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7 Asset Other Equities 0.7%
2 Asset Asia & Pacific Equities 2.6%
5 Asset European Equities 8.8%
6 Asset NorthAmerican Equities 13.4%
9 Asset UK Equities 50.5%
8 Asset Property 0.0%
1 Asset Alternatives 0.0%
3 Asset Bonds 19.1%
4 Asset Cash 4.9%
THE INVESTOR CENTRE
T he key drivers of global market
sentiment have not changed.A
Brexit vote points to upheaval and
uncertainty in UK and European
markets, as the continent remains
hobbled by sluggish economic activity
and lacklustre demand.The pace of
the Federal Reserve’s rate hikes is also
under close watch as an indicator of
the US’s economic health.
Meanwhile, China strives for
structural reforms to kick-start growth,
but it is unclear whether government
intervention can lift the brakes.The
mainland seems to be losing ground
to India, which is more insulated from
global volatility but faces challenges to
market liberalisation.
Political events, particularly the US
presidential elections,may also have
a bearing on global equities in H2.
The recent stabilisation of the oil
price has provided some relief to
commodity exporters after a
prolonged rout.Yet the energy sector
still needs to reckon with an inability
to increase capital spendi g if crude
fail to extend above $50 a barrel.
D spite the unknowns, our focus on
the fundamentals helps us see through
the fog and select companies with the
ability to thrive over the long term.
US markets advanced as the local
economy continued to chug
along. Globally, the recipe for
volatility included a bit of monetary
policy, a pinch of China and of oil
prices, and a helping of Brexit.
The portfolio performed well.
Performance came primarily from
individual business selection; our
sector exposure was a net negative.
Cullen/Frost Bankers and BOK
Financial were notably strong. Both
have signi cant loan exposure in the
oil industry and had seen their share
prices decline along with oil.Yet this is
not their‘ rst rodeo’ in terms of
oil-price cyclicality, and both banks
were able to manage through the most
recent downturn.
Long-time holding Phillips 66 was
weak: it is primarily an oil-re ning and
chemical company and negatively
correlated to oil prices.Microsoft was
also weak: it reported earnings per
share shy of short-term expectations.
Its rate of adoption of cloud
computing also disappointed some.
Going forward, markets will be
faced with new problems to ponder.
We will continue to focus on the
long-term fundamentals of businesses
rather than the news of the day.
ABERDEEN ASIA
Far East
Asian markets present good value
compared to historic levels
ARISTOTLE
NORTH AMERICAN
Portfolio has performed strongly
thanks to individual business selection
ABERDEEN
Ethical
Focus is on companies with strong
long-term prospects to ride out storm
USmayholdo on
rate hike following
EU referendumresult
USmarketsmake
progress despite
volatilityoverseas
Brexit vote points
to upheaval inUK
andEuropeanmarkets
Jamie Cumming Hugh Young Howard Gleicher
Brexit concerns appear to have
overshadowed worries of a US
rate hike. Some expect the Federal
Reserve to refrain from raising rates
after the UK’s vote to leave the EU.
These uncertainties have unsettled
Asian stock markets, sparking a broad
ight to safe-haven assets.
Aside from external stresses,Asia
is grappling with domestic challenges.
In Japan, there is disenchantment with
Abenomics.The delay of a sales tax
hike is a setback for scal consolidation,
triggering a Fitch outlook downgrade.
In China, President Xi Jinping has
eschewed demand-driven stimulus
for supply-side structural reform, but
whether deleveraging, restructuring
and liberalisation can withstand the
pressures of a faltering economy
remains to be seen.
While SoutheastAsia has been
relatively resilient, concerns are
centred on rising authoritarianism
in some countries.Against an
uncertain backdrop, our engagement
with our holdings has been
encouraging,with many tightening
costs and paring a
broader level,Asian valuations remain
attractive, compared to historical
levels and other parts of the world.
All information correct as at 30 June 2016
28 | THE INVESTOR