The year to the end of April 2015 was a good one for Invesco Asia as the fund generated a return on net assets of 28.3% and a return to shareholders of 29.4%, both well ahead of the 22.7% return on the company’s outgoing benchmark – MSCI All Countries Asia Pacific ex Japan Index (to be replaced by the MSCI Asia ex Japan Index which excludes Australia). The discount narrowed from 10.6% to 9.8%. The dividend has been increased from 3.45p to 3.65p.
The manager says the outperformance was largely attributable to strong stock selection in the information technology and materials sectors. Chinese internet companies NetEase and Baidu were among the larger contributors thanks to a growing market appreciation of their ability to monetise mobile traffic.Among the materials stocks, the Indian agrochemical company, UPL, was a key positive contributor, as its share price was driven higher. Stock selection elsewhere in India has also been a significant contributor to relative returns with good returns from holdings in banks and Adani Ports & Special Economic Zone, which benefited from its good revenue and earnings growth supported by
its high quality port asset on the west coast of India.
Conversely, stock selection in financials detracted from relative performance, particularly limited exposure to the Chinese banks and insurers, as these stocks outperformed over the period. Elsewhere, DGB Financial detracted after the South Korean bank unexpectedly announced a rights issue to shore up its capital base in anticipation of stronger loan growth, while Standard Chartered suffered on the back of continued negative earnings surprises and concerns about asset quality. Overall, investments in South Korea had a negative impact, with holdings in POSCO, Hyundai Mobis, Shinhan Financial, and Shinsegae among the larger negative contributors. Generally, this can be attributed to a lack of confidence in a domestic consumption recovery and fears about the outlook for exports given the slowing growth rate of the Chinese economy.
IAT : Invesco Asia buoyed by IT and materials holdings