India Update Oct 08 _SIN.indd - Aberdeen Asset Management

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India Update Oct 08 _SIN.indd - Aberdeen Asset Management

MONTHLY COMMENTARY OCTOBER 2008India UpdateMarket Overview• Indian equities fell in September, as the Þnancial sector upheaval spread from the US toEurope, and US lawmakers rejected the initial US$700bn bank rescue package. (At the timeof writing, the US has approved a revised bailout plan.)• Portfolio investments topped US$2bn, leading the rupee sharply lower. In response, theIndian central bank bought US dollars to slow the domestic currency’s fall, raised theinterest-rate ceiling on non-resident banks’ deposits of foreign currencies and allowedbanks to borrow more.• Industrial activity beat expectations in July, but fell over the January-July period. Annualinßation held steady above 12% in September and is expected to remain in double digitsfor the rest of the year.• India and Pakistan agreed to expand commerce and economic cooperation along theborder of the disputed Kashmir region.Portfolio NewsDuring the month, we sold energy Þrm Bharat Petroleum, following a run-up in its share price. Thestate’s mandate for the company to sell fuel below cost has made the operating environment verydifÞcult. We also took proÞts from Hero Honda (see below), which continues to perform well despitethe volatile environment. New model launches have helped the company maintain its strong marketposition. Conversely, we added to ABB India and Housing Development Finance Corp, on weak prices.In corporate news, ICICI Bank, which holds US$81m-worth of Lehman’s senior bonds, made anadditional US$28m in provisions. DLF received regulatory approval to buy back Rs11bn-worth ofshares at a price not exceeding Rs600 per share, while the board of Bosch India approved a sharebuyback plan not exceeding 25% of the company’s equity. Tata Power agreed to buy an 11% stakein Australian renewable energy producer Geodynamics for A$44.1m (US$37m). Sun Pharmaceuticalextended the deadline for its offer for all outstanding shares of Israel’s Taro Pharmaceutical byanother month.We hold the companies highlighted above.Focus - Hero Honda - clear road ahead?Units(mil)Hero Honda: Motorcycle salesHero Honda: Motorcycle market-share%3.5603.02.52.01.51.00.50.040FY02 FY03 FY04 FY05 FY06 FY07 FY08 YTD-FY09Source: CLSA, 24 Sep 08585654525048464442Indian rupee1000Hero Honda has emerged a leader in the domestic motorcycle market, focusing on entry andmid-segment bikes. Having recently raised prises, the company’s strategy is to keep discounts toa minimum. Together with volume growth through increased production earnings are expected togrow 35% year-on-year in the second quarter of FY09, according to BNP Paribas. The stock hasbeen appreciating steadily over the past six years, ending at INR872.3 at the close of September,up sharply from a low of INR188.25 in March 2003, but a shade below its peak of INR890 inMarch 2006.9008007006005004003002001000Hero Honda share priceMar 02Sep 02Mar 03Sep 03Mar 04Sep 04Mar 05Sep 05Mar 06Sep 06Mar 07Sep 07Mar 08Sep 08Source: Bloomberg, Oct 08PAGE 1 OF 2


MONTHLY COMMENTARY OCTOBER 2008India UpdateFor more informationMarketing DeskTel: +65 6395 2701Fax: +65 6438 0743Aberdeen Asset Management Asia Limited21 Church Street#01-01 Capital Square TwoSingapore 049480Tel: +65 6395 2700Fax: +65 6535 7159www.aberdeen-asia.comImportant informationThe above is strictly information purposes only and should not be considered an offer, orsolicitation, to deal in any of the mentioned funds. Any research or analysis used to derive, orin relation to, the above information has been procured by Aberdeen Asset Management AsiaLimited (“Aberdeen Asia”) for its own use, without taking into account the investmentobjectives, Þnancial situation or particular needs of any speciÞc investor, and may have beenacted on for Aberdeen Asia’s own purpose.Aberdeen Asia does not warrant the accuracy, adequacy or completeness of the informationherein and expressly disclaims liability for any errors or omissions. The information is given ona general basis without obligation and on the understanding that any person acting upon or inreliance on it, does so entirely at his or her own risk. Any projections or other forward-lookingstatements regarding future events or performance of countries, markets or companies are notnecessarily indicative of, and may differ from, actual events or results. Aberdeen Asia reservesthe right to make changes and corrections to the information, including any opinions orforecasts expressed herein at any time, without notice.Aberdeen Asset Management Asia Limited, Registration Number 199105448EPAGE 2 OF 2

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