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Market Perspective Summary

    Pacific ex-Japan Value: June 2011

    June 30, 2011

    The developed Pacific markets—as measured by the MSCI Pacific ex Japan Index—declined 1.7% for the month, trimming the gain for the first half of the year to 2.5%.

    Sector performance was mostly negative during June. The energy sector depreciated the most as oil prices dropped amid concerns about the global economic recovery. Technology was the benchmark’s best performer due to the small number of representative stocks in the sector from Hong Kong, Singapore and Australia. Materially, consumer staples appreciated as defensive sectors rallied.

    The portfolio declined in absolute terms and underperformed its benchmark in June, with security selection being the main driver. Hong Kong and Australia detracted but Singapore and New Zealand helped to offset some of the losses.

    Consistent with our value discipline, we have been reducing our exposure to successful holdings and deploying funds to stocks that are well short of our measures of fair value. In that spirit, we sold down well-performing telecoms names and invested in real estate development in Hong Kong and China. We also added to our positions in a range of sectors to take advantage of recent share-price weakness.

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