JPMorgan Asian says that, over the six months ended 31st March 2016, the company’s return on net assets was 9.0% and the return to shareholders 8.3%, reflecting a widening of the discount over the period. The company underperformed its benchmark, the MSCI Asia ex Japan Index, which returned 11.4%.
The managers’ report says JPMorgan Asian’s portfolio underperformed during the period under review, with both country allocation and stock selection detracting from performance. In terms of asset allocation, our overweight positions in China and India were notable detractors as these proved to be the two worst performing equity markets in the region over the past six months. We held a neutral weight, relative to our benchmark, in Malaysia which rose strongly over the period as the currency rebounded in response to stabilising oil prices and improving macroeconomic conditions. Another detractor at the country level was our minor underweight position in Indonesia; the top performing market during the period with a rise of over 40%.
At the stock level, the key contributor to performance was stock selection in Taiwan and Thailand. We were correctly overweight semiconductor stocks in Taiwan, such as Taiwan Semiconductor Manufacturing and Silicon Motion Technology, both of which produced strong performance on the back of supportive fundamentals. In Thailand, our large overweight in Airports of Thailand was a notable contributor to performance as a result of strong levels of inbound tourism into Thailand, particularly from China. Owning Thailand’s PTT Public was also beneficial as the stock benefited from resilient refining margins and expected demand growth in refined products.
In contrast, Chinese financials were notable detractors from performance. Our significant overweight positions in China Taiping Insurance and China Merchants Bank, underperformed during the period as they fell in response to concerns over their earnings sensitivity to the domestic equity market and to the wider economy. Wind power generator, China Longyuan Power, also corrected sharply over the period due to unfavourable tariff cuts. After having generated strong performance, several of our Chinese healthcare names such as Phoenix Healthcare and Sino Biopharmaceutical also fell over the period for stock specific reasons. We continue to believe in the long-term structural growth prospects of these companies.
JAI : JPMorgan Asian holdings in Chinese financials weigh on performance