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Aberdeen New Dawn tries to steer away from Chinese bubble

Over the 12 months to the end of April 2015 Aberdeen New Dawn generated a total return on net assets of 17.1% and a return to shareholders of 14.3%. Unfortunately the company’s benchmark did much better – the MSCI All Countries Asia Pacific ex Japan Index returned 22.7%. The dividend was increased to 3.8p from 3.6p.

The Chairman describes the market environment as frothy and says it is not unusual for the investment manager to trail the market in such conditions. For evidence of the frothiness of the market we might look to today’s sharp falls on the Chinese stock market. This was the market that the fund was most underweight and the Chairman’s statement says this underweight was accountable for most of the fund’s underperformance.

For evidence that the Chinese market was experiencing a liquidity fuelled bubble, the manger points to the example of Hanergy Thin Film Power, a stock that see-sawed violently before being suspended. The manager says “The inexplicable valuations pre-correction and opaque business operations were classic red flags and underscore the importance of maintaining a level head amid periods of investor mania. The mainland remains an exciting growth story, but thorough due diligence remains crucial to picking the best companies.”

The fund’s Indian investments did well on average. Not holding the big four Australian banks was also beneficial to the fund’s relative performance.

On the downside, the funds commodities and energy exposure was generally unhelpful – the manger singles out Thai-listed PTTEP and Singapore-listed Keppel Corp in this regard. Jardine Strategic was impacted by worries over the performance of its Indonesian subsidiary, Astra International. Standard Chartered was another laggard.

ABD : Aberdeen New Dawn tries to steer away from Chinese bubble

 

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