Aberdeen Asian Income’s net asset value returned 16.9% in sterling terms over the six months to 30 June 2016, outperforming the MSCI AC Asia Pacific ex Japan Index, which returned 13.0%. Against this backdrop, the Ordinary Share price total return rose by 16.6% and the discount over NAV per Ordinary share widened from 6.8% at the start of the year to 7.3%. At the time of writing the current discount is 7.2%.
An amendment to the management fee has been agreed with effect from 1 June 2016. From that date the manager is entitled to a management fee payable quarterly in arrears based on an annual amount of 0.85% (previously 1.0%) of the net asset value valued monthly and on the average of the previous five monthly valuation points. Also from that date the annual RPI uplift applicable on the company secretarial and administration fee has been discontinued.
The low exposure to China was a key contributor to the fund’s performance relative to its benchmark. The manager maintained an underweight position in this market relative to the benchmark, and this proved beneficial as the market lagged the broader regional markets/indices after the sharp sell-off in the first two months of the year. The lack of exposure to Chinese financials was particularly helpful. Stocks, such as China Life Insurance, Ping An Insurance and Bank of China, none of which Aberdeen Asian Income holds, were hampered by concerns about the resilience of the financial system.
The portfolio’s underlying holdings in Australia also aided relative returns. AusNet Services, which operates the largest network of electricity and gas infrastructure in Victoria, was boosted by better-than-expected results and an upbeat dividend outlook. Diversified commodity producer South32 recorded an improvement in tandem with the recovery in commodity prices.
Singapore was another contributor, aided by the manager’s preference for defensive high-yielding companies. Singapore Telecommunications benefited from its diversified operations across the region, which continue to be aided by higher data consumption. The strength of its cash flow supports an attractive dividend yield. Venture Corporation reported solid earnings growth and maintained its absolute dividend. Meanwhile, Jardine Cycle & Carriage’s recovery was supported by the share price rally of its Indonesian subsidiary Astra International, which was buoyed by the rise in the broader stock market.
On the other hand, Hong Kong was the main detractor from performance, led lower by HSBC and Texwinca. HSBC continued to be dampened by higher provisions. That said, the lender has continued to strengthen its capital position by reducing exposure to riskier assets and streamlining its balance sheet, supported by focused, competent and professional management. It also offers an attractive dividend yield. Textile manufacturer Texwinca was weighed down by weak results, but it maintains robust cash flows and its dividend yield remains decent.
The first two quarterly dividends, covering the six months to 30 June 2016 therefore total 4.0p (2015 – 4.0p). As indicated at the time of the first and second interim dividend announcements, in the absence of unforeseen circumstances, the Board expects to pay four interim dividends for the year ending 31 December 2016 totalling at least 8.5p per Ordinary share (2015: four quarterly dividends paid totalling 8.5p).
AAIF : Aberdeen Asian Income cuts manager’s fee