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THE INVESTOR
THE INVESTOR CENTRE
All information correct as at 30 September 2015
G
lobal markets are likely to remain
volatile in the near term, with policy
action a key determinant of market direction.
The chief concern seems to be China’s
slowing economy, which is sapping investor
con dence despite reassurances from Beijing
that it will keep growth on an even keel.
Meanwhile, the European Central Bank
cut its growth forecast, while its Japanese
counterpart appeared more sanguine. Both,
however, pledged to remain accommodative
and were open to extending their bond-
buying programmes.And Greece’s
unresolved debt crisis may continue to induce
jitters, even as voters headed to the polls.
In contrast, the Federal Reserve is set to
normalise interest rates, although economic
data has provided little clarity about when
this should occur.This has a ected market
sentiment, partly because of concerns
over how developing economies will cope
with higher borrowing costs. Commodity-
exporting nations remain particularly
vulnerable, with no sign yet of a recovery
in resource prices. On a brighter note,
currency weakness may boost export-driven
economies, while low energy prices could
o er some respite for net oil consumers.
With the recent global sell-o , share prices
seemmore re ective of the challenges that
lie ahead.As such, we will look to add to
favoured holdings when the opportunities
arise, while our fundamentals-driven
investment process should hold our portfolio
in good stead over the longer term.
T
he US stock market pull-back for the
quarter has been widespread and fairly
uniform across the market cap spectrum.The
causes have varied depending on the news
source: China’s economic slowdown, future
interest rate hikes, various geopolitical fears
and a general global economic slowdown have
all been blamed.What is clear is that markets
are repricing global growth expectations.
Against this economic backdrop the
portfolio held up well,with the majority of the
value added from security selection, which
made a positive contribution in six of the nine
sectors.The top contributor to outperformance
was construction materials company Martin
Marietta Materials, Inc.The construction
industry is improving regionally and Martin
Marietta is uniquely positioned to bene t.
The primary detractor was media and
entertainment companyTimeWarner Inc.,
which sold o in sympathy withTheWalt
Disney Company’s lowering pro t guidance
for its cable networks unit on erce
competition from other cable networks, as
well as video-streaming services and
alternative media sources.We remain
con dent inTimeWarner management’s
ability to create value and enhance pro tability
by eliminating its lower-margin businesses.
While we believe the increase in volatility
is the‘new normal’, such periods can create
opportunities for long-term investors.
ABERDEEN ASIA
Far East
Low oil prices continue to boost
consumer spending power
ARISTOTLE
North American
Opportunities in construction sector
through Martin Marietta Materials, Inc.
ABERDEEN
Ethical
Currency weakness may boost
export-driven economies
USandChinese
uncertainty trigger
global sell-o
Markets are repricing
global growth
expectations
Chinese slowdown
is sapping investor
con dence
Jamie Cumming
Hugh Young
Howard Gleicher
F
inancial markets have had a bumpy ride.
Worries over the US Federal Reserve’s
impending monetary policy normalisation
vied with the slowing Chinese economy for
the limelight.
In mid-August, China’s unexpected yuan
devaluation triggered a global sell-o . Near-
term sentiment is expected to remain fragile
as persistent fears remain, especially over
how emerging markets will cope with
a US rate hike. China’s lack of policymaking
nous, in the wake of the stock market
meltdown, has cast doubts over Beijing’s
ability to steer the world’s second-largest
economy back on course.
While parallels have been drawn with
previous crises since the recent turbulence,
the situation today is di erent.MostAsian
countries have healthy stockpiles of foreign-
exchange reserves; their nancial systems are
more robust and currencies oat relatively
freely.Additionally, the low oil price,
e ectively a tax break for both consumers
and businesses, should also bene t most of
the region, while currency weakness should
boost export competitiveness.
At the company level, e orts to cut
costs are progressing.With many existing
challenges re ected in stock prices, we will
be looking to add to favoured holdings when
the opportunities arise.
