hugh young of aberdeen sees region offering greater returns than in heady days before 1997
Shareholders investing in Southeast Asia today stand to make more money than was ever possible during the heady days before the 1997 financial crisis.
That was the line of Hugh Young, managing director of Aberdeen Asset Management Asia, who told the Investment Week Markets Forum 2003 that following its rude awakening, Southeast Asia could now be seen as 'your value story, pure and simple'.
While Western economies have been coming to terms with their own financial scandals, Southeast Asia has been getting its house in order, said Young.
He noted: 'I think overall the picture is one of improved corporate governance and transparency, one of strong government actions across the region that has ultimately been translated into good news for shareholders.
'Companies are looking after their shareholders much much better today than they were five or 10 years ago.
'Perversely, although we are talking about relatively stunted growth rates, about 3% on average compared to the 7%, 8% and 9% rates we saw in the heady days, as shareholders we stand to make more money going ahead from here than we ever did.'
Young sees the markets, on about 11.5 times current year earnings, as relatively cheap but believes they could go down to eight times earnings.
Balance sheets in the region are exceptionally strong, he added, with Aberdeen's broad regional portfolios standing on a debt equity ratio of 25%.
Aberdeen's Asia smaller companies, China (essentially a Hong Kong vehicle) and Singapore funds are sitting on net cash at the balance sheet level of the underlying investments. 'This gives you an idea of some of the strengths at the corporate level in Asia,' said Young. 'To talk of something rather unfashionable today, the dividend yield of our portfolio is standing on an historic level of just under 4%.'
He conceded Asia is going to suffer a bit from the difficult global economic situation of this year but added he believes the argument is one of relative attraction in terms of valuations and relatively strong economies compared to other parts of the world. Southeast Asian governments and corporates had been tidying up balance sheets since 1997 and achieving a 'sea change' in corporate governance, according to Aberdeen. Valuations hit rock bottom two years ago, said Young, but since then there has been 'a fairly quiet bull market'.
Corporates are now 'sticking to their knitting,' he added. Gone are the days when corporates like South Korea's Daewoo 'thought they could rule the world, setting up subsidiaries in every single country under the sun, taking on $80bn or $90bn of debt, a country-sized sum, about the size of Indonesia's debt'.
Partner Insight: For Blackfinch, the arrival of its IHT portfolio services was a 'natural evolution' in the group's offering and points to an established track record of returning cash to investors.
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