sustain the positive
momentum carried over from last year.
Political concerns that had dominated the
landscape in 2014 have receded as newly
elected governments boost expectations
of the acceleration in reforms, notably in
India and Indonesia. In Japan,‘Abenomics’
has supported stock markets, although its
e ectiveness in lifting economic growth
has been thwarted by the consumption tax
hike. Unless structural changes, such as
labour reforms, take place, this experiment
seems doomed to fail. De ationary threats
have come to the fore, exacerbated by
weaker commodity prices. Nevertheless, we
maintain the view that cheaper commodities
helps lower costs for consumers and
businesses alike. Central banks are likely to
continue with more easing measures to spur
growth, which should support asset prices in
the medium term. Conversely, the expected
normalisation of US Federal Reserve
monetary policy some time in 2015 could
muddy that outcome.AcrossAsia, elevated
household debt might negate the positive
e ects of cheaper commodities, while
exports will remain hampered by the Chinese
slowdown. Cost cuts and capital preservation
in a period of weak demand should boost
margins and help well-run companies
position for a cyclical upturn.
