Henderson Far East Income suffers as growth stocks shine – Henderson Far East Income says that, for the year ended 31 August 2017, the net asset value total return was 17.7% whilst the share price total return was 17.3%. As a comparison, the peer group average fund returned 22.2% and the All-World Asia Pacific ex Japan Index (sterling adjusted) returned 23.7% as, says the chairman, growth companies generally did better than those “paying attractive dividends”. A fourth interim dividend of 5.30p has been declared making a total of 20.8p for the year, an increase of 4.0%.
The board went on a trip to Mumbai and concluded that India faces sever challenges “as evidenced by the very long queues of young educated people outside employment offices looking for a job. India needs to find around 15 million new jobs each year to absorb those leaving full time education. We harbour some doubts that reform in India will be fast enough to address the issue. Corruption is widespread in government and business while ethnic and religious tensions remain high. Infrastructure developments, so critical to growth, are promised but progress is very slow with an outdated and cumbersome planning process. Clearly a significant part of the population has benefited from an opening up of the economy but the vast bulk of the 1.3 billion people are still rural with average farm sizes of around 1.5 hectares with very high levels of illiteracy and inadequate infrastructure support. It is difficult to see in these circumstances how India can achieve its potential without a much more determined Government effort and deep structural reform.”
The manager doesn’t say much about the performance of the portfolio beyond reiterating the chairman’s argument about growth stocks outperforming yield stocks and that, at the stock level, they had some success with companies such as Star Petroleum, which rose 72% over the period, Autohome 86%, Anta Sports 56%, Hon Hai Precision 71% and KB Financial 47% but these were not enough to offset the style differentials which favoured cyclicality and growth over defensiveness and yield.
HFEL : Henderson Far East Income suffers as growth stocks shine