Aberdeen Asset Management On Twenty Years Of Transformation In Asia

Aberdeen Asian Smaller Companies Investment Trust PLC celebrates its twentieth anniversary this month. To observe the milestone the company has issued a short 56-page history that is being distributed to shareholders and enquirers later this month. The booklet charts the key world events and explores some of the listed smaller companies in Asia, where it has invested over the last two decades.

Launched on 8 October 1995, the investment trust has witnessed three great economic upheavals, the Asian crisis of 1998, the dot-com boom and bust of 2000 and the global financial crisis in 2008. 2015 has also been a year of turbulence. The so-called “normalisation” of US central bank policy may be a good thing because it points to economic strength in the US and weans markets off speculative capital, but the prospect of a rate hike could accelerate fund outflows from Asia in the short term.

As economies develop and flourish, smaller companies are often the key beneficiaries of that domestic growth, occupying strong market positions and niche areas. Smaller companies are significantly geared into the mega-trend of the Asian consumer. In Aberdeen’s view, investors would do well to go back to basics; embrace businesses that are easy to understand; look for companies with broad regional exposure, established franchises and solid finances; seek out firms that respect minority shareholders.

The Chairman of the trust, Nigel Cayzer, explains in his preface that much has changed since launch, commenting that: “the Asian economies have been the powerhouses of the world with rapid growth, the emergence of an aspirant middle class, and with it, aspiring local economies.”

Hugh Young, manager of the trust and MD of Aberdeen Asset Management Asia, commented, “Smaller companies tend to be under-researched, and because of their size, have more potential for growth than larger companies. In Asia these differences are magnified: research coverage is often thin – benefiting active managers like us who do our own due diligence – while headline growth rates are that much stronger. We would therefore expect smaller companies to outperform their large cap counterparts over the longer term, although periods of mispricing and illiquidity mean investors must be patient.”

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