November 20, 2014 / 9:43 AM / 3 years ago

Aberdeen stays conservative in Asia, despite earnings slowdown

SINGAPORE (Reuters) - Aberdeen Asset Management will avoid riskier bets and stay conservative in its Asia picks despite a drop in earnings growth at its portfolios and fund outflows, the money manager’s Asia chief said on Thursday.

“Typically, a characteristic of our portfolios is that they are pretty conservative. We tend not to play at the Alibaba end of the spectrum,” Hugh Young, Aberdeen’s global head of equities and managing director of its Asian business, told the Reuters Global Investment Outlook Summit.

E-commerce giant Alibaba (BABA.N), which made a record-breaking $25 billion listing in New York earlier this year, has attracted a whole host of top global institutional investors to its shares.

“There aren’t many changes in our portfolio today compared to where it was 2-3 years ago. Many of our top stocks are ones we have held for 10 or more years,” Young said.

Young said Aberdeen’s Asian funds had in 2014 recouped some of the heavy losses they suffered last year, after former U.S. Federal Reserve Chairman Ben Bernanke’s talk of policy tightening triggered a selloff in emerging markets.

Earnings per share on average across Aberdeen’s Asian equity portfolio had risen only around 5 percent, the slowest pace in more than a decade and lower than the 8-to-9-percent growth the fund had anticipated, Young told the summit, held at the Reuters office in Singapore.

“This year, the outlook is one of anemic economic growth and anemic earnings growth. Asia is better than other parts of the world but by historic standards it is still pretty awful,” he said.

Aberdeen’s $100 billion-plus Asia-Pacific equity portfolio was focused on companies with strong balance sheets and management, with 40 percent of the investments concentrated in stocks listed in Singapore and Hong Kong, Young said.

Aberdeen’s largest equity holding in Asia is Samsung Electronics (005930.KS). It has 25 percent of the portfolio invested in Japan, and also owns Hong Kong-listed Chinese firms such as China Mobile (0941.HK).

STANDARD CHARTERED

The money manager has been bullish on India for a long time, comprising a steady 10 percent of its portfolio for the past 10 years. That stance has paid off this year.

The Aberdeen Global – Indian Equity Fund rose 32.6 percent in the year that ended in October, its best performing portfolio in absolute terms this year.

One particular poor performer in Aberdeen Asset’s equity portfolio was Standard Chartered (STAN.L) (2888.HK), whose London shares are down 33 pct so far this year.

Aberdeen is the bank’s second largest shareholder, holding an 8 percent stake worth almost 2 billion pounds ($3.13 billion) at current market prices.

“It’s been a tough ride, it’s now valued like a poor quality Korean bank which seems a little unfair. They’ve made mistakes but it looks – famous last words – quite cheap,” said Young.

He backed comments made by Aberdeen’s head Martin Gilbert earlier this month that the bank’s chief executive Peter Sands and chairman John Peace should be allowed to sort out the current problems, but said changes would probably be needed further down the line.

“At some stage people have talked about refreshing senior management – and yes, it’s probably overdue,” he said.

Young also said he was hoping to create a direct property investment desk next year, one that would invest in actual “bricks and mortar”, in addition to the current strategy of indirect ownership of property funds.

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(For other news from Reuters Global Investment Outlook Summit, click here)

Additional reporting by Masayuki Kitano and Jongwoo Cheon; Editing by Muralikumar Anantharaman

Our Standards:The Thomson Reuters Trust Principles.
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