Aberdeen Asia-Pacific Income Fund, Inc. (NYSE AMEX: FAX)

Fund Managers’ Monthly Report

December 2011

• Asian bond markets weakened in November, as the deepening European debt crisis further challenged sentiment. At the month-end, major central banks coordinated efforts to enhance their capacity to provide liquidity while China cut financial institutions’ required reserve requirement ratios.
• Local market bonds were reasonably well supported as the focus continued to shift from inflation to growth risks and the potential for monetary easing. Bank Indonesia cut its policy rate by a larger-than-expected 50 basis points (bps) to 6%. Third-quarter growth numbers were mixed, with exports reflecting weaker external demand but consumption resilient though with downside risks.
• Indonesian bonds underperformed, with two- and 10-year yields rising by 10 bps and 39 bps, respectively, as the market tested the central bank’s commitment to local market stability. Conversely, Chinese bonds outperformed, with shorter-dated bonds seeing better demand, while the Indian bond market was boosted by the issuance of more foreign bond quotas.
• The Asian credit market was lackluster, with high-yield corporate spreads widening the most. Regional currencies weakened as uncertainties boosted demand for U.S. dollars, with the rupee falling almost 7%.
• Australian bonds outperformed as investors sought the relative safe haven of Commonwealth bonds. Three- and 10-year yields fell by 0.75% and 0.58%, respectively, as short-dated bonds responded to heightened expectations of rate cuts