Martin Gilbert, co-founder and chief executive of Aberdeen Asset Management, looks at how sentiment towards Asia and emerging markets has changed over the past two decades.
"Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning." - Albert Einstein
Einstein is arguably the most famous physicist in the world, but as with many of his discoveries and teachings these wise words are applicable in other areas, including managing a portfolio, particularly during a financial crisis.
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Twenty years ago last week, Thailand spent billions of dollars to defend the Thai baht against attacks from currency speculators. This was perhaps the canary in the coalmine that signalled the onset of the Asian financial crisis.
Seven weeks later at the beginning of July, Thailand devalued the baht and requested technical assistance from the International Monetary Fund.
In the following weeks and months, other Asian countries devalued their currencies and sought assistance.
Panic selling saw stockmarkets tumble and the Asian growth story appeared to have come to a crashing end.
But the key to a crisis is a cool head. The UK stockmarket fell 22% in two days after Black Monday in 1987. Yet, as with all crises, there was a tomorrow.
We had Hugh Young and his team located in Singapore when the Asian financial crisis hit. They could hear first-hand from company management and policymakers, and make measured decisions.
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They knew only too well the worst thing they could do was to make knee-jerk decisions and sell at the point of maximum pain.
We continue to hold some of the companies that we held back then. A good example is Singapore bank, OCBC.
It is a prudently-managed bank that emerged from the Asian crisis in good shape. Unlike many of its Western peers, it also weathered the global financial crisis in 2007 just fine.
Today, it is a regional financial services giant. Over the past 20 years, its share price total return is in excess of 350%.
Our investment in OCBC is not the result of blind faith, but rather the result of meeting with and questioning management on a regular basis and an ongoing analysis of the balance sheet and business model.
Our Asian equity team has met with OCBC 25 times over the past five years alone. At no point have we stopped asking simple questions or assumed that the past is a guide to the future.
