During the month the Trust returned -13.0%, while the Index returned -15.7%. Asian equity markets continued to fall following sharp declines in September. With a global economic slowdown looming, the crude oil price fell more than 30% and the Baltic Dry Index fell more than 70% in October. The collapse of these indicators of global demand and international trade prompted concerns about the outlook for Asian exports.Taiwan, Malaysia and Hong Kong were the better performing markets in October while Thailand and Indonesia were the worst performing markets. Asset allocation was positive, due to our holdings of cash and our reduced emphasis on Thailand, which performed poorly. Stock selection was positive due to our key picks in China and Korea. Debt reduction, credit contraction and negative wealth effects are likely to continue to cloud the near-term outlook.In Asia, domestic demand and infrastructure spending remain strong and should support corporate earnings. China and other Asian countries have enough domestic demand, excess savings and policy flexibility to buffer a potential deceleration in exports. In the near term, more concerted global action to address the systemic financial risk should help to reduce market volatility.The liquidity injections by various governments and the imposition of restrictions on short-selling are supportive for equity markets. Valuations have fallen to levels which have arguably already reflected the corporate earnings decline in the coming quarters.Our strategy has been to increase our emphasis on large, high quality companies with relatively secure earnings. Apart from defensive sectors where earnings are less reliant on the economy, we hold growth companies with low valuations and strong cash flow.
