SOURCE: Aberdeen Asset Management

aberdeen asset management

April 22, 2010 12:44 ET

Increased Portfolio Diversification From Asian Bonds

Aberdeen's Asian Managers Visiting Several Major U.S. Cities Next Month

PHILADELPHIA, PA--(Marketwire - April 22, 2010) -  The April 14 decision by Singapore to tighten monetary policy via its currency band, the Singapore dollar, together with continuing speculation regarding Chinese renminbi revaluation, highlights the compelling long-term attraction in Asian fixed income securities, according to Aberdeen Asset Management, the global asset management group.

Asian fixed income has traditionally been under-represented in portfolios and benchmarks. However, Aberdeen is seeing increased interest in the asset class, given the strength of Asian economies and the growing need among institutions to diversify their fixed income exposure.

Asia has emerged as a capital exporting bloc that, thanks to high savings and prudent fiscal management, has been living within its means. Unlike the West, current accounts are mainly in surplus, while deficits (relative to GDP) are lower in most cases. Rating agencies testify to this resilience, with recent sovereign upgrades in South Korea and Indonesia. Furthermore, it appears that, with Asia likely to lead global growth for some years to come, the credit outlook remains positive.

In the near term, a gradual reduction in government stimulus used to boost domestic consumption and growing fears of inflation are likely to result in higher interest rates in Asia. Aberdeen believes this should lead local currencies to appreciate against key global currencies, given the contrasting outlook for growth in the major Western economies. In addition, with pressure on China building to allow the renminbi to strengthen, any adjustment there is likely to see other Asian countries follow.

While Aberdeen is "structurally bullish" on currency prospects, it also sees selective value in credit, even though spreads over U.S. Treasuries have narrowed in the past 12 months.

Conventionally, Asian local currency bonds comprise government bonds in local currencies. They provide currency diversification, either directly or synthetically, in markets which are nominally closed, such as China's, through the use of derivatives. The markets are lowly correlated within the region as well as with the developed markets, thereby adding greatly to global portfolio diversification.

Aberdeen has a dedicated team of 12 Asian fixed income investment professionals located in the region managing over $5.2 billion in assets. These include specialists in Asian local currency bonds, currency and credit research. Under Anthony Michael, the team manages the Aberdeen Asia Bond Institutional Fund (CSABX), which is the only dedicated Asian Bond fund for U.S. 40 Act mutual funds, according to data from Morningstar1. Details are available through Aberdeen's website at www.aberdeen-asset.us/asiabond

Anthony Michael, Aberdeen's head of fixed income - Asia Pacific, comments:

"Asia's fixed income markets offer tremendous opportunities to international investors in search of portfolio diversification and return enhancement. This is because of the region's superior fundamentals and its sheer variety, with countries rated from triple A to sub-investment-grade."

"There is still a perception that Asia is part of a larger emerging market universe, with all the contingent risk that used to imply. But if you make the effort to understand the market idiosyncrasies, you can exploit the mispricing which results."

Aberdeen's Asian portfolio management team will be visiting several major cities in the U.S. to discuss their views with institutional investors and Registered Investment Advisors during the weeks of May 17 and May 24. Please call U.S. business development manager Mark Ouimet at 215-405 2417 or email him at mark.ouimet@aberdeen-asset.com. For a more detailed introduction to this growing asset class, Aberdeen has produced a brochure which examines the Asian fixed income market in more detail, its characteristics, differences and opportunities. Please contact Mark Ouimet for further details.

1. Data generated from Morningstar Direct based on a universe of U.S. open-ended world bond funds as of March 16, 2010.

For further information about Aberdeen Asset Management, please contact:
Katie Cowley, T: 215-405-2423 or E: katie.cowley@aberdeen-asset.com

NOTES TO EDITORS

Concentrating investments in the Asia-Pacific region subjects the Fund to more volatility and greater risk of loss than geographically diverse funds.

About Aberdeen worldwide
Aberdeen Asset Management Inc. is the wholly-owned U.S. subsidiary of Aberdeen Asset Management PLC ("Aberdeen Asset"), a global investment management group which is headquartered in Aberdeen, Scotland, and manages more than $230 billion of assets for both institutions and private individuals (as of Dec. 31, 2009). The group employs over 1,800 staff across 26 countries worldwide.

Aberdeen's Asia Pacific fixed income capability

At Aberdeen, we believe a locally-based team of Asian fixed income specialists is the most effective approach to managing this unique asset class. The wide diversity and idiosyncratic characteristics of the region's bond markets makes locally-based investment an essential requirement.

Our Asian fixed income team is centered in Singapore (with a smaller team in Bangkok) and is composed of two teams of experienced investment professionals -- one with dedicated responsibility for Asian credit and another for Asian interest rates and currency. We believe this structure provides our specialist teams with the freedom to focus on idea-generation and the identification and exploitation of alpha opportunities within their area of expertise.

To be successful in Asia's bond markets requires a disciplined analytical approach through proprietary research into the global macroeconomic environment and developing a deep understanding of the region's political and policy influences, together with knowledge of local bond market technicals and idiosyncrasies.

Important information

The above is for information purposes only and should not be considered as an offer, or solicitation, to deal in any of the investments mentioned herein. AAM does not warrant the accuracy, adequacy or completeness of the information and materials contained in this document and expressly disclaims liability for errors or omissions in such information and materials.

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