January 2010
The UK market reached a yearly high during December in what was a strong finish to 2009
with the FTSE 100 Index rising above the 5,400 level having been as low as 3,600 last March.
The market benefited from further strong global economic data which helped sentiment
despite the news that Greece’s credit rating was downgraded, Spain’s outlook revised
downwards and Dubai World required a US$10bn bailout by its neighbour Abu Dhabi. The FTSE
All-Share Index rose 4.3% over the month driven by the outperformance of larger companies.
The FTSE 100 Index advanced 4.4% whereas the FTSE SmallCap Index returned 2.4%, reflecting
a degree of risk aversion at the close of the year.
Economic news flow was mixed, but importantly, data from the US, including consumer
confidence and manufacturing numbers, was generally encouraging. Within the UK,
unemployment levels unexpectedly decreased as was also the case in the US. The Bank of
England maintained the quantitative easing programme and kept interest rates at prior levels
as it sought to bolster growth. Meanwhile, the government pumped a further £40bn into
the Royal Bank of Scotland and Lloyds Banking Group to shore up their capital bases. With
the emergence of a tentative global recovery, emphasis in the UK is increasingly on the need
for fiscal tightening given the difficult outlook for the public finances, while the impact of a
sustained period of loose monetary policy in terms of inflation or deflation is still unclear.
In portfolio activity, we raised our position in Wood which had recently been introduced.
Against this, the holdings in Millenium & Copthorne Hotels and Cobham were trimmed
following strong runs in both stocks. Whilst we expect markets to exhibit continued volatility
throughout 2010, we remain committed to investing in high quality businesses with strong
balance sheets at attractive long term valuations.
Source: Monthly Factsheet Aberdeen Asset Managers Limited