REVIEW


ANNE RICHARDS CHIEF INVESTMENT OFFICER, ABERDEEN ASSET MANAGEMENT


The IMF warns that emerging market economies face the risk of a “sudden stop” if there is further spill-over from Europe. Asia and Latin America are also looking


extremely exposed to a hard landing in China. And China’s bursting property bubble is increasing fears about a credit


crunch, given that local government debt in China may be as much as 200% of GDP. Weakening emerging market currencies also complicate the inflation picture. On the bright side, fiscal deficits in Asia are small and declining, which gives regional policymakers there some room to maneuver. But China may now find it hard to avoid stagflation. There is still hope that U.S. growth could pick up in a few months, but the increasing correlation between regional economic growth will make this difficult. Equity markets continue to fluctuate


with volatility rising commensurately. Some analysts suggest that there is now considerable value embedded in prices, as PE ratios based on historic earnings approach the lows of 2008/9. But what is currently pre-occupying investors’ minds is that company cash flows will


soon fall as we flirt with a recession. As has been permanently the case since 2009, the macro-environment is crucial in determining the eventual outcome. Consequently, it is no wonder that risk assets have behaved poorly. While paralysis prevails, global market turmoil should continue and further declines in stock markets are possible. We have been cautious that declining growth momentum and sovereign debt woes may cause further setbacks in performance, citing 1,250 and possibly at an extreme 1,220 as possible levels to which the S&P 500 might retrace. These supports did not hold and levels of 1,000 to 1,020 are now more realistic. This is a market being driven by political event risk, and both positive and negative outcomes will move the market violently either way.


The British Garden at Hanover Square: a decade of remembrance


The British Garden at Hanover Square, located in the heart of Lower Manhattan, has been a focal point for the British-American community to reflect upon and remember the many sacrifices made during the terrorist attacks of 9/11. Since the Garden’s dedication by Her


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Majesty Queen Elizabeth II, the site has been a tranquil spot for solace and reflection. This year was an important one for


the Garden in a number of ways. First, the Garden is welcoming Canada and Australia to join its community. Second, the Garden helped honor the victims and


their families with a special concert on September 11, 2011, which included a visit from the Canadian Prime Minister. Aberdeen Asset Management is proud to be a sponsor of The British Garden. For more information about the British Garden at Hanover Square, please visit www.britishgarden.org


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