| |
Country Allocation
Monthly Commentary
11/28/2008
We saw some signs of stability in the Asian equity markets in late November after the panic sell-off in October and early November, as governments across the world launched coordinated rescue and stimulus plans. The Fund ended the month flat, outperforming the benchmark which fell 5.4%.
In China, the government announced a comprehensive RMB 4 trillion stimulus plan and an aggressive interest rate cut of 108 bps this month. B-share investments finally started to recover, as liquidity returned to the Chinese markets. The Shanghai and Shenzhen B shares indices rose 20.0% and 12.5% respectively. Infrastructure stocks performed well due to support from the Chinese government, especially the railway sector, which will benefit from the large spending announcements. The Fund's holding in Zhuzhou CSR, a railway automation company, rose more than 40%. The Chinese government's aggressive rate cuts also supported the banking and property sectors, with ICBC and Sino-Ocean Land performing well.
The shocking terrorist attacks in Mumbai led to a power shift in India, with the finance minister replacing the minister for internal security, and the prime minister Dr Manmohan Singh is taking over responsibility for the finance ministry. Dr Singh is a veteran economist and architect of India's foreign investment programme, so we consider the economy to be in good hands. The BSE Sensex index fell 8.3% over the month, as profit taking and weak economic data from the US led to the market giving back all its gains. India's Q3 GDP growth of 7.6% was seen as a positive achievement in light of the global slowdown and inflation eased to 8.8%. We added a leading power and infrastructure firm Reliance Infrastructure to increase the portfolio's emphasis on domestic growth.
The Taiwanese government also introduced spending vouchers to boost domestic demand. However, Taiwan disappointed over the month, as investors worried about the demand for technology in the remaining months, and the market fell 9.2%. We believe Taiwan is lacking near-term catalysts. Nevertheless, we continue to find attractive investment ideas in transportation and some tech names.
The Thai and Indonesian markets fell 4.8% and 10.9% respectively this month. The Thai political crisis deepened as anti-government protesters forced the closure of the nation’s 2 main airports. We do not hold any investments in Thailand due to the unstable political environment and weakening economic outlook. In Indonesia, the Rupiah fell 13.46%, one of the worst performing Asian currencies, as foreign fund flows exited from the Indonesian bond market. In an effort to stabilize the Rupiah, the Central Bank imposed restrictions on foreign exchange purchases.
November was a difficult month, as emotions swung from despair to relief. Looking forward to the last month of 2008, we expect more fiscal and monetary packages from governments globally and the equity markets continue to stabilize. The domestic growth story in Asia remains our main investment strategy, especially in China. After the massive sell-down in the past 12 months, we believe there is excellent long-term investment value with the MSCI Asia ex-Japan region trading at 8.9x 2009 PE and below 1.2x 2009 PB.
* The Fund has changed its index from MSCI AC Far East ex-Japan to MSCI Daily TR AC Far East ex-Japan Net with effect from 1 January 2007.
** The Fund invests into emerging markets and investors should be aware of the risks associated with such investments. Please refer to the relevant prospectus for details and risk factors associated with investment in emerging markets.
|
