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Aberdeen Global Technology Fund Annual report to 30 September 2014

Performance Review The Aberdeen Global Technology Fund rose by 11.46% in Singapore dollar terms for the year under review, underperforming the benchmark Merrill Lynch Technology 100 Index’s 19.25% gain.

Market Review Technology shares gained during the year under review, despite sporadic heavy selling. Heightened geopolitical tensions in the Ukraine and the Middle East compelled investors to reassess their exposure to the high growth, but riskier stocks that dominate the sector. Meanwhile, increasingly downbeat news on the China and Eurozone economies also weighed on sentiment. However, a more encouraging outlook for the US and UK and continued loose monetary policy across the developed world was enough to coax buyers back. Merger and acquisition activity was particularly buoyant across the industry. Several multi-billion dollar deals were announced, including Comcast’s purchase of Time Warner Cable for US$45.2 billion. Meanwhile, Facebook’s purchase of Whatsapp for US$16 billion and the much-hyped Alibaba IPO kept the sector in the limelight.

Portfolio Review At the stock level, UK-based scientific research equipment maker, Oxford Instruments, was a key detractor. Its share price fell in the wake of UK government spending cuts, which dampened demand for publicly-funded research. The company also faced pressure from the strengthening pound. However, Oxford Instruments has sound management and a promising strategy for long-term growth, including acquisitions and new product development. Our holding Taiwan Mobile suffered from heightened competition and concerns over the high prices telecom carriers paid for spectrum on which to launch their 4G mobile broadband networks.

Meanwhile, Anite weighed on performance after issuing a profit warning at the beginning of the review period. The mobile test equipment provider said changes at major handset and chipset makers had led to contracts being delayed. More recently, a rebound in Anite’s handset testing business lifted revenues, while demand from Asia Pacific remained robust. Aveva Group’s shares also took a hit following a surprise profit warning. The engineering software company faced foreign exchange pressures, as well waning demand from South America and parts of Asia. Elsewhere, not holding Micron Technologies or Avago Technologies hurt relative performance. Memory chip-maker Micron’s purchase of Elpida significantly increased its market share and boosted sales, while Avago was buoyed by solid earnings growth and a well-received acquisition.

Conversely, holding Microsoft supported relative returns. Its share price rose steadily following Satya Nadella’s appointment as chief executive. Investors cheered his shift in company strategy toward mobile and cloud computing. Meanwhile, Intel Corp performed well on the back of a new server product cycle, greater penetration into the tablet market and improvements in its core PC business.Taiwan Semiconductor Manufacturing Corporation gained after reporting record high sales over multiple quarters, on robust demand for its products.

In portfolio activity, we introduced Visa and Brazilian software group Totvs for their quality and attractive long-term prospects. We also initiated engineering software designer Aveva, Dassault Systemes and Keyence on attractive valuations, using proceeds from selling Adobe Systems, IBM and Texas Instruments, which no longer met our investment criteria. We also sold our remaining position in Canon owing to challenging industry conditions.

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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