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Aberdeen Asset Management Favours HDFC, Grasim

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Asian stocks could fall further as sentiment remains fragile, but the region's equity markets should make a relatively quick recovery as valuations are attractive, Aberdeen Asset Management's Asia head Hugh Young said on Friday.

He also said Aberdeen, which manages about $300 billion, continues to favour Indian blue chips such as housing finance firm HDFC and cement-maker Grasim, and did not intend to bargain-hunt state-linked firms whose shares have taken a beating.

"I think this year as a whole should be a year to forget," Young told Reuters Insider and ET Now in an interview.

"Is there still downside risk? Absolutely... Markets at the moment are volatile and people are certainly fearing a double-dip recession in the West. I personally think that is quite likely to occur."

"A decent element of a double-dip is priced in, and markets are now looking reasonably valued but I don't think they are dirt cheap," he added.

Aberdeen Asia, which Young heads, is one of Asia's more successful fund managers. Its Pacific Equity Fund returned an annualised 11.5 per cent in dollar terms in the three years to June 2011, beating the 7.2 per cent average gain in the MSCI Asia ex-Japan index over the same period.

Young said that while troubles in Europe and the United States will affect Asia, the region's firms remain attractively priced, with many shares traded at price-earnings ratios of 12-13 times with dividend yields of 3-4 per cent.

"The fundamentals of Asia will pull it through and we should see stock markets performing better, probably sometime next year."

On India, Young said Aberdeen remained bullish on the cement sector despite the overcapacity problems currently plaguing the industry.

"The industry is going through a digestion period of new capacity and earnings are nothing to shout about. But the pricing of the stocks are cheap, they are well managed, and the long-term growth for the industry still remains exceptionally strong," he said.

"We've had a big position in cement for a long time, primarily to Grasim and now also to Ambuja," he added.

Asked if Aberdeen would consider buying shares of government-linked or public sector undertaking (PSU) firms, whose shares have been among the worst hit among Indian stocks this year, Young said the UK fund manager intended to stick to firms that it was currently invested in.

"Certainly in valuation terms, the PSU stocks in India are cheap," he said.

"Our first screening for stocks, however, is quality. Where we find the quality and the dynamism, the great management, the flexibility is sadly outside the PSU sector and that really accounts for the rise of companies like HDFC, Infosys in areas where the government has not interfered in."


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