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China and India deliver for Aberdeen New Dawn

Aberdeen New Dawn - Market setback creates opportunities

China and India deliver for Aberdeen New Dawn – Back in October 2018, we published a research note that discussed moves by Aberdeen New Dawn’s (ABD) to take advantage of selling across Asian markets to increase its exposure to China (click here to access this research note). This has worked out well; ABD reported year-end results to 30 April 2019 this morning with China among the strongest performing major global markets over the first few months of 2019.

ABD delivered an NAV total return of 4.9% over the year, beating its benchmark by 1.9% in the process, while the shares returned 8%.

ABD mainly accesses China through its holding of the Aberdeen Standard – China A Share Equity Fund. The vehicle invests in firms with solid balance sheets, healthy cash flows and good earnings visibility. They are also domestically focused companies in sectors such as consumer, travel and healthcare that have been more insulated from trade-related pressures. The manager of ABD attributes the relative outperformance of the A share fund to locally based holdings, amid slowing growth and heightened trade tensions.

Upbeat on India too

ABD retains its constructive view on Indian equities, which also performed well. At the year-end, India was the largest portfolio holding, at 11.7%, through the Aberdeen Standard Indian Equity fund. The following extract from the ABD manager’s report discusses their India view:  “The portfolio’s holding of the Aberdeen Standard – Indian Equity Fund was among the best performers in the portfolio for the year. This fund holds companies with dominant market positions and good growth potential, such as Hindustan Unilever, UltraTech Cement and Housing Development Finance Corporation. These companies have competent managements and proven history of achieving above-industry returns almost irrespective of the macroeconomic and political conditions in the country.

While the Indian market performed well over the period, it was a rollercoaster ride as a strengthening US Dollar and rising oil prices put pressure on the currency and current account. A liquidity crunch in the non-bank financial sector and a dispute between Pakistan and India further exacerbated concerns. Pressures eventually eased, however, as geopolitical tensions receded and the central bank intervened to cut interest rates and inject liquidity. Positive momentum for the incumbent Bharatiya Jain Party (BJP) in the run up to the general election lifted markets. At the time of writing, the BJP had won a landslide victory, paving the way for Prime Minister Narendra Modi to push through further reforms in his second term that should bode well for the market and economy over the longer term.”

Trade tensions weigh elsewhere

The manager went on to note that Singapore, another key market, lagged the region on concerns over trade tensions and weak global growth. Caution took over as companies kept more cash on balance sheets and the property sector was pulled down as the government enacted demand-stemming measures.

ABD: China and India deliver for Aberdeen New Dawn

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