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MarketViews
MarketViewsfrom dianomi Comprehensive Investment Guides and Reports
Sponsored by:
By Merry Sheils
A guide to
Investing in Asia
Wha yu need
nw: Why Asia?
Emerging economies, o which
China and India are among the most
signicant, are slated to reach a
staggering 42% o global GDP by 2020.
P4
Underanding rend,
differene & ri far
Governmental and culture dierences
can make it difcult to achieve a clear
understanding o economic position,
and intention.
P8
Topfeatures >>
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Market Views|
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Closed-end funds have a one-time initial public offering and then are subsequently traded on the secondary market through one of the stock exchanges. The investment return anprincipal value will fluctuate so that an investors shares may be worth more or less than the original cost. Shares of closed-end funds may trade above (a premium) or below (a discounthe net asset value (NAV) of the funds portfolio. Past performance does not guarantee future results. Foreign securities are more volatile, harder to price and less liquid than Usecurities. These risks may be enhanced in emerging market countries. Concentrating investments in a single country, region or industry may subject a fund to greater privolatility and risk of loss than more diverse funds.Investors should consider a funds investment objectives, risks, charges and expenses carefully before investing. A copof the prospectus for Aberdeen Australia Equity Fund, Inc., Aberdeen Chile Fund, Inc. and Aberdeen Global Income Fund, Inc. that contains this and other informatioabout the fund may be obtained by calling 866-839-5205. Please read the prospectus carefully before investing. Investing in funds involves risk, including possibloss of principal.Aberdeen Asset Management Inc., 1735 Market Street, 32nd Floor, Philadelphia, PA 19103. NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALU
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A GUIDE TO INVESTING IN ASIA | Market Views
Sponsored byAberdeen Asset Management Inc. is a wholly-owned U.S. subsidiary o Aberdeen Asset Management
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Aberdeen has been active in Asia since 1985 with an on-the-ground presence in the region or over two
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Market Views|
A GUIDE TO INVESTING IN ASIA
Why INVEST IN ASIA?The story of explosive growth in emerging markets, led by
Asia, is well known, and for several years, Asia has played a
leadership role. Lower trade barriers have created global demand
for Asian products and services. Globalization, industrialization,
urbanization and automation have made their manufacture and
delivery more feasible.
Asias four billion population now accounts for
57% of the worlds inhabitants and represents 28%
of global GDP. Emerging economies, of which
China and India are among the most signicant,
are slated to reach a staggering 42% of global GDP
by 2020.
China, arguably the Asian leader, has annual GDP
of $5.9 trillion, and grew 11% at its peak in 2010.
Although it has slowed to around 8.6%, suggesting
it faces some difcult headwinds, it still is nearly
three times the growth rate of the US. This growth
puts it on track, according to some estimates, to
become the worlds largest economy by 2027.
Further, all of Asia will represent more than half of
the global economy by 2050.1
Asia also leads in global capital formation, with
$20 trillion of capitalization. Its regional stockexchanges rival those in the US, Toronto and
Germany and have experienced heady compound
annual growth rates (CAGR): The Shanghai Stock
Exchange leads, with 57%; The Bombay Stock
Exchange and the National Stock Exchange of
India are next, with 25% and 24%, respectively,
followed by The Hong Kong Exchange, with 21%.
The Asia-Pacic region in total boasts the highest
percentage of savers - 61% versus an average of
46% elsewhere across the globe.
A high savings gure is positive for exporters of
large-ticket items and accounts for the growth in
capitalization.
Asias four billion population now accoun
for 57% of the worlds inhabitants an
represents 28% of global GD
1 BBC News Business, August 2, 2011 - http://www.bbc.co.uk/news/business-14368324.
http://www.bbc.co.uk/news/business-14368324http://www.bbc.co.uk/news/business-143683247/31/2019 Product 2854 PDF Link
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A GUIDE TO INVESTING IN ASIA | Market Views
Thegrowthstory.What are the underlying components of the growth
story in Asia, and, given recent global developments, is it
sustainable? If so, where do the opportunities lie?
As we analyze the key economies in the region, we begin with China, Asias
most signicant economy. We believe there are our key drivers that are the
linchpins o its phenomenal economic position on the world stage.
1Urbanization.There has been an
enormous shit rom an
agrarian economy in China to a
more industrialized one. Former
arm inhabitants have since
migrated to the cities where jobs
in actories are plentiul and the
quality o lie is improved.
At least 300 million have doneso over the past 25 years, and
another 300 million will make the
move over the next 25 years. This
movement creates an ongoing a
need or upscale housing, better
ood and additional household
products required to support
living in an urban environment.
In China, the heaviest population
is concentrated primarily in
coastal cities. As the migration
rom arms to cities has occurred,
less crowded inland cities are
expanding, creating critical need
or investments in inrastructure.
Roads, sewers, railroads, airports
and transportation are required
to support this ongoing growth.
2GrowinG Middle
Class.A growing middle class
means there is more disposable
income to spend on consumer
goods, many o them high priced.
Certainly an improved diet has
positive implications as these
people gravitate toward eating
more protein, or example. Chinas
$1.3 billion population includes1% who are considered rich. These
13 million people are demanding
luxury goods. Notably, the top three
Mercedes-Benz dealerships in the
world are in Beijing, Shanghai and
Hong Kong.
3aUtoMation.Not unlike the productivity
economics witnessed in the
US since the wide-spread use o
the Internet, Asian economies are
increasing prots through use o
automation. Research indicates
that or every 2% in increased GDP
growth, automation spending has
a multiplier eect o 3. Thereore,
automation could experience a
12% CAGR by the end o 2017.
Companies that produce those
technology goods and services are
poised to enjoy dramatic proits.
4ManUfaCtUrinG
and environMental
iMproveMents.Chinas current environment
is a challenge. Smog is thick
in the cities, and air and water
pollution are among the highest
o any country. The Chinese auto
industry is taking strong steps to
enorce tough emission standards,
even more stringent than thosein the state o Caliornia, arguably
the strictest in the US. Companies
engaged in manuacturing
products and services designed
to clean up the environment can
capitalize on this demand. This i
especially true since there are ew
i any, state-owned companies
providing these services, a good
thing, given Chinas propensity o
protectionism.
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Market Views|
A GUIDE TO INVESTING IN ASIA
Different Economies
Comprise AsiaIndiaAlthough China is the dominant story in Asia,
India also deserves a strong mention for a
couple of reasons. India has the second-highest
population in the world 1.21 billion, as of
the 2011 census, and it is expected to surpass
Chinas by 2025. Its population is relatively
young 50% of its inhabitants are 25 or
younger. It has the second-highest populationgrowth rate in the world, with one obvious
explanation being that India is not tied to the
one child policy that exists in China.
The Indian economy is the 9th largest in the
world, with $1.73 trillion in GDP, and is
expected to grow by 8.2% in 2012. According
to the Export-Import Bank of India, its external
debt of $305 billion was just 17.3% of total
GDP in 2011. (It is no secret that, by contrast,
US debt now is equal to our $14.6 trillion
GDP, or 100%). Although total external Indian
debt has risen recently to $336 billion, it still
represents a modest proportion of GDP2.
India also has the second highest labor force
of any global economy 190 million people
are working in India. Those workers now have
higher incomes to spend on more expensively
priced goods. Even though salaries do not begin
to equal those of the more developed world,
Indians are highly motivated to upgrade their
lifestyle.
A recent measure of global consumer condence
showed India had the highest reading of the 56
countries surveyed, registering a gure of 1213.
(By contrast, the most-recent reading for the US
market is 61.1).
The service sector represents nearly 58% of
total Indian GDP, as many global corporations
have outsourced customer-service functions
to Indias much less expensive labor force.
Although the trend has attened recently, it still
remains strong.
Technology is another opportunity for
investment in India. In fact, India has the
second-largest mobile phone usage of any
country, 894 million. It ranks among the top
three countries in internet penetration, 121
million. Even with high usage of both phonesand Internet, however, its vast population
suggests a strong market for purveyors of
technology.
The Association of Southeast Asian Nations
(ASEAN) is an important region in global
commerce. It is a geopolitical and economic
organization of ten countries in Southeast
Asia. Originally formed in 1967, it comprises
Indonesia, Malaysia, the Philippines, Singapore
and Thailand. We examine some of these
countries next.
IndonesiaThis country, while not as heavily populated
as either China or India, has witnessed
signicant growth in recent years. Indonesia
has 237.6 million people, 58% of whom
reside on the island of Java. It is the fourth
most populous country in the world, after
China, India and the US.
Indonesias $1 trillion economy is the 16th
largest in the world, and the largest economy
in Southeast Asia, and is growing in excess of
6% annually.
Nearly half of Indonesias total GDP
comprises the industrial sector - 47% , and
38% is focused on services. The balance
comes from agriculture. Because it has only
11% of arable land, Indonesia must import a
great deal of its food, creating opportunities
for other countries to export those products.
Because Indonesia has vastly neglected
investments in its infrastructure, dropping
in 2011 from 8% to only 2%, there is
signicant demand for building, energy and
transportation projects. For example, some
of its airports currently are operating at more
than twice the capacity for which they were
built originally4. The implications for foreign
investment in such a densely populated
country are obvious.
Japans Sumitomo Corp. is considering
investing up to $10 billion in energy projects
over the next four years. This is in addition to
its having already invested $5 billion in the
country over the past few years.
Indonesias economy
is growning in excess
of 6% annually
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A GUIDE TO INVESTING IN ASIA | Market Views
MalaysiaThis country has a population of 28.1
million, 58% of whom are under the age of
30, suggesting a rm foundation for future
growth.5
Malaysias GDP of $414.4 billion grew at
a 7% rate from 2010-2011. International
trade is important to its economy, and it isthe largest Islamic banking and nancial
center. Its economy is based on services
and manufacturing, and it is noted for
its export of semiconductor components,
electrical products and information and
communication technology. It also exports
some commodities, including rubber,
petroleum and palm oil. In turn, it imports
machinery, electronics, petroleum products,
vehicles, iron and steel products, chemicals
and food.
Real estate investments have surged in
Malaysia, particularly in the rental market,
as tourism and a relatively low cost of living
offer attractive incentives.
SingaporeWith a surface size just one-third that of the
of Rhode Island, Singapore has 5.2 million
in population. However, it is home to 100
commercial banks and enjoys leadership in
global trading, nance and services.
According to the Department of Statistics,
Singapore, the most-recent gure for GDP(2010) shows $222.7 billion6. That same year,
Singapores economy grew by a s taggering
17.9%, while much of the rest of the globe
struggled to stay aoat. Its growth rate has
dropped to a much more modest 3%, as it
weathers the effects of the Euro Zones debt
crisis.
Singapore has a young labor force, suggesting
that there is ample room for additional
expenditures on household goods, technology,
communications and similar products.
The demographic makeup of Singapore is
surprising it has twice as many Internet
users as television sets. There is little, if any,
corruption or drug use. Most of us can recall
the caning incident in 1994, when an American,
Michael Fay, pled guilty to vandalism and was
punished accordingly.
Once part of Malaysia, from which it separated
in 1965, Singapore now maintains smoother
ties with it concerning tax issues, water supply
and transportation arrangements. Singapores
major manufacturing is in electronics - 40%,
but it contributes only 5% of its labor force to
that industry. It gradually is transitioning to a
service and research-based economy. Rising
demand for communications, technology and
transportation services, coupled with increased
consumer spending and tourism, are primary
economic drivers. Because Singapore has strict
intellectual property protection, manufacturers
are moving there from China7.
The PhilippinesThis area of Asia has a population of 93.3
million and is the third-largest English-
speaking country in the world. With a
literacy rate of 95%, it ranks among the
highest in the world in terms of an educated,
skilled labor force. Interestingly, wages
are around one-fth of that of the US. It
is easy to understand why that foreigncompanies that now outsource programming
and business processes enjoy 30% - 40% in
annual cost savings.
The Philippines has a $200 billion GDP,
and it grew 7.6% in 2010, the latest year for
which that statistic is available. The private
sector contributes 70% to total GDP, and
electronics is its primary export. In turn, it
imports electronic parts (to assemble into
nished electronics goods for export), food
and commodities.
2 Export-Import Bank of India - LINK
3 Reuters, October 30, 2011 Consumers Confidence Highest in India-Nielsen- LINK
4 Financial Times, December 16, 2011 Indonesia Regains Investment Grade Status- LINK
5 Investment U, October 19, 2010, Investing in Malaysia: Five Reasons To Add This Strong Emerging Market To Your Global Portfolio, by Carl Delfield.- LINK
6 Department of Statistics, Singapore - LINK
7 Investment U, October 6, 2010, Investing in Singapore: Why Your Portfolio Needs This Hot Emerging Market by Carl Delfield.- LINK
Reerences
http://www.bea.gov/national/index.htm#gdphttp://in.reuters.com/article/2011/10/30/idINIndia-60200420111030http://www.ft.com/intl/cms/s/e7d2bf3a-2732-11e1-b9ec-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fe7d2bf3a-2732-11e1-b9ec-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3DIndonesia%2Binfrastructure%26ftsearchType%3Dtype_news#axzz1lvagqAAihttp://www.investmentu.com/2010/October/emerging-market-investing-in-malaysia.htmlhttp://www.singstat.gov.sg/stats/themes/economy/hist/gdp2.htmlhttp://www.investmentu.com/2010/October/investing-in-singapore.htmlhttp://www.investmentu.com/2010/October/investing-in-singapore.htmlhttp://www.singstat.gov.sg/stats/themes/economy/hist/gdp2.htmlhttp://www.investmentu.com/2010/October/emerging-market-investing-in-malaysia.htmlhttp://www.ft.com/intl/cms/s/e7d2bf3a-2732-11e1-b9ec-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fe7d2bf3a-2732-11e1-b9ec-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3DIndonesia%2Binfrastructure%26ftsearchType%3Dtype_news#axzz1lvagqAAihttp://in.reuters.com/article/2011/10/30/idINIndia-60200420111030http://www.bea.gov/national/index.htm#gdp7/31/2019 Product 2854 PDF Link
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Market Views|
A GUIDE TO INVESTING IN ASIA
Industries and sectors:Meeting the demand from
other countriesWhenever there is a young, skilled, and relatively low-cost labor force, opportunities abound
to capitalize on it. Foreign companies can benet consider the proliferation of call centers
outsourced to Asia by US companies.
An educated labor force adds to the allure in Asia. Asians currently lead in hard sciences,
math and engineering. In fact, more Asians are enrolled in these disciplines than are American
students. The demand in other countries for these skills cannot be underestimated. Indeed,
the late Steve Jobs of Apple, Inc. commented that the company was forced to employ workers
overseas because of the shortage of workers with these skills in the US 8.
With a total Asian middle class of 500 million to 600 million spending between $2.0 trillion
and $2.5 trillion, Asian inhabitants will continue to seek to improve their lives, raise their
standard of living and enjoy the consumption levels similar to those of the West. Food,
household goods and commodities are obvious opportunities for foreign companies to prot.
In addition, banks and nancial institutions represent attractive opportunities in Asia. As global
interest rates are expected to rise, the Asian nancial sector is poised to benet.
8 The New York Times, January 21, 2012, How the US Lost Out on iPhone Work -
http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?
CapitalizationOppotunities to invest in Asia exist
acoss te equit capita stuctue.
Large capitalization growth and income
generally seeks capital appreciation and
current income by ocusing on Asian
companies that pay dividends on common
stock, preerred stock and convertiblesecurities. These companies are considered
relatively stable, and since they provide some
downside protection in terms o the income
component, are deemed to be less risky than
other equities. However, dividends are not
guaranteed, and some may be sensitive to
changes in interest rates.
Large capitalization, long-term growth
companies generally ocus on capital
appreciation, rather than on the combination
o growth and income noted above.
Although these Asian companies are
considered large, they may not always
compare in size with large US companies.
Thus, they may be somewhat less liquid and
have higher volatility.
Small capitalization companies in Asiagenerally are below $3 billion in market value.
Because o their smaller size and, thereore,
lower levels o liquidity, these securities
may not trade as readily, and prices can be
more volatile than the large capitalization
companies noted above. Although this
short-term volatility can smooth out over
time, because o their size, these companies
may have limited fnancial resources and/
or products, and inormation may not be as
readily accessible as or larger companies.
RIsk FActoRs
As in any investment strategy, there are
risks associated with Asia investments.
01 UNEASY TRADE RELATIONSHIPS
For example, China has a long-running dispute with
Taiwan, and at times has had strained relations with
its trading partners (including the US).
02 COMPROMISE IN INNOVATION
Chinas communist leadership is another issue to
consider. A government that exercises so much
control raises questions relating to innovation, orexample. In a country where The Party reigns
supreme, decisions oten are made to keep the
leaders in power, rather than or the good o the
countrys economy. These kinds o political risks can
put downward pressure on share prices.
03 DIFFERING REPORTING STANDARDS
Obtaining the accurate inormation necessary or
investment decision-making can be a challenge in
Asia. Some Asian countries (with the exception o
Singapore) may have creative ways o presenting
the numbers that are inconsistent with how the
US mandates its reporting. Particularly in China,
governed by communist leadership, there are poor
accounting and corporate governance standards.
Inormation is controlled tightly by the government,
making it dicult to obtain the level o dependable
data we are used to seeing in the US.
04 DIFFERING ECONOMIC FOCUS
Also, there tends to be a ocus on expanding market
share rather than on protability, as US investors are
used to doing. Growing market share at the expense
o the bottom line means that both short- and long-
term debt may be out o balance when compared to
the typical US company valuations that constitute a
reasonable option or investment.
05 INFLATION & CURRENCY
Infation, the bane o any investment, is a concern
http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?7/31/2019 Product 2854 PDF Link
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A GUIDE TO INVESTING IN ASIA | Market Views
9 Ghost cities are a result of the governments
overbuilding to keep growing the economy, similar to
Keynesian stimulus packages in the US.
Some Asian countries may have
creative ways of presenting the
numbers that are inconsistent with
how the US mandates its reporting.
Investment
vehicles
Closed-end funds are one avenue for reaching
the Asia market. The fund raises capital and
then invests that capital according to the funds
objectives. Only a xed number of shares are
issued, and the shares trade on a stock exchange.
Because the number of shares are constant, manyinvestors believe that closed-end funds free-up
portfolio managers to focus on their investment
objectives and avoid the distractions of daily
in-ows and redemption requests. For this reason,
closed-end funds are often deemed at an advantage
for investing in thinly traded emerging markets
such as Asia.
Separately managed accounts are another
route, whereby the investment manager selects
individual securities exclusively in the Asian
market. Depending upon the strategy involved,
the securities are held for varying lengths of time
before sale. The types of securities purchased
(stocks, bonds, etc.) depend upon the objective of
the account holder and may be tailored specically
to meet goals of income, capital appreciation, etc.
Exchange Traded Funds (ETFs) are a popular
and rapidly growing investment mode, and Asia
has seen tremendous increase in these avenues.
ETFs can be sliced and diced in various ways
i.e., agriculture, metals, technology, etc., to name
just a few. Because fees are lower than those for
managed accounts, investor demand has been
rampant. Although the investor gives up alpha
(performance above the index), it is also true that
the majority of managers do not outperform their
benchmark.
Another obvious way to access the Asia market is
to buy the securities of US companies who
do substantial business there. Doing so means
an investor may avoid some of the political risk
mentioned above, since company control is
outside Asia.
in some Asian countries. China in particular is
experiencing higher-than-expected levels o
infation (over 4%) as it tries to balance monetary
policy with growth expectations. The Central
Bank responds to such pressures by tightening
monetary policy, and stock prices can suer.
Nor can currency risks be ignored. I an Asiancurrency weakens against the dollar, oreign
investments can be aected adversely.
06 HIGH LEVELS OF DEBT
China also has another risk. Because its rapid
growth has been driven, in part, by investment in
projects that turned out not to be viable i.e., ghost
cities9, high levels o debt have ensued. Servicing
the debt means that households represent a lower
contribution to GDP. For GDP growth that is driven
by consumption, that balance must change, and thegovernment will need to transer wealth back rom
the state to households. Either policy makers must
make direct transers to households or shit the debt
burden to the state. Both solutions have a downside,
either political ramications or a high debt burden.
07 DEPENDENCY ON OTHER ECONOMIES
Finally, because Asian economies depend upon
exports, when their trading partners experience
diculties, those diculties tend to reverberate
up the ood chain. China and other parts o Asia
already are eeling the pushback rom the Euro
Zones scal crisis. The Euro Zone is Chinas largest
trading partner.
There are many means to access the Asian market. Several fnancial
institutions oer portolios with primary exposure to Asia. As noted previously,
these can have acapitalization, industryorgeographicocus.Alternative assets, primarily hedge
funds, private equityand real estate
are additional vehicles for investing in Asia.
Hedge funds generally invest in securities listed
on a stock exchange, and often use leverage
to enhance returns. Private equity involvesinvesting either in venture capital, buy-outs
or special situations, holding for several years
while costs are streamlined and the company is
restructured to maximize prot, and then sold.
Real estate funds take positions in industrial
or residential properties, often in the form of
real estate investment trusts (REITS) and hold
the investments until market conditions are
appropriate for a sale at a higher price.
Finally, commodities are another method for
accessing the Asia market. Because of the rapid
growth these countries have experienced, couple
with the changing demographics, for example,
the move from an agrarian to an industrialized
economy, the demand for commodities in Asia
has rocketed upward. Commodities are based on
supply and demand. There can be no question
about increased demand. Oil is an obvious
example more automobile owners consume
more oil. Coal is another, as the demand for
heating and manufacturing increases. Copper,
used in construction, electrical grids, appliances
phones and vehicles has experienced signicant
demand increase. Precious metals, such as gold,
platinum and palladium all have experienced
increased demand, as a growing middle class bu
jewelry, for example.
What is not so obvious is that these commoditi
are driven by supply characteristics, as well.
When a commodity is scarce, the price goes up
Focusing on commodities where there are supp
constraints creates prot opportunities. For
example, Russia and Africa control most of the
mining supply for gold and precious metals.
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Market Views|
A GUIDE TO INVESTING IN ASIA
CONClUSION
China has seen a marked decline
in manufacturing. As in the US,
the purchasing managers index in
China remains a primary business
barometer. Its recent reading of 50.5,
reecting a modest increase from the
49.5 registered in December 2011,
is interpreted as a signal of cooling
economic growth. Coupled with a
continuing drop-off in payrolls, the
government may face the decision
to enact more aggressive easing
measures in its attempt to prop up
growth.
Chinas stock market needs both
exports and domestic consumption
to ourish. With the Euro Zones
issues being a strong headwind
for exports, tightening monetary
policy impacts consumption. Bank
loans are restricted and reserve
AlThOUGh ThE ASIAN ECONOMy rEMAINS STrONG, IT DEfINITEly hAS COOlED IN rECENT MONThS
requirements are higher. It is
hard for domestic consumption to
have meaningful growth in this
environment.
Further proof lies in property prices
they have been falling in recent
months, with land prices down 60%
year-over-year as of September 2011.
Once the most important sector, it
accounted for 13% of the economy,
and close to 20% if construction-
related industries are included.
Governments public works projects,
nanced with loans from state-owned
banks, helped drive investment as
a share of GDP to 48.5% in 2010
(not surprisingly, that was the peak
of GDP growth, as well). Chinas
ghost cities have empty apartments,
public works projects are winding
down, and unemployment is rising10.
There are eerie similarities to the US.
Yet, China, in particular, does have
additional fuel for its economic
engine, since the Euro Zone is its
largest export market. The troubles
in the Zone are well known, and
as recently as February 6, 2012,
Chinese Premier Wein Jubao
commented in the February 6, 2012
edition of The Wall Street Journal,
Now that Europe is facing a debt
crisis, we must consider our relations
with Europe strategically and
preserve our na tional interests.
While the double-digit growth rates
experienced in recent years are
likely not to be replicated in the near
future, there is no question that Asia
is a vast market for US investments.
Staying aware of the political
and economic issues is vital for
successful investors. Finding expe
trustworthy investment managers i
always important, and will continu
to be so, especially in Asia.
9 The Wall St reet Jour nal,
December 3-4, 2011, Editorial.
Chinas gho
cities have emp
apartments, publworks projects ar
winding down, an
unemployment
rising
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A GUIDE TO INVESTING IN ASIA |Market Views
TheMarket ViewReasons to consider Asia now
Asia is getting plenty o
attention but it is the speed
o its transormation that
truly astonishes us.
By Aberdeen Asia Equities Team
PAGE 11
With over two decades of on-the-ground experience
investing in Asia, we have a long historical
perspective to formulate our views on investing in
this dynamic region. Consider:
Continued economic growth Emerging
Asia10 is driving world growth. According to the
International Monetary Fund, Asia is projected to
grow most rapidly at 7.5% on average in 2012-2013,
compared to the global growth rate of 3.3%11. We
believe that Asia-Pacic markets offer strong growth
prospects, reecting high savings and investment
rates and a tradition of scal prudence.
Positive long term outlook In our opinion,
Emerging Asian markets are supported by strongfundamentals compared to developed markets.
Debt levels in Asian economies are lower than
the developed world, where unprecedented scal
deterioration took place in recent years. Also, we
expect a growing middle-class to increasingly drive
the Asian economies in the future, as we see a
secular trend away from export dependence towards
domestic demand.
Healthy and less indebted economies - Asian
economies are in far better shape than their heavily
indebted G7 counterparts. Fundamentals are strong
and the economies are more stable as reected in
balance of payments (which are generally in surplus)
and substantial foreign exchange reserves. We
believe that the scal stance of Asian countries has
markedly improved leading to a decrease in the
sovereign default rates.
Tradition o fscal and monetary prudence
Asias tradition of prudent scal and monetary
policies meant, ahead of the global downturn,
fundamentals were stronger in many Asian
economies than in many developed countries. This
record of scal discipline gave Asian governments
the ability to cope with the global downturn while
only reducing scal balances slightly, leaving them
in good shape for future growth.
Strong balance sheets Not only are balance
sheets strong at the country level, they are also
strong at the corporate and household level. Asian
consumers have low levels of debt and a high level
of savings.
Favorable demographics Asian nations are
characterized by a young, growing population wit
rising incomes. A strong rise in the working age
population is predicted through 2050in sharp
contrast to Europe, where working age population
expected to record a secular decline. The emergen
of an Asian middle class will help drive the trend
domestic consumption and intra-regional trade.
Growing sophistication and liquidity o Asian
markets Domestic nancial markets are stillyoung but growing fast. In 2010 Asia accounted
for almost two-thirds of the IPO market in dollar
terms12. This sophistication and liquidity provides
investors with the opportunity to diversify away
from the escalating sovereign credit risk in the
developed markets.
Attractive valuations We believe that equity
valuations in the region are reasonable, given
company quality and balance sheet strength.
Additionally, spreads are reasonably attractive giv
the low default risk of emerging market sovereign
Positive prospects Investing in Asia can be
challenging; however, we believe there are excelle
opportunities available for rms with the research
capabilities to accurately assess investment
opportunities. As an active fund manager, we trus
our own rather than third party research. Company
visits provide deeper insights and our investment
process is driven by in-person meetings, which
continue throughout the lifetime of our investmen
With 80 investment professionals on the ground in
Aberdeens Asian ofces, we believe we can offerinvestors unique access to the strong and growing
potential of the Asia-Pacic region. To learn mor
about Aberdeens Asian-focused closed-end funds
please visit www.aberdeen-asset.us/cef. Please se
important disclaimer information on page 3.
10 Emerging Asia comprises: China, Hong Kong SAR, Ind
Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwa
Thailand and Vietnam.
11 International Monetary Fund, January 24, 2012.
12 Ernst & Young, December 2010.
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Market Views|
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Our fund managers most useful tool
No. 5: A shared cup of tea.
Before ever investing in Asiawe prefer to interview face-to-face.
In Asian markets, you have to do your own due diligenceand discovery. Not just take someone elses word for it.
Thats why its important to have people locally, on the
ground, researching markets and companies first hand.
We believe Asia represents one of the worlds strongestand growing economic regions and the prospects for income
and appreciation have never looked better.
At Aberdeen, we only do our own research and our fund
managers are based in the regions where we invest.
But it takes more than an understanding of the big pictureto appreciate the diverse range of investment opportunities
in Asia, as weve discovered over many cups of tea.
Aberdeen Closed-End Funds.
www.aberdeen-asset.us/cef
Aberdeens Asia-Pacific and global closed-end funds listedin the U.S. are:
Aberdeen Asia-Pacific Income Fund, Inc. (FAX) Aberdeen Australia Equity Fund, Inc. (IAF)
Aberdeen Emerging Markets Telecommunications andInfrastructure Fund, Inc. (ETF)
Aberdeen Global Income Fund, Inc. (FCO)
Aberdeen Indonesia Fund, Inc. (IF) The Asia Tigers Fund, Inc. (GRR)
The India Fund, Inc. (IFN) The Singapore Fund, Inc. (SGF)
For more information, contact our Investor Relations Team at800-522-5465 or e-mail [email protected].