Asia Weekly

Market Update

Week Ended: October 10, 2008

No passion so effectually robs the mind of all its powers of acting and reasoning as fear.
—Edmund Burke

These are difficult times in the global financial markets, and particularly so in Asia. As always, we at Matthews are thankful for the support of our shareholders, many of whom have witnessed and come through such panics in the past. We understand that some may be experiencing this for the first time, and we continue to work hard in the best interests of all our shareholders to keep our heads whilst those around us may be losing theirs.

We believe that we are now seeing prices that in no way reflect the growth potential and stability of Asia’s stronger companies. In our recent past, it was possible to argue that some were priced unreasonably high; now, many seem to be unreasonably cheap. Indeed, reason has been replaced by fear. No one knows for certain when the markets have bottomed—only that it happens when the outlook seems worst.

We are witnessing a change of roles in the global economy. Change can be frightening, particularly when it comes to what we have become accustomed to seeing as the bedrock of the financial system, the supposed “risk free” investment. That foundation is now giving way; exactly what will replace it is not yet clear to anyone. Meanwhile, investors are adrift in panicky markets, which can give rise to all sorts of opportunities.

It may seem facile to say this, but we believe the basic truths of wealth generation remain the same as always. Be prudent. Live within your means. Plan for growth and success and implement those plans gradually. Give yourself a timetable and move at your own pace. Review your objectives and risk tolerance. Disregard those who would distract you with exaggerated promises; turn your back on those who would paralyze you with fear. We believe the giants at the center of Asia, India and China, remain on track with their reform plans: China embarking on further land reform and India continuing to lower the cost of business and allow greater foreign access to her markets.

At Matthews, our approach to investing is to try to heed the words of the Anglo-Irish statesman and philosopher Edmund Burke—not to be paralyzed by fear. We are anchored by a long-term view of how the Asian economies are evolving—toward a more consumption-oriented model and therefore more stable and self-driven. We are armed with our knowledge and research of what we consider to be the better-run Asian companies. We stand ready to be decisive when the opportunities to act arise.

We will continue to communicate with you throughout this period. Not just on the events unfolding in the Western economies, but also on the continued reform, expansion and strengthening of the Asian economies. We will endeavor not to be drawn into the hugely expensive game of “chicken” being played in the financial markets. We will focus our attention not on the destruction to the past financial landscape, but to the construction of the future financial architecture—because that is where the opportunities lie.

Asia Weekly Archive