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Aberdeen Malaysian Equity Fund Annual report to 30 September 2014

Performance Review The Aberdeen Malaysian Equity Fund rose by 5.35% in Singapore dollar terms for the year under review under review, compared with the benchmark FTSE Bursa Malaysia KLCI index, which gained 8.54%.

Market Review Malaysian equities rose over the review period on the back of robust exports and manufacturing growth. Exports helped to counteract the effects of government subsidy cuts, and measures to cap inflation and reduce household borrowing. This included the central bank raising interest rates by 0.25% to 3.25% for the first time in three years as part of a normalisation process, after the 1.50% cut following the global financial crisis of 2008. Subsequently, rates were held steady as the local economy cooled, amid a slide in commodity prices. Among key trading partners, economies such as China, Europe and Japan slowed, however monetary policy among major central banks remained accommodative. This, despite the US Federal Reserve’s tapering of asset purchases and hints of rate hikes in 2015.

Portfolio Review At the stock level, among the biggest detractors to relative performance was our lack of exposure to electricity utility firm, Tenaga Nasional, which benefited from the latest round of tariff hikes in January 2014. This was seen as a sign of the government’s commitment to implement a fuel-cost- pass-through mechanism, which may add stability and predictability to its earnings. Meanwhile, Oriental Holdings detracted, as a key purchaser of its automotive parts, Honda, decided to phase out one of its main motorcycle products. Furthermore, brewer Guinness Anchor detracted owing to weaker results from subdued consumer spending. Investors also expect excise duties to be increased.

On the other hand, internet service provider Time dotcom, contributed to performance on the back of healthy results, while insurer LPI Capital, continued to do well with its consistently strong underwriting operations. In addition, not holding Genting benefited the fund, as gaming revenues were weaker amid lower tourist arrivals and dampened domestic consumption.

In portfolio activity, we initiated Bumi Armada on attractive valuations, given the management’s established track record in providing floating production, storage and offloading (FPSO) services to offshore oil producers. We believe the management has the capability to work through the relatively weak cycle in the offshore supply vessel market.

Source: Aberdeen Asset Management Asia Limited The performance returns are sourced from Lipper, based on percentage growth, calculated on a NAV-to-NAV basis with gross income reinvested.


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