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Market Views|

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A GUIDE TO INVESTING IN ASIA | Market Views

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4/12PAGE 4

Market Views|

A GUIDE TO INVESTING IN ASIA

Why INVEST IN ASIA?The story of explosive growth in emerging markets, led by

Asia, is well known, and for several years, Asia has played a

leadership role. Lower trade barriers have created global demand

for Asian products and services. Globalization, industrialization,

urbanization and automation have made their manufacture and

delivery more feasible.

Asias four billion population now accounts for

57% of the worlds inhabitants and represents 28%

of global GDP. Emerging economies, of which

China and India are among the most signicant,

are slated to reach a staggering 42% of global GDP

by 2020.

China, arguably the Asian leader, has annual GDP

of $5.9 trillion, and grew 11% at its peak in 2010.

Although it has slowed to around 8.6%, suggesting

it faces some difcult headwinds, it still is nearly

three times the growth rate of the US. This growth

puts it on track, according to some estimates, to

become the worlds largest economy by 2027.

Further, all of Asia will represent more than half of

the global economy by 2050.1

Asia also leads in global capital formation, with

$20 trillion of capitalization. Its regional stockexchanges rival those in the US, Toronto and

Germany and have experienced heady compound

annual growth rates (CAGR): The Shanghai Stock

Exchange leads, with 57%; The Bombay Stock

Exchange and the National Stock Exchange of

India are next, with 25% and 24%, respectively,

followed by The Hong Kong Exchange, with 21%.

The Asia-Pacic region in total boasts the highest

percentage of savers - 61% versus an average of

46% elsewhere across the globe.

A high savings gure is positive for exporters of

large-ticket items and accounts for the growth in

capitalization.

Asias four billion population now accoun

for 57% of the worlds inhabitants an

represents 28% of global GD

1 BBC News Business, August 2, 2011 - http://www.bbc.co.uk/news/business-14368324.
http://www.bbc.co.uk/news/business-14368324http://www.bbc.co.uk/news/business-14368324


5/12PAGE 5


Thegrowthstory.What are the underlying components of the growth

story in Asia, and, given recent global developments, is it

sustainable? If so, where do the opportunities lie?

As we analyze the key economies in the region, we begin with China, Asias

most signicant economy. We believe there are our key drivers that are the

linchpins o its phenomenal economic position on the world stage.

1Urbanization.There has been an

enormous shit rom an

agrarian economy in China to a

more industrialized one. Former

arm inhabitants have since

migrated to the cities where jobs

in actories are plentiul and the

quality o lie is improved.

At least 300 million have doneso over the past 25 years, and

another 300 million will make the

move over the next 25 years. This

movement creates an ongoing a

need or upscale housing, better

ood and additional household

products required to support

living in an urban environment.

In China, the heaviest population

is concentrated primarily in

coastal cities. As the migration

rom arms to cities has occurred,

less crowded inland cities are

expanding, creating critical need

or investments in inrastructure.

Roads, sewers, railroads, airports

and transportation are required

to support this ongoing growth.

2GrowinG Middle

Class.A growing middle class

means there is more disposable

income to spend on consumer

goods, many o them high priced.

Certainly an improved diet has

positive implications as these

people gravitate toward eating

more protein, or example. Chinas

$1.3 billion population includes1% who are considered rich. These

13 million people are demanding

luxury goods. Notably, the top three

Mercedes-Benz dealerships in the

world are in Beijing, Shanghai and

Hong Kong.

3aUtoMation.Not unlike the productivity

economics witnessed in the

US since the wide-spread use o

the Internet, Asian economies are

increasing prots through use o

automation. Research indicates

that or every 2% in increased GDP

growth, automation spending has

a multiplier eect o 3. Thereore,

automation could experience a

12% CAGR by the end o 2017.

Companies that produce those

technology goods and services are

poised to enjoy dramatic proits.

4ManUfaCtUrinG

and environMental

iMproveMents.Chinas current environment

is a challenge. Smog is thick

in the cities, and air and water

pollution are among the highest

o any country. The Chinese auto

industry is taking strong steps to

enorce tough emission standards,

even more stringent than thosein the state o Caliornia, arguably

the strictest in the US. Companies

engaged in manuacturing

products and services designed

to clean up the environment can

capitalize on this demand. This i

especially true since there are ew

i any, state-owned companies

providing these services, a good

thing, given Chinas propensity o

protectionism.


6/12PAGE 6

Market Views|


Different Economies

Comprise AsiaIndiaAlthough China is the dominant story in Asia,

India also deserves a strong mention for a

couple of reasons. India has the second-highest

population in the world 1.21 billion, as of

the 2011 census, and it is expected to surpass

Chinas by 2025. Its population is relatively

young 50% of its inhabitants are 25 or

younger. It has the second-highest populationgrowth rate in the world, with one obvious

explanation being that India is not tied to the

one child policy that exists in China.

The Indian economy is the 9th largest in the

world, with $1.73 trillion in GDP, and is

expected to grow by 8.2% in 2012. According

to the Export-Import Bank of India, its external

debt of $305 billion was just 17.3% of total

GDP in 2011. (It is no secret that, by contrast,

US debt now is equal to our $14.6 trillion

GDP, or 100%). Although total external Indian

debt has risen recently to $336 billion, it still

represents a modest proportion of GDP2.

India also has the second highest labor force

of any global economy 190 million people

are working in India. Those workers now have

higher incomes to spend on more expensively

priced goods. Even though salaries do not begin

to equal those of the more developed world,

Indians are highly motivated to upgrade their

lifestyle.

A recent measure of global consumer condence

showed India had the highest reading of the 56

countries surveyed, registering a gure of 1213.

(By contrast, the most-recent reading for the US

market is 61.1).

The service sector represents nearly 58% of

total Indian GDP, as many global corporations

have outsourced customer-service functions

to Indias much less expensive labor force.

Although the trend has attened recently, it still

remains strong.

Technology is another opportunity for

investment in India. In fact, India has the

second-largest mobile phone usage of any

country, 894 million. It ranks among the top

three countries in internet penetration, 121

million. Even with high usage of both phonesand Internet, however, its vast population

suggests a strong market for purveyors of

technology.

The Association of Southeast Asian Nations

(ASEAN) is an important region in global

commerce. It is a geopolitical and economic

organization of ten countries in Southeast

Asia. Originally formed in 1967, it comprises

Indonesia, Malaysia, the Philippines, Singapore

and Thailand. We examine some of these

countries next.

IndonesiaThis country, while not as heavily populated

as either China or India, has witnessed

signicant growth in recent years. Indonesia

has 237.6 million people, 58% of whom

reside on the island of Java. It is the fourth

most populous country in the world, after

China, India and the US.

Indonesias $1 trillion economy is the 16th

largest in the world, and the largest economy

in Southeast Asia, and is growing in excess of

6% annually.

Nearly half of Indonesias total GDP

comprises the industrial sector - 47% , and

38% is focused on services. The balance

comes from agriculture. Because it has only

11% of arable land, Indonesia must import a

great deal of its food, creating opportunities

for other countries to export those products.

Because Indonesia has vastly neglected

investments in its infrastructure, dropping

in 2011 from 8% to only 2%, there is

signicant demand for building, energy and

transportation projects. For example, some

of its airports currently are operating at more

than twice the capacity for which they were

built originally4. The implications for foreign

investment in such a densely populated

country are obvious.

Japans Sumitomo Corp. is considering

investing up to $10 billion in energy projects

over the next four years. This is in addition to

its having already invested $5 billion in the

country over the past few years.

Indonesias economy

is growning in excess

of 6% annually


7/12PAGE 7


MalaysiaThis country has a population of 28.1

million, 58% of whom are under the age of

30, suggesting a rm foundation for future

growth.5

Malaysias GDP of $414.4 billion grew at

a 7% rate from 2010-2011. International

trade is important to its economy, and it isthe largest Islamic banking and nancial

center. Its economy is based on services

and manufacturing, and it is noted for

its export of semiconductor components,

electrical products and information and

communication technology. It also exports

some commodities, including rubber,

petroleum and palm oil. In turn, it imports

machinery, electronics, petroleum products,

vehicles, iron and steel products, chemicals

and food.

Real estate investments have surged in

Malaysia, particularly in the rental market,

as tourism and a relatively low cost of living

offer attractive incentives.

SingaporeWith a surface size just one-third that of the

of Rhode Island, Singapore has 5.2 million

in population. However, it is home to 100

commercial banks and enjoys leadership in

global trading, nance and services.

According to the Department of Statistics,

Singapore, the most-recent gure for GDP(2010) shows $222.7 billion6. That same year,

Singapores economy grew by a s taggering

17.9%, while much of the rest of the globe

struggled to stay aoat. Its growth rate has

dropped to a much more modest 3%, as it

weathers the effects of the Euro Zones debt

crisis.

Singapore has a young labor force, suggesting

that there is ample room for additional

expenditures on household goods, technology,

communications and similar products.

The demographic makeup of Singapore is

surprising it has twice as many Internet

users as television sets. There is little, if any,

corruption or drug use. Most of us can recall

the caning incident in 1994, when an American,

Michael Fay, pled guilty to vandalism and was

punished accordingly.

Once part of Malaysia, from which it separated

in 1965, Singapore now maintains smoother

ties with it concerning tax issues, water supply

and transportation arrangements. Singapores

major manufacturing is in electronics - 40%,

but it contributes only 5% of its labor force to

that industry. It gradually is transitioning to a

service and research-based economy. Rising

demand for communications, technology and

transportation services, coupled with increased

consumer spending and tourism, are primary

economic drivers. Because Singapore has strict

intellectual property protection, manufacturers

are moving there from China7.

The PhilippinesThis area of Asia has a population of 93.3

million and is the third-largest English-

speaking country in the world. With a

literacy rate of 95%, it ranks among the

highest in the world in terms of an educated,

skilled labor force. Interestingly, wages

are around one-fth of that of the US. It

is easy to understand why that foreigncompanies that now outsource programming

and business processes enjoy 30% - 40% in

annual cost savings.

The Philippines has a $200 billion GDP,

and it grew 7.6% in 2010, the latest year for

which that statistic is available. The private

sector contributes 70% to total GDP, and

electronics is its primary export. In turn, it

imports electronic parts (to assemble into

nished electronics goods for export), food

and commodities.

2 Export-Import Bank of India - LINK

3 Reuters, October 30, 2011 Consumers Confidence Highest in India-Nielsen- LINK

4 Financial Times, December 16, 2011 Indonesia Regains Investment Grade Status- LINK

5 Investment U, October 19, 2010, Investing in Malaysia: Five Reasons To Add This Strong Emerging Market To Your Global Portfolio, by Carl Delfield.- LINK

6 Department of Statistics, Singapore - LINK

7 Investment U, October 6, 2010, Investing in Singapore: Why Your Portfolio Needs This Hot Emerging Market by Carl Delfield.- LINK

Reerences
http://www.bea.gov/national/index.htm#gdphttp://in.reuters.com/article/2011/10/30/idINIndia-60200420111030http://www.ft.com/intl/cms/s/e7d2bf3a-2732-11e1-b9ec-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fe7d2bf3a-2732-11e1-b9ec-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3DIndonesia%2Binfrastructure%26ftsearchType%3Dtype_news#axzz1lvagqAAihttp://www.investmentu.com/2010/October/emerging-market-investing-in-malaysia.htmlhttp://www.singstat.gov.sg/stats/themes/economy/hist/gdp2.htmlhttp://www.investmentu.com/2010/October/investing-in-singapore.htmlhttp://www.investmentu.com/2010/October/investing-in-singapore.htmlhttp://www.singstat.gov.sg/stats/themes/economy/hist/gdp2.htmlhttp://www.investmentu.com/2010/October/emerging-market-investing-in-malaysia.htmlhttp://www.ft.com/intl/cms/s/e7d2bf3a-2732-11e1-b9ec-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fe7d2bf3a-2732-11e1-b9ec-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3DIndonesia%2Binfrastructure%26ftsearchType%3Dtype_news#axzz1lvagqAAihttp://in.reuters.com/article/2011/10/30/idINIndia-60200420111030http://www.bea.gov/national/index.htm#gdp


8/12PAGE 8

Market Views|


Industries and sectors:Meeting the demand from

other countriesWhenever there is a young, skilled, and relatively low-cost labor force, opportunities abound

to capitalize on it. Foreign companies can benet consider the proliferation of call centers

outsourced to Asia by US companies.

An educated labor force adds to the allure in Asia. Asians currently lead in hard sciences,

math and engineering. In fact, more Asians are enrolled in these disciplines than are American

students. The demand in other countries for these skills cannot be underestimated. Indeed,

the late Steve Jobs of Apple, Inc. commented that the company was forced to employ workers

overseas because of the shortage of workers with these skills in the US 8.

With a total Asian middle class of 500 million to 600 million spending between $2.0 trillion

and $2.5 trillion, Asian inhabitants will continue to seek to improve their lives, raise their

standard of living and enjoy the consumption levels similar to those of the West. Food,

household goods and commodities are obvious opportunities for foreign companies to prot.

In addition, banks and nancial institutions represent attractive opportunities in Asia. As global

interest rates are expected to rise, the Asian nancial sector is poised to benet.

8 The New York Times, January 21, 2012, How the US Lost Out on iPhone Work -

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?

CapitalizationOppotunities to invest in Asia exist

acoss te equit capita stuctue.

Large capitalization growth and income

generally seeks capital appreciation and

current income by ocusing on Asian

companies that pay dividends on common

stock, preerred stock and convertiblesecurities. These companies are considered

relatively stable, and since they provide some

downside protection in terms o the income

component, are deemed to be less risky than

other equities. However, dividends are not

guaranteed, and some may be sensitive to

changes in interest rates.

Large capitalization, long-term growth

companies generally ocus on capital

appreciation, rather than on the combination

o growth and income noted above.

Although these Asian companies are

considered large, they may not always

compare in size with large US companies.

Thus, they may be somewhat less liquid and

have higher volatility.

Small capitalization companies in Asiagenerally are below $3 billion in market value.

Because o their smaller size and, thereore,

lower levels o liquidity, these securities

may not trade as readily, and prices can be

more volatile than the large capitalization

companies noted above. Although this

short-term volatility can smooth out over

time, because o their size, these companies

may have limited fnancial resources and/

or products, and inormation may not be as

readily accessible as or larger companies.

RIsk FActoRs

As in any investment strategy, there are

risks associated with Asia investments.

01 UNEASY TRADE RELATIONSHIPS

For example, China has a long-running dispute with

Taiwan, and at times has had strained relations with

its trading partners (including the US).

02 COMPROMISE IN INNOVATION

Chinas communist leadership is another issue to

consider. A government that exercises so much

control raises questions relating to innovation, orexample. In a country where The Party reigns

supreme, decisions oten are made to keep the

leaders in power, rather than or the good o the

countrys economy. These kinds o political risks can

put downward pressure on share prices.

03 DIFFERING REPORTING STANDARDS

Obtaining the accurate inormation necessary or

investment decision-making can be a challenge in

Asia. Some Asian countries (with the exception o

Singapore) may have creative ways o presenting

the numbers that are inconsistent with how the

US mandates its reporting. Particularly in China,

governed by communist leadership, there are poor

accounting and corporate governance standards.

Inormation is controlled tightly by the government,

making it dicult to obtain the level o dependable

data we are used to seeing in the US.

04 DIFFERING ECONOMIC FOCUS

Also, there tends to be a ocus on expanding market

share rather than on protability, as US investors are

used to doing. Growing market share at the expense

o the bottom line means that both short- and long-

term debt may be out o balance when compared to

the typical US company valuations that constitute a

reasonable option or investment.

05 INFLATION & CURRENCY

Infation, the bane o any investment, is a concern
http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?


9/12PAGE 9


9 Ghost cities are a result of the governments

overbuilding to keep growing the economy, similar to

Keynesian stimulus packages in the US.

Some Asian countries may have

creative ways of presenting the

numbers that are inconsistent with

how the US mandates its reporting.

Investment

vehicles

Closed-end funds are one avenue for reaching

the Asia market. The fund raises capital and

then invests that capital according to the funds

objectives. Only a xed number of shares are

issued, and the shares trade on a stock exchange.

Because the number of shares are constant, manyinvestors believe that closed-end funds free-up

portfolio managers to focus on their investment

objectives and avoid the distractions of daily

in-ows and redemption requests. For this reason,

closed-end funds are often deemed at an advantage

for investing in thinly traded emerging markets

such as Asia.

Separately managed accounts are another

route, whereby the investment manager selects

individual securities exclusively in the Asian

market. Depending upon the strategy involved,

the securities are held for varying lengths of time

before sale. The types of securities purchased

(stocks, bonds, etc.) depend upon the objective of

the account holder and may be tailored specically

to meet goals of income, capital appreciation, etc.

Exchange Traded Funds (ETFs) are a popular

and rapidly growing investment mode, and Asia

has seen tremendous increase in these avenues.

ETFs can be sliced and diced in various ways

i.e., agriculture, metals, technology, etc., to name

just a few. Because fees are lower than those for

managed accounts, investor demand has been

rampant. Although the investor gives up alpha

(performance above the index), it is also true that

the majority of managers do not outperform their

benchmark.

Another obvious way to access the Asia market is

to buy the securities of US companies who

do substantial business there. Doing so means

an investor may avoid some of the political risk

mentioned above, since company control is

outside Asia.

in some Asian countries. China in particular is

experiencing higher-than-expected levels o

infation (over 4%) as it tries to balance monetary

policy with growth expectations. The Central

Bank responds to such pressures by tightening

monetary policy, and stock prices can suer.

Nor can currency risks be ignored. I an Asiancurrency weakens against the dollar, oreign

investments can be aected adversely.

06 HIGH LEVELS OF DEBT

China also has another risk. Because its rapid

growth has been driven, in part, by investment in

projects that turned out not to be viable i.e., ghost

cities9, high levels o debt have ensued. Servicing

the debt means that households represent a lower

contribution to GDP. For GDP growth that is driven

by consumption, that balance must change, and thegovernment will need to transer wealth back rom

the state to households. Either policy makers must

make direct transers to households or shit the debt

burden to the state. Both solutions have a downside,

either political ramications or a high debt burden.

07 DEPENDENCY ON OTHER ECONOMIES

Finally, because Asian economies depend upon

exports, when their trading partners experience

diculties, those diculties tend to reverberate

up the ood chain. China and other parts o Asia

already are eeling the pushback rom the Euro

Zones scal crisis. The Euro Zone is Chinas largest

trading partner.

There are many means to access the Asian market. Several fnancial

institutions oer portolios with primary exposure to Asia. As noted previously,

these can have acapitalization, industryorgeographicocus.Alternative assets, primarily hedge

funds, private equityand real estate

are additional vehicles for investing in Asia.

Hedge funds generally invest in securities listed

on a stock exchange, and often use leverage

to enhance returns. Private equity involvesinvesting either in venture capital, buy-outs

or special situations, holding for several years

while costs are streamlined and the company is

restructured to maximize prot, and then sold.

Real estate funds take positions in industrial

or residential properties, often in the form of

real estate investment trusts (REITS) and hold

the investments until market conditions are

appropriate for a sale at a higher price.

Finally, commodities are another method for

accessing the Asia market. Because of the rapid

growth these countries have experienced, couple

with the changing demographics, for example,

the move from an agrarian to an industrialized

economy, the demand for commodities in Asia

has rocketed upward. Commodities are based on

supply and demand. There can be no question

about increased demand. Oil is an obvious

example more automobile owners consume

more oil. Coal is another, as the demand for

heating and manufacturing increases. Copper,

used in construction, electrical grids, appliances

phones and vehicles has experienced signicant

demand increase. Precious metals, such as gold,

platinum and palladium all have experienced

increased demand, as a growing middle class bu

jewelry, for example.

What is not so obvious is that these commoditi

are driven by supply characteristics, as well.

When a commodity is scarce, the price goes up

Focusing on commodities where there are supp

constraints creates prot opportunities. For

example, Russia and Africa control most of the

mining supply for gold and precious metals.


10/12PAGE 10

Market Views|


CONClUSION

China has seen a marked decline

in manufacturing. As in the US,

the purchasing managers index in

China remains a primary business

barometer. Its recent reading of 50.5,

reecting a modest increase from the

49.5 registered in December 2011,

is interpreted as a signal of cooling

economic growth. Coupled with a

continuing drop-off in payrolls, the

government may face the decision

to enact more aggressive easing

measures in its attempt to prop up

growth.

Chinas stock market needs both

exports and domestic consumption

to ourish. With the Euro Zones

issues being a strong headwind

for exports, tightening monetary

policy impacts consumption. Bank

loans are restricted and reserve

AlThOUGh ThE ASIAN ECONOMy rEMAINS STrONG, IT DEfINITEly hAS COOlED IN rECENT MONThS

requirements are higher. It is

hard for domestic consumption to

have meaningful growth in this

environment.

Further proof lies in property prices

they have been falling in recent

months, with land prices down 60%

year-over-year as of September 2011.

Once the most important sector, it

accounted for 13% of the economy,

and close to 20% if construction-

related industries are included.

Governments public works projects,

nanced with loans from state-owned

banks, helped drive investment as

a share of GDP to 48.5% in 2010

(not surprisingly, that was the peak

of GDP growth, as well). Chinas

ghost cities have empty apartments,

public works projects are winding

down, and unemployment is rising10.

There are eerie similarities to the US.

Yet, China, in particular, does have

additional fuel for its economic

engine, since the Euro Zone is its

largest export market. The troubles

in the Zone are well known, and

as recently as February 6, 2012,

Chinese Premier Wein Jubao

commented in the February 6, 2012

edition of The Wall Street Journal,

Now that Europe is facing a debt

crisis, we must consider our relations

with Europe strategically and

preserve our na tional interests.

While the double-digit growth rates

experienced in recent years are

likely not to be replicated in the near

future, there is no question that Asia

is a vast market for US investments.

Staying aware of the political

and economic issues is vital for

successful investors. Finding expe

trustworthy investment managers i

always important, and will continu

to be so, especially in Asia.

9 The Wall St reet Jour nal,

December 3-4, 2011, Editorial.

Chinas gho

cities have emp

apartments, publworks projects ar

winding down, an

unemployment

rising


11/12

A GUIDE TO INVESTING IN ASIA |Market Views

TheMarket ViewReasons to consider Asia now

Asia is getting plenty o

attention but it is the speed

o its transormation that

truly astonishes us.

By Aberdeen Asia Equities Team

PAGE 11

With over two decades of on-the-ground experience

investing in Asia, we have a long historical

perspective to formulate our views on investing in

this dynamic region. Consider:

Continued economic growth Emerging

Asia10 is driving world growth. According to the

International Monetary Fund, Asia is projected to

grow most rapidly at 7.5% on average in 2012-2013,

compared to the global growth rate of 3.3%11. We

believe that Asia-Pacic markets offer strong growth

prospects, reecting high savings and investment

rates and a tradition of scal prudence.

Positive long term outlook In our opinion,

Emerging Asian markets are supported by strongfundamentals compared to developed markets.

Debt levels in Asian economies are lower than

the developed world, where unprecedented scal

deterioration took place in recent years. Also, we

expect a growing middle-class to increasingly drive

the Asian economies in the future, as we see a

secular trend away from export dependence towards

domestic demand.

Healthy and less indebted economies - Asian

economies are in far better shape than their heavily

indebted G7 counterparts. Fundamentals are strong

and the economies are more stable as reected in

balance of payments (which are generally in surplus)

and substantial foreign exchange reserves. We

believe that the scal stance of Asian countries has

markedly improved leading to a decrease in the

sovereign default rates.

Tradition o fscal and monetary prudence

Asias tradition of prudent scal and monetary

policies meant, ahead of the global downturn,

fundamentals were stronger in many Asian

economies than in many developed countries. This

record of scal discipline gave Asian governments

the ability to cope with the global downturn while

only reducing scal balances slightly, leaving them

in good shape for future growth.

Strong balance sheets Not only are balance

sheets strong at the country level, they are also

strong at the corporate and household level. Asian

consumers have low levels of debt and a high level

of savings.

Favorable demographics Asian nations are

characterized by a young, growing population wit

rising incomes. A strong rise in the working age

population is predicted through 2050in sharp

contrast to Europe, where working age population

expected to record a secular decline. The emergen

of an Asian middle class will help drive the trend

domestic consumption and intra-regional trade.

Growing sophistication and liquidity o Asian

markets Domestic nancial markets are stillyoung but growing fast. In 2010 Asia accounted

for almost two-thirds of the IPO market in dollar

terms12. This sophistication and liquidity provides

investors with the opportunity to diversify away

from the escalating sovereign credit risk in the

developed markets.

Attractive valuations We believe that equity

valuations in the region are reasonable, given

company quality and balance sheet strength.

Additionally, spreads are reasonably attractive giv

the low default risk of emerging market sovereign

Positive prospects Investing in Asia can be

challenging; however, we believe there are excelle

opportunities available for rms with the research

capabilities to accurately assess investment

opportunities. As an active fund manager, we trus

our own rather than third party research. Company

visits provide deeper insights and our investment

process is driven by in-person meetings, which

continue throughout the lifetime of our investmen

With 80 investment professionals on the ground in

Aberdeens Asian ofces, we believe we can offerinvestors unique access to the strong and growing

potential of the Asia-Pacic region. To learn mor

about Aberdeens Asian-focused closed-end funds

please visit www.aberdeen-asset.us/cef. Please se

important disclaimer information on page 3.

10 Emerging Asia comprises: China, Hong Kong SAR, Ind

Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwa

Thailand and Vietnam.

11 International Monetary Fund, January 24, 2012.

12 Ernst & Young, December 2010.


12/12

Market Views|

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Our fund managers most useful tool

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Before ever investing in Asiawe prefer to interview face-to-face.

In Asian markets, you have to do your own due diligenceand discovery. Not just take someone elses word for it.

Thats why its important to have people locally, on the

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We believe Asia represents one of the worlds strongestand growing economic regions and the prospects for income

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Aberdeens Asia-Pacific and global closed-end funds listedin the U.S. are:

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For more information, contact our Investor Relations Team at800-522-5465 or e-mail [email protected].

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