Aberdeen Global - Hozam Plaza

Asian Property ShareFor the year ended 30 September 2012PerformanceFor the year ended 30 September 2012, the value of the Asian PropertyShare - S Accumulation shares increased by 35.52% compared to anincrease of 35.96% in the benchmark, the MSCI AC Asia Pacific RealEstate Index.Source: Lipper, Basis: total return, NAV to NAV, net of annual charges, gross incomereinvested, USD.Manager’s reviewAsian property outpaced the broader market, which rose in the yearunder review despite being buffeted by turbulence. Much of the gainswere due to major central banks’ attempts to reflate the globaleconomy, which included the European Central Bank’s bond-buyingplan and the third round of quantitative easing from the US. Alsoreviving risk appetite were China’s cash infusion to boost liquidity in itsbanking system, as well as interest rate cuts in Europe and China.Sentiment had been roiled by speculation over Greece’s exit from theEurozone, as well as anaemic economic data across the globe.Portfolio reviewAt the stock level, Ayala Land did well, posting record profits in 2011and registering earnings growth of over 30%. The Philippine propertydeveloper maintained its positive trend in the first half of 2012, with asimilar level of year-on-year growth. This is a result of its strategy totarget more market segments and, to a lesser extent, successfulgeographical expansion outside the capital Manila. Also contributing toperformance was Yanlord Land, as its share price was buoyed by animprovement in sentiment in China’s residential property market. Last,Malaysia’s Oriental Holdings re-rated as investors started to appreciatethe underlying value of the different operating entities and its realestate business. Conversely, our holding in Hong Kong & ShanghaiHotels proved costly, as its shares were affected by concerns thatglobal economic slowdown would hurt travel-related businesses. InJapan, ResortTrust Inc faced slower sales of resort memberships duringthe period.In portfolio activity, we introduced East Japan Railway and LondonlistedMillennium & Copthorne Hotels, the hospitality arm ofSingapore’s City Developments, which derives the bulk of its earningsfrom the Asia Pacific. In the IPO market, we subscribed to the flotationof Tesco Lotus Retail Growth Freehold & Leasehold Property Fund,which holds 17 shopping malls that are anchored by Tesco Lotushypermarkets. We also participated in the public offer for Far EastHospitality Trust, which holds a decent portfolio of good-yieldingSingapore-based assets, along with longer-term potential for furtherasset enhancement and injection opportunities. We took part in theIPO for Ascendas Hospitality Trust, which has a diversified portfolio ofgood-yielding Asian assets. Against this, we sold Siam City Cementgiven its relative share price strength, and Sankei Building following FujiMedia Holdings’ takeover bid. Similarly, we sold Parco on accepting JFront Retailing’s partial bid in Japan. We also exited Fraser and Neave,which was the subject of an offer by Thai Beverage; and divested SPSetia, given the uncertainty surrounding its future plans, which becamea major concern.OutlookLooking ahead, Asian stockmarkets are likely to face further volatility.The boost from the latest bout of central bank intervention appearsshort-lived. Recent data point to further economic deterioration.Worsening violence in Syria, tensions in the Gulf, as well as labourunrest in China and Indonesia are adding to concerns. However, Asiaremains in far better shape than the West, with regional growthexpected at above 6% for 2012. We are also confident that ourholdings will be able to withstand the gathering headwinds, given theirfinancial resilience and guided by experienced management.34 Aberdeen Global - Asian Property Share