Baring Asset
Management (Asia)
Limited
19/F, Edinburgh Tower,
15 Queen’s Road Central,
Hong Kong
Tel +852 2841 1411 www.barings.com
Authorised and regulated by the
Financial Services Authority
Investment Community Conference Call
www.asiapacificfund.com
Khiem Do
August 14, 2008

Table of Contents
Section 1: Asian Markets Review
Section 2: Asian Investment Outlook and Strategy
Page
2 - 5
6 - 28
1

Baring Asset
Management (Asia)
Limited
19/F, Edinburgh Tower,
15 Queen’s Road Central,
Hong Kong
Tel +852 2841 1411 www.barings.com
Authorised and regulated by the
Financial Services Authority

Local Currency exchange rate (US$/Local rate)
(3 month period to June 30, 2008)
03/31/2008 06/30/2008 Change %*
North Asia
Chinese Renminbi
New Taiwan Dollar
Hong Kong Dollar
South Korean Won
ASEAN
Singaporean Dollar
Indonesian Rupiah
Malaysian Ringgit
Thai Baht
Philippines Peso
7.01
30.38
7.78
990
1.38
9,205
3.20
31.49
41.77
6.85
30.35
7.80
1,046
1.36
9,220
3.27
33.44
44.90
2.3
0.1
-0.2
-5.3
1.4
-0.2
-2.1
-5.8
-7.0
Indian Rupee
VN Dong
40.12
16,110
43.03
16,842
-6.8
-4.3
Most Asian currencies corrected vs the USD in the June quarter
(except Renminbi and Sing $)
*: + denotes an appreciation of the local currency vs the USD (and vice-versa)
Source: Factset, Bloomberg
3

Asian Stock Markets: Country Performance
(3 month period to June 30, 2008)
Country - Index
Gross return in USD
(%)
North Asia
MSCI China Free
MSCI Hong Kong Free
MSCI Korea Free
MSCI Taiwan Free
ASEAN
MSCI Singapore Free
MSCI Indonesia Free
MSCI Malaysia Free
MSCI Thailand Free
MSCI Philippines Free
MSCI AC Far East Free Ex Japan Gross
MSCI India Free
Vietnam (HCM Local price index)
-3.5
-3.9
-7.6
-10.5
-0.9
-4.5
-9.1
-11.8
-24.8
-6.4
-19.7
-22.7
‘Growth’ markets of VN and India continued to fall sharply, while Singapore and HK/China fared relatively better
Source: Factset, Bloomberg
4

Asian Stock Markets: Sectoral Performance
(3 month period to June 30, 2008)
Gross return in USD
(%)
MSCI Energy
MSCI Consumer Staples
MSCI Utilities
MSCI Financials
MSCI Materials
MSCI Information Technology
MSCI Telecommunication Services
MSCI Industrials
MSCI Real Estate
MSCI Consumer Discretionary
MSCI Health Care
7.7
-0.4
-2.8
-5.5
-6.4
-8.3
-8.8
-10.7
-11.4
-13.0
-17.1
Defensives (Energy, Consumer Staples) led, while Cyclicals (Consumer Disc., Real Estate) lagged
Source: Factset
5

19/F, Edinburgh Tower,
15 Queen’s Road Central,
Hong Kong
Tel +852 2841 1411 www.barings.com
Authorised and regulated by the
Financial Services Authority

Performance of Global Asset Classes:
Extremely challenging environment !
3-Month Risk vs Return * 12-Month Risk vs Return *
Source: BCA Research (7/2008)
Only commodities, cash and high quality bonds produced positive returns
7

Global Risk Appetite still Very Weak:
Hide in government bonds or be brave and buy cheap equities ?
Global Risk Appetite Since 1981
Risk index
Source: Credit Suisse (7/2008)
Investors , in general, have been hiding
8

Risk Appetite:
Global Emerging Markets/Asia vs US
GEM/Asia Equity Risk Appetite Index US Equity Risk Appetite Index
Source: Credit Suisse (7/2008)
GEM/Asia at ‘panic’ levels, whereas
US has recovered somewhat
9

Significant Flows out of EM Asia:
Precursor to Asian recession … or … other reasons?
(US$bn)
10
8
6
4
2
-
(2)
(4)
(6)
(8)
(10)
(12)
(14)
(16)
(18)
(20)
Jan-03
2.6
(5.4)
0.7
(5.8)
Monthly Net Foreign Buying in EM Asia
Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06
(15)
(15)
(12.9)
(18)
Jan-07 Jul-07 Jan-08 Jul-08
Recent selling likely caused by de-risking by foreign investors and switching out of Asia to other OECD and EM markets
Note: EM Asia here includes India, Indonesia, Korea, Taiwan, Thailand and the Philippines.
Source: Morgan Stanley (7/2008)
10

Current Concerns in Equity Markets:
‘Perfect storm’ of negative expectations!

Fear of oil prices climbing to $ 200/bbl
 Fear of economic stagflation

Fear of global and regional inflation rates remaining high , inducing OECD Central banks to potentially make a mistake by tightening policy too soon and by too much
 Fear of further significant capital required to re-capitalise the US and UK/European financial systems > dilution to current shareholders

Fear of losing money by investing in equities in the short-term , despite more attractive valuations
With so many ‘fears’, is there room for being a contrarian ?
11

Asia vs World:
Relative performance over past decade
(As at June 30, 2008)
(%)
25
20
0
-5
-10
-15
15
10
5
-20
-25 -22.1
YTD
-11.7
MSCI Price Returns – Annualised (in USD terms)
-7.7
-12.5
16.8
6.9
20.2
10
11.1
MSCI AC Asia ex JP Index
MSCI World Index
2.6
1 Year 3 Years 5 Years 10 Years
After this year’s short-term setback,
Asia’s out-performance is expected to continue
Source: Bloomberg (7/2008)
12

Our Key Long-Term Views:
Secular Asian equity bull trend, interrupted
Asia – Positive long-term fundamentals remains intact
 Secular growth driven by domestic demand

Supportive liquidity
– excess domestic savings, healthy banking system
 Attractive equity valuations, and lowly-geared corporate balance sheets
Short-term issues – 1) Have oil prices peaked; and
2) Has the US equity market bottomed ?
13

Barings’ Base Case Scenario:
Cautiously optimistic
 Long-lasting and severe US recession ?
Barings forecasts flat growth
 Asian economies’ GDP growth to slow ?
Mid-term cycle correction in long up-cycle, but no recession
 China’s PBOC to ease off on monetary tightening in H2 ’08 as inflation appeared to have peaked ?
Recent signals appear more positive
 Equities becoming more attractively priced, but risk aversion remained high and excess liquidity allocated towards equities was low: We are looking for a change in sentiment
Potential upside risk in equity markets in H2 ?
14

US Financial Crisis:
An update of our check-list
Conditions for Market Stabilisation
Weakening currency
Monetary easing
Bottoming out of housing sector
Current status in the US

Now neutral
Not quite there yet
Re-capitalization, if not nationalization, of financial institutions
Clearance in credit markets
Share price stabilization on earnings downgrades
Not quite there yet
Not quite there yet
Not quite there yet
Positive newsflows still lacking!
15

Oil Price:
Where are we in the long cycle ?
Real Oil Price
Oil Price (in real terms)
Source: Credit Suisse (7/2008)
It appears that the oil price is close to reaching a long-term peak
16

World Oil Demand:
Who consumes more (or less) in 2008 (mm bbl/day)?
Mm bbl/day
0.50
0.41
0.33
0.24
0.12
0.08
0.05
0.05
0.01
0.00
(0.50)
China Middle
East
Latin
America
Other
Asia
FSU Pacific
(Japan)
Africa Europe
(0.49)
North
America
Recent slowing of Chinese and other economies, plus substitution effects, are expected to cause slower demand growth for oil
Source: JP Morgan (7/2008)
17

Global Retail Petrol Prices:
China vs rest of world (price in US$/litre)
1.0
0.5
0.0
US$/litre
3.0
2.5
2.0
1.5
Despite subsidies, pricing gap between China and US is narrowing
Source: JP Morgan (7/2008)
18

China & Asia’s Core vs Headline Inflation:
Headline: worrying …………..… Core: still tame
Asia ex-Japan
YoY %
8
7
6
5
CPI Core CPI
4
3
2
1
0
-1
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
China
YoY %
10
8
6
4
2
CPI Non-food CPI
-
(2)
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Source: Morgan Stanley (7/2008)
Chinese headline inflation appeared to have peaked, but other Asian counterparts still at high levels
19

Inflation in China:
Food vs non-food
YoY%
25%
20%
15%
10%
5%
0%
Jan-05 Jul-05
CPI - Food
Jan-06
CPI - Food
Jul-06 Jan-07
CPI - Non-food
Jul-07
CPI – Non-Food
Jan-08
Food price inflation holds the key to China’s inflation
Source: JP Morgan (7/2008)
20

Food Price Inflation in China:
Pork price holds the key
Source: JP Morgan (7/2008)
Pork price still high, but price trend has flattened out
21

China’s Key Macro Variables:
Past over-heating periods vs now
Growth Rate (% p.a.)
80
76.0%
70
60 58.0%
50
40
40.0%
42.0%
47.0%
49.0%
40.0%
35.0%
29.0%
30
26.0%
25.0%
18.0%
20.0%
19.0%
20
15.0%
10
0
84-85 88-89 93-94 Now
Money (M2) Growth
84-85 88-89 93-94 Now
Loan Growth
84-85 88-89 93-94 Now
Fixed Asset Investment Growth
84-85 88-89 93-94
Non-food Inflation
1.7%
Now
Current cycle milder than past over-heating episodes: no need for aggressive tightening by PBOC ?
Source: JP Morgan (7/2008)
22

Profit Outlook of Asia vs US:
Fundamental factors continue to favour Asia
EPS index
(2008/09: starting at 100 on base date of February ‘07)
US: Down revisions still dominate
Index
115
110
105
2009
100
95
90
85
Feb 07 May 07
2008
Aug 07 Nov 07 Feb 08 May 08
Asia Pacific Ex-Japan: Stable revisions
Index
130
2009
125
120
115
110
105
100
95
Feb 07 May 07 Aug 07
2008
Nov 07 Feb 08 May 08
Stable Asian earnings revisions vs US down trend
Source : JP Morgan (7/2008)
23

Earnings Growth vs Valuations:
Consensus expectations for Asia and the World
World
US
Emerging Markets
Asia Ex-Japan *
P/E (E) EPS Growth (%)
2008 E 2009 E 2008 E 2009 E
12.2
10.6
10.8
15.6
13.8
11.5
11.5
10.0
8.4
19.5
19.9
14.6
12.6
10.9
9.8
15.8
Div. Yield
2008 E
3.2
2.3
3.2
3.1
ROAE (%)
2008 E
15.4
16.8
18.8
15.6
* Excludes Australia
Source: Goldman Sachs, IBES (7/2008)
More sustainable earnings growth expected in Asia/EM, yet valuations of the latter still cheaper than US
24

Asian Equities vs Asian Bonds:
Equities appear very cheap, but ……
-1
-2
1
0
-3
-4
-5
-6
(%)
4
3
2
Apr-95
APXJ Price
700
600
500
400
-
300
200
100
Apr-97 Apr-99 Apr-01 Apr-03 Apr-05 Apr-07
10Y Bond Yield - Fwd Earnings Yield (%)
Avg. +1 Std dev
Avg. -1 Std dev
US$ Price (Right)
….. higher investor confidence and risk appetite needed to close the gap
Source: Morgan Stanley (7/2008)
25

Asia Pacific ex Japan Equity Markets:
Price and P/E trends
MSCI AC Asia Pacific ex Japan (Price Index vs P/E Band)
MSCI Price Index
900
800
700
600
500
400
300
200
100
0
Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07
25x
22x
19x
16x
13x
Attractive valuation
Source: Morgan Stanley (7/2008)
26

Is the US Equity Market Close to the Bottom?
Past 150 years’ cycle study say ……
US Real Equity Returns: Declines from Peak
Index of Real Return
Source: Credit Suisse (7/2008)
….. probably Yes !
27

Asia Pacific Fund’s Portfolio Strategy
What has changed?



Investors’ risk appetite has weakened further as equity investors were hit by four factors: oil price spike, stagflation, the US financial crisis, and monetary tightening bias in growth economies of BRIC
Signs of “capitulation” selling in Asian equities in June/July
We have lowered the portfolio’s beta and active risk over the past 6 months
What has not changed?



Portfolio favoring large caps and stable growth to cyclical growth
Portfolio still focused on sectors with a sustainable growth trend, including domestic consumption, infrastructure and asset reflation
Portfolio looking to add back selective growth stocks in periods of severe market weakness, as it seems that we are close to an important market low
28

Important Information
This document is provided as a service to professional investors/advisers. It is issued in the United Kingdom by Baring Asset Management Limited and/or by its investment adviser affiliates in other jurisdictions. The affiliate serving as the Asia Pacific Fund’s investment adviser is Baring Asset
Management (Asia) Limited. In the United Kingdom this document is issued only to persons falling within a permitted category under (i) the FSA’s rules made under section 238(5) of the Financial Services and Markets Act 2000 and (ii) the Financial Services and Markets Act 2000 (Promotion of Collective
Investment Schemes) (Exemptions) Order 2001.
This is not an offer nor a solicitation to buy or sell any investment referred to in this document. Baring Asset Management group companies, their affiliates and/or their directors, officers and employees may own or have positions in any investment mentioned herein or any investment related thereto and from time to time add to or dispose of any such investment.
The contents of this document are based upon sources of information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This document may include forward-looking statements, which are based upon our current opinions, expectations and projections as of the date on the cover hereof. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. The value of any investments and any income generated may go down as well as up and is not guaranteed. Past performance will not necessarily be repeated. Changes in rates of exchange may have an adverse effect on the value, price or income of an investment. There are additional risks associated with investments (made directly or through investment vehicles which invest) in emerging or developing markets. Compensation arrangements under the Financial Services and Markets Act 2000 of the United Kingdom will not be available.
Private investors in the Company referred to herein should obtain their own independent financial advise before making investments. This document must not be relied on for purposes of any investment decisions. Before investing in the Company, we recommend that all relevant documents, such as reports and accounts and prospectus should be read, which specify the particular risks associated with investment in the Company, together with any specific restrictions applying and the basis of dealing. The Company may not be available for investment in all jurisdictions. There may also be prohibitions or restrictions on distribution of this document and other material relating to the Company and accordingly recipients of any such documents are advised to inform themselves about and to observe any such restrictions.
Complied (Boston): August 1, 2008
29