Aberdeen Asian Smaller Companies has announced results for the year ended 31 July 2015. The net asset value total return for the period was -4.7%. This compares poorly to a fall in the MSCI AC Asia Pacific ex Japan Index of -1.2% and the MSCI AC Asia Pacific ex Japan Small Cap Index’s return of -0.8%. For shareholders though the problem was compounded by a widening of the fund’s discount from 0.7% to 11.9%. The dividend was increased to 15p from 13p.
The portfolio underperformed the regional small-cap benchmark over the period. An overweight position in India benefited the fund. Optimism over consumer spending and a recovery in the domestic car sector boosted industrial and auto paints maker Kansai Nerolac Paints and lubricants producer Castrol India. Cement-maker Ramco Cements benefited from the government’s focus on fixing creaky infrastructure. Gujarat Gas’ plans to merge with sister company GSPC Gas were viewed positively by the market. Godrej Consumer Products also outperformed, given its healthy bottom line and leading position in the fast-moving consumer goods industry.
In China their light exposure hurt performance, as the stock market was among the best performers despite the sell-off. They have exposure to China via smaller companies listed in Hong Kong that have operations on the mainland. Holdings there, particularly Dah Sing Financial, benefited from the broader China rally.
Elsewhere, in North Asia, the lack of exposure to Taiwan added to performance, owing to expectations that slowing exports could hurt some of the country’s core industries, such as electronics. But the underweight to Korea dampened returns, given that the market was the second-strongest regional performer after India, led by sizzling gains in health-care and internet stocks.
The plunge in commodity prices hurt stock markets and currencies of resources-exporting countries, such as Australia, Indonesia and Malaysia. The portfolio benefited from its light exposure to energy and mining-related stocks, particularly in Australia, which sold off heavily. The fund’s holding in ARB – which makes and sells parts for four-wheel-drive vehicles – contributed to performance; its exports were boosted by the weak currency, while its domestic and Thai plants operated efficiently through the year.
Conversely, the heavy exposure to Indonesia and Malaysia detracted from performance. Aside from commodity weakness, country-specific risks also eroded sentiment. Cement-maker Holcim Indonesia’s shares fell in tandem with other cement stocks, as president Jokowi requested state-owned producers to cut prices. Another weak performer was Multi Bintang, as the brewer reported weaker results amid a tightening regulatory environment.
Some of our holdings lagged over the period. Retailer Aeon Co (Malaysia), a core holding, was hurt by higher store-opening costs and weaker consumer confidence after the goods and services tax was implemented in April. Despite share price weakness, Shangri-La Hotel (Malaysia)’s results were decent and the weak ringgit could boost tourist arrivals.
AAS : Aberdeen Asian Smaller hit by discount widening