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Emerging Market Debt
February 2012
For Professional Use OnlyNot for public distribution
Viktor Szabo, CFA, Portfolio ManagerAberdeen Asset Management
Presentation toCitywire Conference
1
Table of contents
• Introduction to Aberdeen Asset Management
• Why Aberdeen for EMD?
• Investment team, philosophy and process
• EMD solutions
• Performance
• Allocation
• Appendices
2
Total assets under management $270.3bn
Total emerging market assets $88.9bn**
About Aberdeen Asset Management
• Aberdeen is an LSE listed* asset management company
- Sole focus on our clients' portfolios and their interests
• Global reach and local understanding
- 30 offices and over 500 investment professionals worldwide
- Investors based in all the key regions in which we invest, providing strong local knowledge
• Core investment expertise in emerging markets across both fixed income and equities
• Transparent investment processes
- As fundamental investors, our investment decisions are based on our own research
* Since 1991** Specialist mandatesSource: Aberdeen Asset Management, 31 Dec 11
Property11.4%
Fixed Income 22.7%
Equities46.6%
Money Markets5.1%
AlternativeInvestmentStrategies
14.2%
Emerging Markets Debt
$6.9bn
Emerging Market Equities$43.5bn
Asian Debt$6.7bn
Asian Equities$31.8bn
3
EMD assets under management $6.9bn*
Why Aberdeen for Emerging Market Debt?
• A strong global emerging markets footprint
• A dedicated, stable, experienced team of specialists
• A focus on the entire EMD universe
• We avoid complex opaque structured products
• We apply a forward looking, diversified approach to risk
• Our size ensures investment flexibility
* Including EMD assets carved out from other mandatesBreakdown of local currency versus US$ denominated debt (by benchmark)Source: Aberdeen Asset Management PLC, as at 31 Dec 11
Local currency debt$1.9bn
US$ denominated debt$5.0bn
Investment team, philosophyand process
5
Emerging Market resources
London
Brett Diment*Edwin Gutierrez
Kevin DalyEsther ChanMax WolmanViktor Szabo
Siddharth DahiyaFlora Sexton
Anthony SimondAndrew Stanners
Ewa Gray
Hugh Young* Flavia Cheong
Chong Yoon-ChouKristy Fong
Andrew GillanMark Gordon-James
Pruksa IamthongthongGan Ai MeeJames ThomAdrian LimLouis Lu
Christopher WongThomas Reeves
David Smith
Singapore
Anthony Michael*Kenneth Akintewe
Scott BennettAdam McCabeChew May TanWah Yong TanEe Leen Yeuh
Marisa LohMark Khoo
Ambrose Tan
Adithep Vanabrisksha*Orsen Karnburisudthi
Ratanawan Saengkitikomol
Pongtharin Sapayanon*Supakorn Tulyathan
Brett Diment: Head of Global Emerging Debt
Hong Kong
Nicholas Yeo*Frank TianKathy Xu
Nicholas Chui
Devan Kaloo*Joanne Irvine*
Andy BrownMubashira BukhariSusan McDonaldFiona ManningStephen ParrGabriel Sacks
Osamu YamagataCatriona Edmond
Peter TaylorWilliam Scholes
Devan Kaloo: Head of Global Emerging Equities
Leverage off Aberdeen’s highly rated global emerging equity platform
* Head of desk. Total number of investment professionals in Emerging is 70 (27 Fixed Income, 43 Equity). Includes affiliated persons under and inter-company agreementSource: Aberdeen Asset Management, Jan 12
Gerald Ambrose*Bharat JoshiJalil Rasheed
Mohd Najman Md IsaAndrew SanJolynn Kek
Evan Cheah
Suhaila SubohEdmund GohJeremy Teng
Emerging markets offices Fixed Income resourcesEquity resources
Bangkok
Sao Paulo
Nick RobinsonBrunella Isper
Eduardo Figueiredo
London
Singapore
BangkokKuala Lumpur
Hong Kong
Sao Paulo
Kuala Lumpur
Budapest
Budapest
Jozsef Szabo
6
EMD: the investment team
• Stable and experienced team
- With 12 people, we are one of the best resourced EMD teams
- Average of 9 years’ experience in EMD
• Local presence brings local knowledge
• Extensive primary coverage of sovereign and corporate issuers
- We research over 50 countries and more than 100 corporate issuers
- Expertise across each sub segment of the asset class
• Continuous collaboration with Asian debt and EM equity teams
Brett Diment Edwin Gutierrez Kevin Daly
Esther Chan Max Wolman
Siddharth Dahiya Andrew Stanners
Viktor Szabo
Jozsef Szabo
Ewa GrayAnthony Simond Flora Sexton
7
EMD: our investment philosophy
We believe:
• A thorough forward looking fundamental approach supplemented by market technical analysis is key to understanding and pricing all relevant risk factors
• Extensive resources are needed to deliver comprehensive primary coverage across the distinct sub segments of the EMD asset class
• In constructing diversified portfolios capturing alpha opportunities across all the different segments of the asset class
• In a benchmark aware, not benchmark driven approach
8
EMD: investment process
Step 3:Scenario analysis
Step 4:Comparative analysis
Step 5:Portfolio
Step 2:Technical analysis
Step 1:Fundamental analysis
Constructing diversified portfolios within a risk-adjusted framework
Assessing relative value across the investment universe
Forward looking assessment of risk-adjusted returns
Gauging market dynamics
Proprietary sovereign and corporate research
9
EMD solutions
EMD Plus – invests in hard currency sovereigns, quasi sovereigns and corporate bonds, localcurrency debt and FX
• Pooled fund: Aberdeen Global – Select Emerging Markets Bond Fund ($1,101m)
• Benchmark: JP Morgan EMBI GD
• AUM: $2,382m
EMD Local Currency – invest primarily in local currency debt and FX
• Pooled fund: Aberdeen Global – Emerging Markets Local Currency Bond Fund ($165m)
• Benchmark: JP Morgan GBI-EM GD
• AUM: $1,915m
EMD Core – invest primarily in hard currency sovereign and quasi sovereign bonds
• No pooled fund
• Benchmark: JP Morgan EMBI GD
• AUM: $2,337m
EM Corporates – invest in hard currency corporate bonds
• Pooled fund: Aberdeen Global – Emerging Markets Corporate Bond Fund ($53m)
• Benchmark: JP Morgan CEMBI BD
• AUM: $600m
As of 31 Dec 11
10
To 31 Dec 11
EMD: performance
Annualised
1 year 3 years 5 years Since inception
Emerging Market Debt Plus Composite1 6.79 23.20 8.35 16.39
JP Morgan EMBI Global Diversified 7.35 16.08 7.87 11.35
Difference -0.55 +7.12 +0.48 +5.03
Emerging Markets Debt Core Composite2 7.89 19.44 7.95 12.87
JP Morgan EMBI Global Diversified 7.35 16.08 7.87 10.79
Difference +0.54 +3.36 +0.08 +2.09
Emerging Market Debt Local Currency Composite3 -2.20 - - 12.64
JP Morgan GBI-EM Global Diversified -1.75 - - 12.17
Difference -0.44 - - +0.47
Emerging Market Debt Corporate Composite4 - - - 1.49
JP Morgan CEMBI Broad Diversified - - - 1.93
Difference - - - -0.45
1. Inception: 1 Aug 992. Inception: 1 Jan 963. Inception: 1 May 094. Inception: 1 Feb 11Source: Aberdeen Asset Management. Total return, gross of fees, USD
11
Country Portfolio (%) Benchmark (%)(%) of total fund
Hard currency Local currency FX (% of portfolio)
Sovereign/Quasi
Corporate
Argentina 4 2 4
Brazil 8 7 1 3 4 1
Chile 1 3 1
Dominican Republic 2 1 1 1
El Salvador 3 2 2 1
Mexico 14 7 9 1 4 4
Peru 3 4 2 1
Uruguay 2 2 2 2
Venezuela 7 4 7
Other* 8
Latin America total 44 40 26 7 11 7
Croatia 2 1 2
Hungary 1 2 1
Ivory Coast 2 1 2
Kazakhstan 3 3 2 1
Lithuania 3 2 3
Namibia 1 1
Qatar 2 2
Russia 6 6 5 1
Senegal 1 1
Serbia 1 1
South Africa 7 3 3 4
Turkey 5 6 4 1
UAE 3 2 1
Ukraine 1 3 1
Other** 12
Europe/Middle East/Africa total 38 40 30 4 4
China 5 3 2 2 1 1
Indonesia 3 6 2 1
Malaysia 3 3 1 2 2
Pakistan 1 1
Philippines 2 6 2
Sri Lanka 1 1 1
Vietnam 1 1 1
Asia total 16 20 10 3 3 3
US/Cash 2 2 90
Total 100 100 68 14 18 100
* Belize, Ecuador, Jamaica, Panama
** Belarus, Bulgaria, Gabon, Georgia, Ghana, Iraq, Jordan, Lebanon, Nigeria, Poland
Source: Aberdeen Asset Management
Positions for the Aberdeen Global Select Emerging Markets Bond Fund, 31 Dec 2011
Aberdeen Global – Select Emerging Markets Bond FundCurrent portfolio positions
Appendices
13
Aberdeen Global – Select Emerging Markets Bond FundFund characteristics
Fund name
Fund domicile
Fund type
Portfolio Manager
Fund currency
Fund size
Benchmark
Inception date
Valuation
Select Emerging Markets Bond Fund
Luxembourg
SICAV
Emerging Markets Debt team
USD
$1.1 billion as at 27/01/2012
JPM EMBI GD USD
15 August 2001
DailyShare Class ISIN Currency AMC Minimum investment
A - 2 LU0132414144 USD 1.50% USD 1,500
A – 2 Hedged LU0376989207 EUR 1.50% EUR 1,500
I - 1 LU0231480053 USD 1% USD 1,000,000
I – 2 LU0231480137 USD 1% USD 1,000,000
14
Aberdeen Global – Emerging Markets Corporate Bond FundFund characteristics
Fund name
Fund domicile
Fund type
Portfolio Manager
Fund currency
Fund size
Benchmark
Inception date
Valuation
Aberdeen Global – Emerging Markets Corporate Bond Fund
Luxembourg
SICAV
Emerging Markets Debt team
USD
$64.9 millions as at 27/01/2012
JPM Corporate EMBI Broad Diversified
30 December 2010
DailyShare Class ISIN Currency AMC Minimum investment
A - 2 LU0566480116 USD 1.50% USD 1,500
I – 2 LU0566481197 USD 1% USD 1,000,000
15
Aberdeen Global – Emerging Markets Local Currency Bond FundFund characteristics
Fund name
Fund domicile
Fund type
Portfolio Manager
Fund currency
Fund size
Benchmark
Inception date
Valuation
Aberdeen Global – Emerging Markets Local Currency Bond Fund
Luxembourg
SICAV
Emerging Markets Debt team
USD
$181.7 millions as at 27/01/2012
JP Morgan GBI-EM Global Diversified Index
6 April 2010
DailyShare Class ISIN Currency AMC Minimum investment
A - 2 LU0396317926 USD 1.50% USD 1,500
I – 2 LU0396318908 USD 1% USD 1,000,000
16
Croatia
Step 1: fundamental analysis – proprietary research
• 50 countries and over 100 corporates researched, with over 500 meetings each year
• Fundamental research undertaken for each country:
- Proprietary sovereign risk models
- Focus on key macroeconomic variables, political environment, fiscal and monetary policy developments, major risks
• Bottom-up corporate research to assess underlying creditworthiness of the companies in which we invest
• Top down industry research
Argentina
Brazil
Chile
ColombiaPanama
Poland
Russia
IMF/WB
Ecuador
Peru
Vietnam
Kazakhstan
UkraineRomania
Turkey
PhilippinesThailandVenezuela
Dominican Rep
MalaysiaNigeria
Jamaica
Uruguay
Guatemala
Pakistan
Indonesia
South Africa
Egypt
Iraq
Lithuania
Mexico
El Salvador
China
Ivory Coast
Hungary
India
Serbia
Belize
Ghana
Costa Rica
Georgia
Namibia
Senegal UAEQatar
Sri Lanka
17
Foreign holdings of local Hungarian Government debt
Step 2: technical analysis
Source: GDMA, Bloomberg, Nov 11
2,000
2,500
3,000
3,500
4,000
4,500
5
6
7
8
9
10
11
12
13
Jan04
Nov04
Aug05
Apr06
Jan07
Oct07
Aug08
May09
Feb10
Nov10
Jul11
bn HUF% HGB 10Y yield (lhs) Foreign holdings (rhs)
We conduct technical analysis to assess the impact on valuations of:
• Supply risks
• Positioning risks
• Percentage of foreign versus local ownership
• Fund flows
18
Step 3: scenario analysis
• We conduct scenario analysis for 50 countries
• Updated monthly
• We forecast risk-adjusted returns for key external and domestic bonds and foreign exchange rates
• Base, best and worst case forecasts on a one and six month horizon
• Integral to our risk management process
Current Base case (6m)
Risk scenarios %
Worstcase
Bestcase
Riskadjuste
d
Draw-down
South Africa External Bond*
Price 106.4 105.4 103.5 108.0 1.5 -0.2
Spread 120 135 160 100
USDZAR FX Forecast
Spot 6.70 7.00 7.20 6.30 0.5 -4.2
South Africa Domestic Bond*
Price 88.4 91.6 85.5 93.5
Yield 8.5% 8.0% 9.0% 7.7% 3.9 -1.8
South Africa CorporateBond**
Price 107.4 105.8 103.0 108.6 1.2 -1.2
Spread 297 315 370 260
Source: Aberdeen Asset Management, Apr 11Risk adjusted: % weighted return using 50% for base case return, 20% for best case return and 30% for worst case return plus 6 months of accrued interestDrawdown: 6 months worst case return plus 6 months of accrued interest* 10 year bonds, ** 6 year bondHypothetical positions are used here and actual market conditions may have a different impact on the portfolio. A portfolio may not include these securities.For illustrative purposes only. Past performance is not an indications of future results and you may lose money by investing.Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially
19
Step 4: comparative analysis
Source: Aberdeen Asset Management, Apr 11Six month expectation of returns. Countries used for hypothetical and illustrative purposes onlyProjections are offered and are not reflective of potential performance. Projections are no guaranteed and actual events or results may differ materiallyActual market conditions may have a different impact on the portfolio. No assumptions regarding future performance should be made
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
0 -1 -2 -3 -4 -5 -6 -7
Risk (worst case return %)
Thai Baht
Argentina 10yr USD
South Africa 10yr ZAR
Expected risk-adjusted return %• We assess the relative value between:
- Individual country yield curves
- Hard currency sovereign and corporate bonds
- External versus domestic bonds
- Emerging market currencies
� In order to identify the instruments that have the most attractive risk-return profiles and evaluate their impact on the portfolio as a whole
Alrosa
20
Step 5: current portfolio positionsConstructing a diversified, risk-controlled portfolio
Country Portfolio (%) Benchmark (%)(%) of total fund
Hard currency Local currency FX (% of portfolio)
Sovereign/Quasi
Corporate
Argentina 4 2 4
Brazil 8 7 1 3 4 1
Chile 1 3 1
Dominican Republic 2 1 1 1
El Salvador 3 2 2 1
Mexico 14 7 9 1 4 4
Peru 3 4 2 1
Uruguay 2 2 2 2
Venezuela 7 4 7
Other* 8
Latin America total 44 40 26 7 11 7
Croatia 2 1 2
Hungary 1 2 1
Ivory Coast 2 1 2
Kazakhstan 3 3 2 1
Lithuania 3 2 3
Namibia 1 1
Qatar 2 2
Russia 6 6 5 1
Senegal 1 1
Serbia 1 1
South Africa 7 3 3 4
Turkey 5 6 4 1
UAE 3 2 1
Ukraine 1 3 1
Other** 12
Europe/Middle East/Africa total 38 40 30 4 4
China 5 3 2 2 1 1
Indonesia 3 6 2 1
Malaysia 3 3 1 2 2
Pakistan 1 1
Philippines 2 6 2
Sri Lanka 1 1 1
Vietnam 1 1 1
Asia total 16 20 10 3 3 3
US/Cash 2 2 90
Total 100 100 68 14 18 100
* Belize, Ecuador, Jamaica, Panama
** Belarus, Bulgaria, Gabon, Georgia, Ghana, Iraq, Jordan, Lebanon, Nigeria, Poland
Source: Aberdeen Asset Management
Positions for the Aberdeen Global Select Emerging Markets Bond Fund, 31 Dec 2011
2121
Adding value in Hungarian local rates
EMD: case study
Forecasts – Jun 09
Current 1 month 6 month Best Worst
Central bank rate
Repo rate (%) 10.00 10.00 8.00
EURHUF forecast
Spot 279 270 260 255 330
10 year bond (%) 10.40 10.00 8.30 8.00 12.80
Source: Bloomberg, Aberdeen Asset Management, Nov 11
250
260
270
280
290
300
310
320
6
7
8
9
10
11
12
13
Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11
HGB 10Y generic (lhs) EURHUF (rhs)
a
b
c
Hungary
a) Built position in local rates and currency in June 2009 following a country research trip in April 2009 and limited foreign ownership
b) Cut rates positions in April 2010 over concerns of contagion from the Greece fiscal crisis and risks related to local elections
c) Re-entered a long position in June 2010 after a sharp sell off and attractive valuations, following calls to our Hungarian office
d) Took profits in late July 2010 after monthly policy meeting showed little further upside
e) Increased rates exposure in anticipation of a new stabilisation program (finally announced in March). The decision was supported by a country research trip.
f) Cut overweight currency position in late February (EURHUF at 271), as we saw limited appreciation potential
g) Gradually reduced rates exposure over the summer as implementation risks increased, and went underweight on currency (EURHUF at 275)
h) Neutralised rates position in July 2011 on increased two-way uncertainty
i) Increased short HUF position in late October on deepening euro-area debt crisis (EURHUF at 300)
Forecasts – Dec 10
Current 1 month 6 month Best Worst
Central bank rate
Repo rate (%) 5.50 5.50 5.50
EURHUF forecast
Spot 278 280 280 270 295
10 year bond (%) 8.18 8.00 7.50 6.65 8.50
d
e
f
h
i
g
22
EMD: case study
a) Started to build exposure as our country research trip (Nov 2009) confirmed a strong fiscal commitment and low default probability
b) Increased position participating in the issuance of the new 2020 bonds
c) Took profits following the rally on weaker economic data, but kept overweight exposure
d) Reduced exposure as valuations became over-stretched
e) Added exposure on faster-than-anticipated economic recovery
f) Took profits on valuation and euro crisis concerns
g) Took further profits on valuation and euro crisis concerns
Lithuania
Forecasts – Feb 10 Current 1 month 6 month Best Worst
USD 01/2015 price 102.2 103.4 103.8 105.1 98.2
spread 388 361 352 321 486
USD 02/2020 price 100.9 101.6 102.7 106.3 92.5
spread 356 345 330 281 481
Forecasts – Oct 10 Current 1 month 6 month Best Worst
USD 01/2015 price 111.7 109.4 111 114 104
spread 276 300 285 220 430
USD 02/2020 price 117.2 114.8 116 118.5 112.5
spread 266 280 273 250 315
95
100
105
110
115
120
Oct 09
Jan 1
0
Apr
10
Jul 1
0
Oct 10
Jan 1
1
Apr
11
Jul 1
1
Oct 11
Price Lithun 2015 Lithun 2020
a
b
c
d
ef
g
Source: Bloomberg, S&P, Aberdeen Asset Management, Oct 11
200
300
400
500
600
700
800
900
1000
1100
31-M
ar-
11
30-A
pr-
11
31-M
ay-
11
30-J
un-1
1
31-J
ul-11
31-A
ug-1
1
30-S
ep-1
1
31-O
ct-
11
30-N
ov-
11
MOBTEL 06/22/2020 CHMFRU 10/25/2017
Switch from CHMFRU into MOBTEL at a OAS spread of 57bps on 21 Oct
OAS spread 121bps as of 14 Dec
• Trade was initiated on the 21 October, switching Severstal 17s into Mobtel 20s
• Rationale for the trade was to reduce the portfolio's weighting in the metals and mining sector due to concerns over slowing global demand for metals
• Fund increased exposure to the telecoms sector which is less cyclical than the commodity sector
EMD: corporate trade example
24
EMD: our distinguishing features
• A strong global emerging markets footprint
• A dedicated, stable, experienced team of specialists
• A focus on the entire EMD universe
• We avoid complex structured products
• We apply a forward looking, diversified approach to risk
• Our size ensures investment flexibility
25
Domestic debt
External debt
Sovereign risk models
• Quantitative models supplement our fundamental analysis
• External inputs:
- Economic strength (25%)
- Economic cycle (25%)
- Solvency (25%)
- Liquidity (25%)
• Domestic inputs:
- Macroeconomic trends (25%)
- Inflation dynamics (25%)
- Savings rates (25%)
- Financial system strength (25%)
Source: Aberdeen Asset Management, Nov 11
0
200
400
600
800
10 15 20 25 30 35 40
Yie
ld s
pre
ad o
ver
treasuries (
bp)
Market score
Russia
Philippines
Dom Rep
Ukraine
Turkey
Peru
Jamaica
Venezuela 1262bp
Source: Aberdeen Asset Management, Nov 11
0
5
10
15
0 5 10 15 20 25 30 35 40
Yie
ld o
n 1
0 y
ear
bonds
Market score
BrazilTurkey
Egypt
Malaysia
PolandMexico
Indonesia
South Africa
26
EMD 2012 outlook
• Softer global growth, but backdrop still constructive for EMD
• Chinese growth will continue to moderate, consensus of 8.3% for 2012
• ECB support for banks via LTRO is supportive for risk assets
• Hard currency spreads attractive given low default risk, corporates also offer good value
• EMFX and corporates poised to outperform as risk appetite increases
• Inflows into EMD have slowed, but are likely to resume with interest rates expected to remain lower for longer
• Risks: Eurozone sovereign debt crisis, China hard landing
27
Diverging credit trends between EM and DM countries
DM vs EM sovereign credit ratings
Source: Morgan Stanley, Aug 11
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
EM rating DM rating
BB-
BB
BB+
BBB-
BBB
A+
AA-
AA
AA+
AAA
2828
General Government Debt (% GDP) vs Government Balance (% GDP)
Sovereign debt iceberg …
Source: IMF, World Economic Outlook Database, Sep 11
BelgiumFrance
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Slovenia
Spain
Australia
Canada
Japan
Norway
Sweden
Switzerland
UK
USA
Indonesia
India
China
Korea
Malaysia PhilippinesThailand
Panama
BelarusCroatia
Egypt
Vietnam
Hungary
Iraq
Kazakhstan
Lebanon
Serbia
Poland
Qatar
RussiaSaudi Arabia
Georgia
South Africa Turkey
UAE
Ukraine
Peru
Barbados
Brazil
Chile
Guatemala
Costa Rica
ArgentinaColombia
Jamaica
El Salvador
Egypt
Lithuania
Venezuela
0
20
40
60
80
100
120
140
160
180
-12.00 -10.00 -8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00
Eurozone G10 Asia CEEMA LatAm
Japan's Govt. Debt is 233%
General Government Balance for 2011 (% of GDP)
Gro
ss G
enera
l Gove
rnm
ent D
ebt f
or
2011 (
% o
f G
DP
)
29
China has resources to address credit and growth risks
China’s public debt is manageable Local debt maturity timetable
Source: HSBC, Jul 11 Source: HSBC, Jul 11
By 201353%
2014 - 1517%
After 201530%
(%)
Greece Italy US India Brazil China RussiaJapan
250
200
150
100
50
0
Local debt
30
S&P breakdown of EMBIG Diversified
AA2.6% A
8.7%
B17.2%
BB22.9%
BBB47.3%
NR1.3%
S&P breakdown of GBI EM Global Diversified
AA0.2%
A48.8%
BBB40.5%
BB10.5%
Source: JP Morgan, 30 Sep 11
Ratings quality of emerging market countries underappreciated
• External debt index is 59% investment grade • Domestic debt index is 89% investment grade
31Source: JP Morgan EMBI Global Diversified, 20 Jan 12
Spread over US Treasuries
Spreads attractive given low default risk
0
100
200
300
400
500
600
700
800
900
1000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
JPM EMBI GD JPM CEMBI BD
32
EM external, domestic and corporate indices are all investment grade
EMD yields look anomalous in “lower for longer” world
EM Local currency index: JPM GBI-EM GD, EM Hard currency index: JPM EMBI GD, EM Corporate index: JPM CEMBI BDSource: JP Morgan, S&P, Bloomberg, Nov 11
0
2
4
6
8
10
12
14M
ay 0
3
Se
p 0
3
Jan
04
Ma
y 0
4
Se
p 0
4
Jan
05
Ma
y 0
5
Se
p 0
5
Jan
06
Ma
y 0
6
Se
p 0
6
Jan
07
Ma
y 0
7
Se
p 0
7
Jan
08
Ma
y 0
8
Se
p 0
8
Jan
09
Ma
y 0
9
Se
p 0
9
Jan
10
Ma
y 1
0
Se
p 1
0
Jan
11
Ma
y 1
1
Se
p 1
1
Yield (%) EM Local currency (BBB+) EM Hard currency (BBB-) EM Corporates (BBB)
US 10 yr (AA+) German 10yr (AAA)
33
Country 10 Year Bond Yield (%) Inflation yoy (%) Real yield Credit rating S&P
Brazil 11.6 6.5 5.1 A-
Hungary 8.8 4.1 4.7 BB+
Colombia 7.3 3.7 3.5 BBB+
Russia 8.2 6.1 2.1 BBB+
Mexico 5.7 3.8 1.9 A-
Indonesia 5.6 3.8 1.8 BB+
South Africa 7.7 6.1 1.6 A
Japan 1.0 -0.5 1.5 AA-
Poland 5.6 4.6 1.0 A
Peru 5.7 4.7 0.9 BBB+
Malaysia 3.4 3.0 0.4 A
Germany 1.9 2.1 -0.2 AAA
Thailand 3.2 3.5 -0.3 A-
US 1.9 3.0 -1.1 AA+
Turkey 9.3 10.5 -1.2 BBB-
UK 2.1 4.2 -2.1 AAA
Source: S&P, Bloomberg, 26 Jan 12
Real yields yet to reflect dramatic improvement in fundamentals
34
Net foreign positions of DM banks in EM
Shrinking DM financial balance sheets not a threat to EM
Source: IMF, CEIC, Haver, UBS estimates
Asia Latin America Central Eastern Europe
2003
0%
2004 2005 2006 2007 2008 2009 2010 2011
2%4%6%8%
10%12%
-2%-4%-6%-8%
-10%
% of GDP
EM financial system aggregate loan/deposit ratio
Source: IMF, CEIC, Haver, UBS estimates
Asia Latin America Central Eastern Europe
2003 2004 2005 2006 2007 2008 2009 2010 2011
105%110%115%120%
70%75%80%85%90%95%
100%
35
Industrial production growth softened…supported by the resilient retail consumption
GDP growth slowed further in Q4 11, but still surprised on the upside…
China: growth moderating, but remains on track
Source: NBS, Credit Suisse, Jan 12 Source: NBS, PBoC, Credit Suisse, Jan 12 Source: NBS, Credit Suisse, Jan 12
China real GDP (%YoY) China retail sales (%yoy, 3m mav) China industrial production (%yoy, 3m mav)
Q2 0
9
Q3 0
9
Q4 0
9
Q1 1
0
Q2 1
0
Q3 1
0
Q4 1
0
Q1 1
1
Q2 1
1
Q3 1
1
Q4 1
18
7
9
10
11
12
13
8.9
Mar
10
Jun 1
0
Sep 1
0
Dec 1
0
Mar
11
Jun 1
1
Sep 1
1
Dec 1
1
14
15
16
17
20
18
19
17.5
Mar
10
Jun 1
0
Sep 1
0
Dec 1
0
Mar
11
Jun 1
1
Sep 1
1
Dec 1
1
12
10
14
16
18
20
22
12.8
• Recent growth data supports a ‘soft landing’
• Inflation continues to moderate and provides scope for further easing
3636
Brazil: Median market forecast for IPCA inflation
Brazil: Foreign Direct Investments
Brazil: inflation pressures easing, FDI remains robust
Source: IBGE, Credit Suisse, Oct 11 Source: Central Bank of Brazil, Credit Suisse, Oct 11
29.9 31.3
40.1 41.244.8
48.2 51.0 50.053.7 55.8 58.1 60.1 61.6
6.16.9
8.39.6
11.0
12.312.7 14.2
15.216.4
17.3 16.3 13.5
0
10
20
30
40
50
60
70
80
Oct
10
Nov 1
0
Dec 1
0
Jan
11
Feb 1
1
Mar
11
Ap
r 11
May
11
Jun
11
Jul 11
Au
g 1
1
Se
p 1
1
Oct
11
Intercompany loans (net) Private equity (net)USDbn, cumulative 12mths
36.1
38.2
48.4 50.8
55.8
60.563.8 64.2
68.972.2
75.4 76.3 75.1
4.5
1.5
Dec 0
4
Dec 0
5
Dec 0
6
Dec 0
7
Dec 0
8
Dec 0
9
Dec 1
0
Dec 1
1
Dec 1
2
Dec 1
3
8.5
7.5
5.5
4.5
3.5
2.5
6.5
3.1
5.75.9
5.3
% y-o-y
4.3
5.9
4.5
6.76.3
Center of the inflation target range
Upper limit of target
7.6
95%
90%
68%50%
50%
95%
90%
68%
• Growth is declining along with inflation pressures
• Significant foreign investment in the pipeline for the years ahead (oil and gas sector, Olympics, World Cup) will remain supportive for the economy
37
Mexico gaining export competitiveness vs China
Unit labour cost in manufacturing
2001 2003 2005 2007 2009
155
145
135
125
115
105
95
Index (2001=100) Mexico China
Source: Bloomberg, Haver Analytics, OECD, Mar 11
Note: Assuming a 30 day month, we use average 2010 USD/MXN exchange rate of 12.636 and USD/RMB exchange rate of 6.7704 to make the conversionSource: Nomura Global Economics; Xinhua News; local government websites in China; Mexican Labor Ministry, Mar 11
Minimum wage in Mexico (2011)
MXN per day USD per day
Mexico City 59.82 4.73
Monterrey, Nuevo Leon 58.13 4.60
State of Michoacan 56.70 4.49
Minimum wage in China (2011)
RMB per month USD per day
Guangzhou City 1,300 6.40
Jiangsu Province 1,140 5.61
Shaanxi Province 860 4.23
• Mexico continues to gain market share of US imports
• Improving US growth will be supportive for Mexican economy
38
Public-sector liquid assets and external debt Public-sector debt amortizations
Venezuela: comfortable financing outlook
* Includes cash holdings in government agencies and PDVSASource: Central bank, Credit Suisse, Sep 11 Source: PDVSA, Ministry of Finance, Credit Suisse, Sep 11
$bn PDVSASovereignSovereign - domestic$bn Other public sector liquid FX holdings*
Gross non-gold FX reserves
Gross gold FX reserves
Public sector external bond debt
0
Q2 0
7
Q2 0
8
Q2 0
9
Q2 1
0
Q2 1
1
15
30
45
60
75
Q3 0
7
Q4 0
7
Q1 0
8
Q3 0
8
Q4 0
8
Q1 0
9
Q3 0
9
Q4 0
9
Q1 1
0
Q3 1
0
Q4 1
0
Q1 1
1
0
2011
2013
2015
2014
2012
2016
2018
2020
2019
2017
2021
2023+
2022
2
4
6
8
10
12
14
16
18
20
22
• High oil prices will remain supportive for high yielding Venezuelan bonds
• Strong willingness and capacity to service debt
39
Commodities led export growth FDI in Malaysia has improved
Malaysia: CNY proxy
Source: CEIC, Credit Suisse, Sep 11 Source: CEIC, Credit Suisse, Sep 11
Electrical and electronics export (RM bn)
Palm oil, LNG, and oil exports (RM bn)
26
21
16
11
6
2007 2008 2009 2010 2011
6
5
4
3
2
1
0
Jun 01 Dec 03 Jun 06 Dec 08 Jun 11
FDI inflows (4q rolling sum, % of GDP)
• Strong current account surplus and increased foreign investment
• Modest appreciation of the Chinese Renminbi is supportive for the Malaysian Ringgit
40
Global Emerging Market Debt team
• Over 100 years investment experience in emerging markets
• Extensive knowledge of sovereign and corporate issuers, domestic and external debt and derivatives
• Experienced and stable team
Team members Role Experience inthe industry
Years of experience in emerging markets
Brett Diment Head of Emerging Market Debt 20 16
Edwin Gutierrez Portfolio Manager 16 16
Kevin Daly Portfolio Manager 23 17
Esther Chan Portfolio Manager 9 9
Max Wolman Portfolio Manager 12 10
Viktor Szabo Portfolio Manager 11 11
Jozsef Szabo Portfolio Manager 14 14
Siddharth Dahiya Corporate Analyst 6 6
Anthony Simond Analyst 3 1
Andrew Stanners Dealer and Portfolio Analyst 11 7
Flora Sexton Dealer 3 <1
Ewa Gray Portfolio Analyst 8 3
Source: Aberdeen Asset Management, Jan 12Includes affiliated persons operating under inter-company agreement
41
Biographies
Brett Diment, Head of Emerging Market Debt
Brett Diment is the head of emerging market debt. Brett joined Aberdeen via the acquisition of Deutsche Asset Management's London and Philadelphia fixed income businesses in 2005. Brett held the same role at Deutsche Asset Management since 1999. Brett joined Deutsche Asset Management in 1991 as a graduate and started researching emerging markets since 1995. Brett graduated with a BSc from the London School of Economics.
Edwin Gutierrez, Portfolio Manager
Edwin Gutierrez is a portfolio manager on the emerging market debt team. Edwin joined Aberdeen following the acquisition of Deutsche Asset Management's London and Philadelphia fixed income businesses in 2005. Edwin held the same role at Deutsche since joining in 2000. Previously, Edwin worked as an emerging debt portfolio manager at Invesco Asset Management and as a Latin American economist at LGT Asset Management. Edwin graduated with an MSc from Georgetown University.
* Or acquired companies
Kevin Daly, Portfolio Manager
Kevin Daly is a portfolio manager on the emerging market debt team. Kevin joined Aberdeen in April 2007 having spent the previous 10 years at Standard & Poor's in London and Singapore. During that time Kevin worked as a credit market analyst covering global emerging debt, and was head of origination for Global Sovereign Ratings. Kevin was a regular participant on the Global Sovereign Ratings Committee, and was one of the initial members of the Emerging Market Council, formed in 2006 to advise senior management on business and market developments in emerging markets. Kevin graduated with a BA in English Literature from the University of California, Los Angeles.
Viktor Szabó, Portfolio Manager
Viktor Szabó is a portfolio manager on the emerging markets debt team. Viktor joined Aberdeen in July 2009 following the acquisition of certain asset management businesses from Credit Suisse Asset Management. Previously, Viktor worked for Credit Suisse Asset Management Hungary as country chief investment officer. Prior to that, Viktor worked for the National Bank of Hungary as the head of market analysis team. Viktor holds an MSc in Economics from the Corvinus University of Budapest. Viktor is a CFA charterholder.
42
Biographies
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute* Or acquired companies
Esther Chan, Portfolio Manager
Esther Chan is a portfolio manager on the emerging market debt team specialising in emerging market corporate bonds and is also a member of the Global Best Ideas team. Esther joined the Singapore office of Aberdeen Asset Management in 2005*. In Singapore, she was a member of the Asian fixed income team, first as a credit analyst in financials and corporates, then as a portfolio manager. She moved to London in 2007, joining the emerging market debt team where she specialises in managing corporate bonds. Prior to that, she worked as a analyst in corporate finance advising companies undergoing debt restructuring in Jakarta, Indonesia. Esther has a LLB (Hons) from University College London and is a CFA Charterholder.
Max Wolman, Portfolio Manager
Max Wolman is a portfolio manager on the emerging market debt team. Max joined Aberdeen* in 2001 from Liontrust Asset Management initially working as a currency dealer for Aberdeen. In 2002 Max moved to the emerging market debt team as an assistant portfolio manager to focus on developing the local currency bonds and foreign exchange investments. More recently Max has been specialising in emerging market corporate bonds having helped develop the corporate bond investment process. Max graduated with a BA (Hons) in Business Management and is a CFA Charterholder.
Jozsef Szabó, Portfolio Manager
Jozsef Szabo is a portfolio manager on the emerging markets debt team and is responsible for local investments in Budapest. Jozsef joined Aberdeen in 2011from the central bank of Hungary where in the last six years he was managing fixed income portfolios as part of the official FX reserves management operations. Previously, Jozsef worked in monetary analysis within the central bank and served as secretary to the Monetary Council. Prior to that, Jozsef worked for the Hungarian Government Debt Management Agency. Jozsef graduated with a Masters degree from the Budapest University of Economic Sciences and is a CFA charterholder.
Siddharth Dahiya, Corporate Analyst
Siddharth Dahiya is a corporate analyst on the emerging market debt team. Sid joined Aberdeen in June 2010 working as a credit risk analyst for the counterparty risk team. Previously, Sid worked for four years at ICICI Bank UK plc in London. He was part of the treasury investment team focussing on Indian bond investments. He started his career at ICICI with the corporate finance team focussing on cross-border M&A. Sid completed a post-graduate degree in business management from the Indian Institute of Management, Lucknow in 2006. Prior to that he completed a Bachelors degree (Honours) in Electronics & Electrical Engineering from Punjab Engineering College, India.
43
Biographies
Andrew Stanners, Dealer and Portfolio Analyst
Andrew Stanners is a dealer and portfolio analyst on the emerging market debt team. Andrew joined Aberdeen via the acquisition of Deutsche Asset Management's London and Philadelphia fixed income businesses in 2005. Andrew held a similar role at Deutsche Asset Management, which he joined in 2004. Previously, he spent time working as an analyst at Cheyne Capital, prior to which he was with Deutsche Asset Management. Andrew graduated with a BA joint honours in Economics and Economic History from York University.
Ewa Gray, Portfolio Analyst
Ewa Gray is a portfolio analyst on the emerging markets debt team. Prior to this, Ewa worked as head of liquidity controllers within our treasury department where she was responsible for managing a team of 6 liquidity controllers, the team are responsible for instructing FX trades and placing cash out in various money market instruments for yield curve pick up as well as managing the daily collateral merging for OTC derivatives. Ewa joined Aberdeen via the acquisition of Deutsche Asset Management's London and Philadelphia fixed income businesses in 2005. Ewa graduated with BSc (Hons) in Mathematics with Business Management from Queen Mary University in 2003.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute* Or acquired companies
Anthony Simond, Investment Analyst
Anthony Simond is an investment analyst on the emerging market debt team. Anthony joined Aberdeen in 2008 upon graduation. Anthony graduated with BA (Honours) in Classics at the University of Bristol.
Flora Sexton, Dealer
Flora Sexton is a dealer on the emerging market debt team. Flora joined Aberdeen in July 2011 working as a credit risk analyst for the counterparty risk team. Previously Flora worked for three years at Paternoster UK Ltd, a specialist pension scheme reinsurance provider, where she worked as an investment analyst on the credit team, focusing on fixed income. Flora graduated from Trinity College Dublin with a BA (Hons) in History.
44
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• Investors should be aware that past performance is not a guide to future returns, the value of investments and the income from them can fall as well as rise and investors may get back less than the amount invested.
• The information contained in this marketing document should not be considered as an offer, or solicitation, to deal in the shares of any securities or financial instruments.
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