New Aberdeen fund to invest in Europe

Investors should consider the European stock market, given its low valuation and high returns on investments, according to Aberdeen Asset Management Ltd.

Robert Penaloza, the company's deputy CEO, said the European stock market was trading at a record-low price-to-earning ratio of 14 times, compared to 25 times six years ago, while its earning-per-share remained high.

European stocks also benefit from low interest rates and face a brisk level of merger and acquisition transactions in the future. Many European companies have actively undergone corporate restructuring, which leads to lower costs and productivity gains.

"It's a good time to invest in Europe as the Thai baht is unusually strong. The return on investment in European stocks will be at least 10-15 percent, based on the earnings growth of 8-10 percent and dividend yield of 3 percent," he said.

James Laing, the fund manager of Aberdeen Asset Management Plc, said Europe boasted the twin attractions of a huge range of globally recognised companies based in mature economies as well as a plethora of exciting Eastern Europe emerging market investment opportunities.

The European market has more than 27,000 listed companies with combined market capitalisation of US$7.923 trillion, second to the US market.

The Thai subsidiary of Aberdeen will launch an initial public offering of its third foreign investment fund (FIF), Aberdeen European Growth Fund, from Nov 20 to Dec 1. The selling agents are Aberdeen, Citibank and Phatra Securities.

The US$50-million Aberdeen European Growth Fund will invest all or substantially of its assets in the Aberdeen Global-European Equity Fund, a sub-fund of the Luxembourg-registered Aberdeen Global umbrella fund, which invests in a portfolio of European equities.

The return of the Aberdeen Global-European Equity Fund is 13.25 percent since the start of this year to date and the average return during the past three years is 23.47 percent.

Mr Penaloza said that Aberdeen remained overweight in the Thai stock market. The company has managed assets of up to US$1.6 billion here and its average return from Thai stocks is 14-15 percent for the year to date.

Since the September coup, foreigners have been net buyers as Thai shares are relatively low with 20 percent discounts when compared to regional markets.

"Concerns about political uncertainties started to ease after the government presented foreign investors with some clarity over government policies and plans to invest in mass transit projects. However, the government needs to communicate and provide them with more information in the future," Mr Penaloza said.

He predicted that corporate earnings of listed firms next year would grow by 6-8 percent, compared to zero growth this year, with dividend yields up by at least 5 percent.