Asian markets were sold down heavily in September in response to the worsening financial crisis. Liquidity and solvency fears have caused risk appetite to collapse globally, leading to significant foreign fund outflows from the region. The earnings outlook for Asia has deteriorated as analysts factor in the impact of the deepening global slowdown.Fund performance was impacted by the overweight position in China related stocks which, despite an unexpected interest rate cut, were sold off in the general flight to quality. Stock selection in the energy and material sectors subtracted further value, as these areas sold off heavily in response to weakening commodity prices and escalating concerns over the global growth outlook.Over the month, we reduced the exposure to energy and materials, and lowered the position in the Singapore property sector where the cycle has started to turn down. Going forward, we continue to focus on stocks that are benefiting from the strength of domestic demand across the region, especially in the consumption and infrastructure areas. The fund is also exposed to sectors benefiting from the structural demand arising from the industrialisation of China and India.
