JPMorgan Asian has published results for the year ended 30 September 2015 that show the fund managed to outperform its benchmark. During the year under review, JPMorgan Asian’s return on net assets was -2.9%, outperforming the MSCI AC Asia ex Japan Index, which delivered a -6.3% return. The Board had been warning JPMorgan that performance needed to improve. The Chairman’s statement says that this outperformance and outperformance since the period end has convinced them that JPMorgan should be retained as managers and that shareholders should vote in favour of continuation of the trust at this year’s AGM. They are also encouraged by the appointment of Richard Titherington as co-manager of the portfolio.
The manager’s report says positive relative performance was driven by both country allocation and stock selection, with positions in China and India being the stand out contributors.
In China, allocations in the financial sector performed well on the back of a supportive liquidity environment, particularly in the mid-sized bank (China Minsheng Bank), property (China Vanke) and insurance (China Pacific Insurance) spaces. Elsewhere, positions in the technology sector, including Tencent (internet service provider) and AAC Technology (smartphone components supplier) continued to deliver positive returns with strong top line growth throughout the year.
In India, the main contributor to performance came from the portfolio’s banking positions, which had also been the case in 2014. HDFC Bank, the largest overweight position in India, again delivered upbeat earnings with strong loan and fee income growth. The secular growth story in quality Indian private banks remains intact and they expect them to continue gaining market share from government owned banks.
Elsewhere within the region, stock selection in Korea was strong, as positions in the chemicals and consumer space contributed to performance due to low input cost and strong convenience store sales respectively. Last but not least, the underweight position in Malaysia also benefited relative performance, as the country’s economy was mired by a weak Malaysian Ringgit and a collapse in oil prices.
Conversely, holdings in the energy sector, which suffered from the sharp correction in commodity prices, were the biggest detractors from performance and allocations to the auto supply chain also detracted from returns during the year. The share prices of Hyundai Wia, an auto parts supplier to Hyundai Motor Group in Korea and Tata Motors in India, fell due to margin concerns and slowing auto demand in China.
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