Aberdeen’s lack of China boosts income trust in 2010

Aberdeen Asian Income trust’s natural aversion to the region’s export-intensive counties such as Korea and China has boosted performance for the first half of 2010.

For the six months, the vehicle – headed by Hugh Young and team – produced a net asset value return of 9.7% while the benchmark MSCI AC Asia Pacific ex-Japan Index returned just 0.5%.

Peter Arthur, the trust chairman, says this was down to strong stockpicking plus the skew towards South Asian countries as China’s stock market underperformed.

“We remain cautious on China as leading indicators have worsened”

Young and team have little Chinese exposure because it lacks high-yielding companies and overweight positions in countries such as Thailand, Malaysia and Singapore all contributed to returns.

Looking forward in Asia, Arthur says the growing impetus to normalise monetary conditions to curb inflation while supporting growth is reassuring, although it may limit market gains in the short-term.

“Nevertheless, any pullback in regional equity markets should be considered healthy and also a good buying opportunity,” he adds. (article continues below)

“We remain cautious on China as leading indicators have worsened: the falling Baltic index for shipping rates, together with declining commodity prices and decelerating manufacturing output, all herald a slowdown in the economy.

“On a positive note, a moderation in the mainland’s expansion may prevent China from overheating, while efforts to lift domestic consumption could reduce the country’s reliance on resource-intensive investments and exports to fuel growth.”

Overall, the chairman says Asia’s long-term story remains attractive, highlighting Aberdeen’s approach of investing in holdings with dependable businesses over the long term