June 2009
Equity markets continued to rally in May, aided by not so much green shoots of recovery, but
rather that the worst of the destocking impact was behind us. China and Brazil both provided
stronger than expected economic data, and this helped fuel risk appetite across global markets.
In the UK, the FTSE All-Share Index rose by 4.2% in total return terms.
As risk appetite increased, it was the cyclical elements of the market that fared best, with strong
performances from the Banks, Mining and Basic Material sectors. Commodity prices continued
to rise, and with it, there has been a sharp pick up in inflationary expectations, perhaps not
surprising given the scale of the stimulus packages from Western Governments. The sectors
which lagged the recovery tended to be those less exposed to global growth, including General
retailers, Telecomms and Real Estate. In terms of size impacts, the strength of the Mining sector
saw the FTSE 100 Index outperform the FTSE 250 and SmallCap Indices.
Economic newsflow showed economies continuing to contract, albeit the data was no worse
than expected. US unemployment rose to 8.9%, while EuroZone GDP fell by 2.5% in Q1 2009,
prompting the ECB to cut rates by 25bps to 1%. In the UK, the quantitative easing programme
was extended, and despite this, gilt yields continued to push out, primarily in response to the
perceived forthcoming issuance.
It was a quiet month for activity, adding to positions in HSBC, National Grid and Rolls-Royce, all trading
at attractive valuations with sound business models, and which had been left behind in the market rally.
Source: Monthly Factsheet Aberdeen Asset Managers Limited