Young forecasts an Indian summer

Hugh Young, managing director of Aberdeen Asset Management’s Asian business, says that India could be as exciting a story as China because of its well-run, long-established companies and good growth prospects. Young (pictured) admits the story is less “catchy”, but says that India has a better variety of companies than mainland China and most of these have been around a “long, long time”. After an impressive run in 2003, he has taken some profits in the region, but it is still one of the major overweight positions in the group’s funds. But China is not yet in bubble territory, according to Young. He believes valuations are not too high and the prospects remain good. Avian flu will not affect the long-term prospects and, he adds, it’s no bad thing to have an excuse to take some profits. He admits that some of the hype surrounding recent IPOs in China is a cause for concern, but says he still “sleeps well at night”. Young’s major sector position is to be overweight in financials and underweight in technology. Of the financials sector, he says: “We are very careful. We have no Thai banks, for example. We are still wary of banks in China. But we have two Singapore banks, which are strongly regulated.” The funds are overweight in Singapore as a whole, despite Young’s pessimism on the economic outlook. He says that companies have large cash piles, which are being returned to shareholders. Technology is an underweight along with other low-end mass manufacturing because of margin pressure and a lack of free cashflow among the companies. He prefers domestically orientated companies, which are not so vulnerable to the global economy. Overall, Young is optimistic on the prospects for Asia, saying that the region has seen significant improvements in return on equity, P/E levels do not look high compared with other world markets, and there is plenty of restructuring and merger & acquisition activity to boost share prices. • In a separate development, Aberdeen says it will be launching an open-ended version of its Asian Smaller Companies investment trust. This will be an exact replica of its existing trust, which invests in companies with a capitalisation of under $600m.