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Aberdeen New Dawn impacted by Chinese slowdown despite low exposure

Aberdeen New Dawn has announced interim figures for the six months ended 31 October 2015. Its benchmark, the MSCI AC Asia Pacific ex Japan Index, fell by 16.4%, while the net asset value fell by 17.0% (both on a total return basis). The share price declined by 16.7% (also on a total return basis), ending the period at 154.25p, with the discount to NAV stable at 12.9%. The Board has declared an unchanged interim dividend for the year of 1.0p.

The Chairman’s statement says falls in Asian equities over the period under review were largely attributed to concerns over the impact of a slowdown in China’s economy and a rise in US interest rates.  Concerns over the slowdown of China’s economy had a negative impact on those companies with significant exports to the mainland, such as the Australian and Malaysian commodity producers, as well as those with more exposure to its financial sector such as the banks in Singapore.  India was less affected by this negative sentiment largely because it has fewer trade ties with China but also because its Central Bank took the opportunity of lower commodity prices to reduce interest rates.

Unfortunately the relative performance of the Company during this period was disappointing although it did benefit from its relatively low exposure to China.  The Company also benefited from its large exposure to India, through the holdings in the Aberdeen Global – Indian Equity Fund and New India Investment Trust. Lastly, Korea was a major contributor to the Company’s performance owing to the appreciation in the preference shares held in Samsung Electronics, following the announcement of its first share buyback in 10 years.  The company also pledged to return 30-50% of its free cash flow to shareholders over the next three years.

The slowdown in the Regional economies had a negative impact on a number of consumer related companies as well as those exposed to the financial sector.  Aberdeen New Dawn suffered from its large holdings in the Singapore banks as these were expected to experience a deterioration in their trade finance business with Chinese companies. The negative impact on these banks is expected to be short lived as they remain well capitalised and conservatively managed, with solid regional networks.  The performance of Standard Chartered Bank was also disappointing despite the ongoing restructuring which has reduced its lending activity, particularly to the commodities sector.

Elsewhere, the property developers in Hong Kong and Singapore suffered from the local authorities’ attempts to curb demand although their underlying fundamentals remain intact. In addition the decline in commodity prices had a negative impact on the Company’s holdings in a number of energy and mining-related companies.

ABD : Aberdeen New Dawn impacted by Chinese slowdown despite low exposure

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