Aberdeen's Cumming defensive on equities for 2013

As investors look to back equities in 2013 as an alternative to low-yielding government bonds, Aberdeen's global equity manager Jamie Cumming is cautious over his own sector's outlook.

The extent to which companies will be able to broaden profit margins further from this year's cuts looks to be shaken by weakening sales figures and profit warnings, the Euro Stars A-rated global equity manager told investors in a conference call on Tuesday.

'Companies have been ruthless in cutting costs and expanding margins. The ability to trim excess fat in the next year will become more difficult as much of the fat has already been cut,' said Cumming, who manages the Aberdeen Global- Responsible World Equity fund.

Low growth and high debt in developed economies has seen the past year marked by loosening monetary policies by central banks. This, in turn, has distorted the view of stock fundamentals, according to Cumming.

'Sales expectations have disappointed and as such we may see further profit warnings and earnings downgrades that have been masked by the ECB and Fed (actions). Caution is still merited.'

Hope in materials

In an expected environment of continuing high volatility, Cumming said that he sees opportunities in both Europe and the emerging markets on valuation.

The materials sector, which has been especially sensitive to negative news flow this year, is one area that he would look to target as an exception to his more defensively positioned portfolio.

'We are looking for specific opportunities to present themselves in materials companies which you might not get in the other cyclical sectors where corporate margins will be more under pressure.'

Top holdings in the Responsible World Equity fund include UK-based Vodaphone, Italian firm ENI and the Taiwanese semiconductor company TSMC ADS. Dominating the geographical listings of stocks in the fund are the US (15% of total), UK (14%), Japan (13%) and Switzerland (12%).

In the past three years, Cumming has returned 34.3%, outperforming the average return in the global equities sector of 24.1%.