Wealth & Finance International - Fund Awards 2015

www.wealthandfinance-intl.com 11 Formed in Aberdeen, Scotland in 1983, Aberdeen Asset Management is a global asset management firm and a FTSE 100 company. We operate in 36 offices across 26 countries with over $480 billion in assets under management as of June 30, 2015. Listed on the London Stock Exchange, we have more than 30 years of experience and have seen decades of expansion through organic growth and acquisition. Aberdeen Asset Management aims for strong investment performance based on original thinking and first-hand research. Our mission is to deliver strong fund performance across a diverse set of asset classes in which we believe we have a sustainable competitive edge. We dislike unnecessary obscurity and complexity so our investment processes strive to be simple and clear. To facilitate local decision-making, we operate in close-knit teams with clear investment processes and flat structures. To further ensure control and accountability, a central executive committee comprising the heads of all the main business lines reports to the board of directors. We pride ourselves on original thinking and research. We also believe strong- ly in portfolio transparency. Implicit in our style is a rejection of commod- itized products and closet indexing; our business therefore stands or falls on whether we can genuinely add value to client wealth over the long term. Economic & Market Overview Most Asian local currency bond markets began to retreat in May amid a broader global sell-off. In June, an unfolding Greek tragedy in view of a potential Eurozone exit weighed heavily on global financial markets. Risk aversion was heightened further by gyrations in Chinese stock markets. Against this backdrop, most Asian local currency bond markets weak- ened, although shorter-term bonds benefited from policy easing, with interest rate cuts in China, India and Korea. It was a similar trend in regional currencies, with the ringgit and the peso among the key laggards, as U.S. dollar demand was supported by expectations of a rate hike by the U.S. Federal Reserve U.S. Federal Reserve’s (“Fed”). This was despite the dovish tone of the Fed’s latest meeting. Across Asian credit markets, investment-grade (IG) losses overshadowed modest high-yield (HY) gains. Indonesian local currency bonds and the rupiah hit a rough patch, caught up in the broader risk aversion. In both Hong Kong and Singa- pore, longer-term bonds sold off in tandem with U.S. Treasury weak- ness. Korean bonds also felt the impact of rising Treasury yields, even though the central bank cut rates to a record low of 1.5% to mitigate the impact of the MERS outbreak. Thai policymakers kept rates unchanged, highlighting the already accommodative stance and depreciation of the baht. Short-term bonds outperformed other tenors amid muted trading. Despite a rate cut, Indian bonds sold off as investors grappled with a more cautious central bank outlook amid concerns over the monsoon as well as higher crude and global bond yields. In Malaysia, short-term bonds drew keen interest. The ringgit was the worst regional performer, depreciating to a 10-year low against the U.S. dollar at one point, owing to speculation of a Fitch credit downgrade that failed to materialize. Instead, Fitch lifted its outlook for Malaysia to stable from negative, noting that a new consump- tion tax and fuel subsidy reforms should support government finances. Chinese bond markets bucked the regional trend, driven by short-end strength. Sluggish inflation, retail sales and credit data raised hopes of further stimulus. Towards the month-end, a sharp drop in domestic equities led the central bank to cut rates and bank reserve ratios to sta- bilize markets. Philippine bonds were resilient owing to slowing inflation and the government’s first monthly budget surplus. As for U.S. dollar bond markets, the IG segment was hurt by the volatile rates environment, being relatively more sensitive to U.S. Treasury swings. In contrast, HY credits posted modest gains, with Chinese prop- erty names lifted by growing signs of a real estate recovery as a result of Beijing’s policy easing. In the primary market, IG deals dominated transactions in a subdued month, with new issues totaling about $90 billion so far this year. Outlook We expect developments in both Europe and the U.S. to continue to drive sentiment in Asian financial markets. Post-Greek referendum, volatility in the euro and European markets is likely to persist, given that ramifica- tions of the “no” vote remain unclear and the risk of a Eurozone exit for Greece remains high. This is despite the resignation of Greek finance minister Varoufakis, who had angered creditors with his belligerence. Whether or not the Greek uncertainty will sway the Fed policy normaliza- tion remains to be seen. While a delay in the expected U.S. rate tighten- ing in September could hurt the Fed’s credibility, the policy of least regret could be to keep policy unchanged until there is further clarity on Greece. In Asia, big swings in China’s equity markets remain worrying. The recent spate of measures – aimed at ensuring ample liquidity in the financial system – appear to signal Beijing’s concern with the pace of the stock sell-off and possible systemic risk. Amid a sluggish economy, a property recovery appears to be gathering pace with increases in both prices and volumes in Tier 1 and 2 cities. Elsewhere in the region, Malaysian markets have sold off, owing to more negative news about state-owned investment vehicle 1MDB. We see regional central banks continuing with policy easing, given that manufacturing activity and ex- ports remain weak. Cheaper oil prices are providing some inflation relief. This may support local currency bond markets. As for Asian currencies, we expect further weakness amid continued U.S. dollar strength. Focus – The home advantage Source: Morgan Stanley, July 2015. For illustrative purposes only.

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