Asia Total Return beat its benchmark over the course of 2014. In total return terms, the Company’s share price outperformed the market, rising by 12.3%, whilst the net asset value advanced by 15.8% in the year to 31 December 2014. This compared with a rise of 9.2% in the Reference Index in sterling terms and an average NAV return of 13.9% from the peer group. The Board has decided to declare an unchanged dividend of 3.25p per share.
The company targets a discount to net asset value of 5% in normal market conditions, and bought back 1,182,000 shares in support of the discount policy but unfortunately their average discount widened to 6.6%.
The manager says stocks in Hong Kong, Thailand and India recorded the strongest gains. Chinese stocks saw mixed performance as robust returns from IT stocks were offset by profit-taking in select consumer and healthcare names. Amongst the top contributors, domestic names in Thailand, including Kasikornbank and Hemaraj Land & Development, advanced on the back of improved consumer confidence and solid earnings growth. The Philippine market extended gains amid a robust macro backdrop and the buoyant property sector, driving a strong run in share prices of Ayala Land and GT Capital on expectations of upgrades to their land bank NAVs. Similarly, Hong Kong stocks recovered from the sell-off in 2013 as interest-rate sensitive stocks rebounded sharply on easing concerns over the impact of rising interest rates. Holdings in the property sector, led by Swire Properties and Hongkong Land, regained ground as earnings growth remained steady, supported by robust occupancy rates in the office sector. Conglomerates Jardine Matheson and Jardine Strategic also outperformed as positive sentiment in Indonesia helped drive a share price recovery in Astra International.
Across other markets, Indian stocks enjoyed a broad-based rally, with domestic names Phoenix Mills, Zee Entertainment and HDFC Bank benefiting from hopes of sustained economic growth recovery amid falling oil prices and a lower inflation outlook. In Taiwan, technology stocks and consumer export names continued their strong momentum driven by solid earnings growth and global market share gains.
Commodity-related stocks were the laggards as Keppel Corporation and Australian-based BHP Billiton retreated on the back of falling oil prices and worries over a weaker global demand backdrop. Chinese consumer names China Lodging Group and Shenzhou International pared gains as investors took profits on concerns over a sluggish macro environment, while health care stocks Mindray Medical and Wuxi Pharmatech fell amid regulatory uncertainty and overhang from the ongoing anti-corruption drive. Amongst stock specific drivers, Hyundai Motor saw its share price plunge as news of its US$12bn land purchase for a new HQ led to renewed concerns about corporate governance.
Overall, capital protection (in the form of put options and short futures on the Australian, Korean and Taiwan markets) pared some gains as equities continued to be supported by loose liquidity conditions globally. For currency hedges, the hedge on the portfolio’s Australian dollar exposure recorded gains following a 13% decline in the Australian dollar versus the US dollar over the year. On the whole, given low volatility and cheap put prices, there was only a marginal drag on performance from the hedging strategies.
ATR : Strong performance from Asia Total Return fails to narrow discount