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									                                  The Asia Pacific Fund, Inc.
                                   Investment Community Conference Call
Baring Asset
Management (Asia)


                                          Asian Investment Outlook
Limited
19/F, Edinburgh Tower,
15 Queen‟s Road Central,
Hong Kong

Tel +852 2841 1411

                                                 www.asiapacificfund.com
www.barings.com



                                                                   Khiem Do
Authorised and regulated by the
Financial Services Authority
                                                              August 14, 2008
Table of Contents



                                                      Page

   Section 1: Asian Markets Review                    2-5

   Section 2: Asian Investment Outlook and Strategy   6 - 28




                                                               1
Section 1
Asian Markets Review
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                                                 7.01         6.85          2.3
                 New Taiwan Dollar                                               30.38        30.35          0.1
                 Hong Kong Dollar                                                 7.78         7.80         -0.2
                 South Korean Won                                                 990         1,046         -5.3

                 ASEAN
                 Singaporean Dollar                                               1.38         1.36          1.4
                 Indonesian Rupiah                                               9,205        9,220         -0.2
                 Malaysian Ringgit                                                3.20         3.27         -2.1
                 Thai Baht                                                       31.49        33.44         -5.8
                 Philippines Peso                                                41.77        44.90         -7.0

                 Indian Rupee                                                     40.12       43.03         -6.8
                 VN Dong                                                         16,110      16,842         -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)
                                                                     Gross return in USD
                              Country - Index                                         (%)

                              North Asia
                              MSCI China Free                                        -3.5
                              MSCI Hong Kong Free                                    -3.9
                              MSCI Korea Free                                        -7.6
                              MSCI Taiwan Free                                      -10.5
                              ASEAN
                              MSCI Singapore Free                                    -0.9
                              MSCI Indonesia Free                                    -4.5
                              MSCI Malaysia Free                                     -9.1
                              MSCI Thailand Free                                    -11.8
                              MSCI Philippines Free                                 -24.8
                              MSCI AC Far East Free Ex Japan Gross                   -6.4
                              MSCI India Free                                       -19.7
                              Vietnam (HCM Local price index)                       -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                                  7.7
                   MSCI Consumer Staples                       -0.4
                   MSCI Utilities                              -2.8
                   MSCI Financials                             -5.5
                   MSCI Materials                              -6.4
                   MSCI Information Technology                 -8.3
                   MSCI Telecommunication Services             -8.8
                   MSCI Industrials                           -10.7
                   MSCI Real Estate                           -11.4
                   MSCI Consumer Discretionary                -13.0
                   MSCI Health Care                           -17.1

                                     Defensives (Energy, Consumer Staples) led,
                            while Cyclicals (Consumer Disc., Real Estate) lagged

 Source: Factset
                                                                         5
Section 2
Asian Investment Outlook
Baring Asset


and Strategy
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
Performance of Global Asset Classes:
Extremely challenging environment !


                3-Month Risk vs Return *                12-Month Risk vs Return *




                                      Only commodities, cash and high quality bonds
                                                          produced positive returns

 Source: BCA Research (7/2008)
                                                                               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




                                                       Investors , in general, have been hiding

 Source: Credit Suisse (7/2008)
                                                                                        8
Risk Appetite:
Global Emerging Markets/Asia vs US

 GEM/Asia Equity Risk Appetite Index        US Equity Risk Appetite Index




                                       GEM/Asia at ‘panic’ levels, whereas
                                            US has recovered somewhat

 Source: Credit Suisse (7/2008)
                                                                     9
Significant Flows out of EM Asia:
Precursor to Asian recession … or … other reasons?
                 (US$bn)

                    10
                     8
                     6
                     4
                                                                                                                                  2.6
                     2
                                                                                                                                                0.7
                      -
                     (2)
                     (4)
                     (6)
                                                                                                                                           (5.4)      (5.8)
                     (8)
                   (10)
                   (12)
                   (14)                                                                                                                         (12.9)
                                          Monthly Net Foreign Buying in EM Asia                                                   (15)
                   (16)                                                                                                                  (15)
                   (18)
                                                                                                                           (18)
                   (20)
                           Jan-03    Jul-03    Jan-04       Jul-04     Jan-05      Jul-05     Jan-06   Jul-06   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)

                              MSCI Price Returns – Annualised (in USD terms)
(%)
 25
                                                                       20.2
 20                                                     16.8
 15                                                                                        11.1
                                                                               10
 10                                                            6.9
   5                                                                                               2.6
   0
  -5
-10                                 -7.7                                MSCI AC Asia ex JP Index
-15                     -11.7              -12.5                        MSCI World Index
-20
-25          -22.1
                 YTD                  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

                                                                           Current status in
    Conditions for Market Stabilisation
                                                                                the US

    Weakening currency                                                              

                                                                               Now neutral
    Monetary easing

                                                                            Not quite there yet
    Bottoming out of housing sector


    Re-capitalization, if not nationalization, of financial institutions    Not quite there yet

                                                                            Not quite there yet
    Clearance in credit markets

                                                                            Not quite there yet
    Share price stabilization on earnings downgrades


                                                                Positive newsflows still lacking!

                                                                                              15
Oil Price:
Where are we in the long cycle ?

                                              Real Oil Price
                  Oil Price (in real terms)




                                                   It appears that the oil price is close to
                                                               reaching a long-term peak

 Source: Credit Suisse (7/2008)
                                                                                    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)                                                                                       (0.49)

             China            Middle    Latin    Other   FSU     Pacific   Africa   Europe    North
                               East    America   Asia           (Japan)                      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$/litre)
 US$/litre
  3.0


  2.5


  2.0


  1.5


  1.0


  0.5


  0.0

                                                                                                                               India




                                                                                                                                                  US
                                                                                                                 Philippines




                                                                                                                                                       Russia

                                                                                                                                                                China
                                                                                                         Japan
                                                                                    Singapore




                                                                                                                                       Thailand
                                                          Hong Kong




                                                                                                Brazil




                                                                                                                                                                                                                           Venezuela
                                                                                                                                                                                                                    Iran
                  Denmark




                                                                                                                                                                                               UAE
                             Germany

                                       Britain

                                                 France




                                                                                                                                                                        Indonesia
         Norway




                                                                      South Korea




                                                                                                                                                                                                     Saudi Arabia
                                                                                                                                                                                    Malaysia
                            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                                                                     China
YoY %                                                                             YoY %

8                                                                                  10
                                                                                                     CPI            Non-food CPI
7
                   CPI             Core CPI                                         8
6

5                                                                                   6

4
                                                                                    4
3

2                                                                                   2

1
                                                                                    -
0

-1                                                                                (2)
     Jan-01   Jan-02     Jan-03    Jan-04     Jan-05   Jan-06   Jan-07   Jan-08         Jan-01   Jan-02    Jan-03   Jan-04   Jan-05   Jan-06    Jan-07   Jan-08




                                                       Chinese headline inflation appeared to have peaked,
                                                            but other Asian counterparts still at high levels

       Source: Morgan Stanley (7/2008)
                                                                                                                                               19
Inflation in China:
Food vs non-food

  YoY%

  25%

                                                                                   CPI - Food
  20%


  15%


  10%


   5%
                                                                                           CPI – Non-Food

   0%
     Jan-05                   Jul-05   Jan-06       Jul-06   Jan-07           Jul-07            Jan-08

                                       CPI - Food            CPI - Non-food




                                       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

(RMB/kg)
  32
  30                          Pork price - 2008
  28                                                                          Pork price - 2007
  26
  24
  22
  20
  18                                                                            Pork price - 2006
  16
  14
  12
  10
       Jan          Feb         Mar       Apr     May   Jun   Jul      Aug    Sep      Oct        Nov        Dec



                                                                                 Pork price still high,
                                                                    but price trend has flattened out

 Source: JP Morgan (7/2008)
                                                                                                        21
China’s Key Macro Variables:
Past over-heating periods vs now
       Growth Rate (% p.a.)
       80
                                                                                                 76.0%

       70


       60                      58.0%


                                                                                         49.0%
       50                                                                       47.0%
                                                                42.0%
              40.0%                                                                                                        40.0%
       40
                                                35.0%

                       29.0%
       30                                               26.0%                                            25.0%
                                                                                                                 20.0%             19.0%
       20                              18.0%
                                                                        15.0%

       10
                                                                                                                                              1.7%
              84-85    88-89   93-94   Now      84-85   88-89 93-94     Now      84-85   88-89   93-94   Now     84-85     88-89   93-94      Now
        0
                   Money (M2) Growth                    Loan Growth             Fixed Asset Investment Growth            Non-food Inflation



                                               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                                       Asia Pacific Ex-Japan: Stable revisions
Index                                                                   Index
115                                                                     130
                                                                                                                2009
                                                                        125
110
                          2009
                                                                        120
105
                                                                        115
100
                                                                        110
                                     2008
 95                                                                                                      2008
                                                                        105

 90                                                                     100

 85                                                                      95

        Feb 07       May 07         Aug 07   Nov 07   Feb 08   May 08         Feb 07   May 07   Aug 07    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



                                            P/E (E)        EPS Growth (%)    Div. Yield   ROAE (%)

                                        2008 E   2009 E   2008 E    2009 E    2008 E       2008 E

      World                              12.2     10.6     10.8      15.6       3.2         15.4

      US                                 13.8     11.5     8.4       19.9       2.3         16.8

      Emerging Markets                   11.5     10.0     19.5      14.6       3.2         18.8

      Asia Ex-Japan *                    12.6     10.9     9.8       15.8       3.1         15.6




                                        More sustainable earnings growth expected in Asia/EM,
                                               yet valuations of the latter still cheaper than US
 * Excludes Australia
 Source: Goldman Sachs, IBES (7/2008)
                                                                                                   24
Asian Equities vs Asian Bonds:
Equities appear very cheap, but ……
                      (%)                                                                                        APXJ Price
                       4                                                                                            700
                       3
                                                                                                                    600
                       2

                       1                                                                                            500

                       0
                                                                                                                    400
                      -1
                      -2                                                                                            300

                      -3                                                                                            200
                      -4
                                                                                                                    100
                      -5

                      -6                                                                                            -
                           Apr-95   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
                                                                                           25x
     800
                                                                                           22x
     700
                                                                                           19x
     600
                                                                                           16x
     500
                                                                                           13x
     400
     300
     200
     100
        0
         Jan-89                Jan-92   Jan-95   Jan-98   Jan-01   Jan-04    Jan-07


                                                                        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




                                                                          ….. probably Yes !

 Source: Credit Suisse (7/2008)
                                                                                    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

								
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