Underweight Chinese tech companies detract from Aberdeen Asian Income – Aberdeen Asian Income’s NAV returned 16.0% in sterling terms, compared to the MSCI All Countries Asia Pacific ex Japan Index, which returned 25.4%. The ordinary share price total return was 17.4% while the discount to NAV narrowed slightly to 7.5% at the year end. A strengthening of over 10% in sterling lowered the returns of assets held in Asian currencies and weakened the Company’s performance.
As reported on other Asian funds, the relative underperformance of Aberdeen Asian Income (AAIF) was in part due to the rally was very narrow and growth-driven, led by Chinese technology companies, not held by the fund. This is reflective of the investment manager’s style. The relatively low income or dividend-yielding stocks, such as those held in your Company, fell out of favour.
Investment manager’s outlook
“Market volatility has returned at the time of writing, with major world markets roiled by the spectre of worsening inflation which could trigger a rise in interest rates by key central banks. There is a sense of foreboding that a further pullback by stock markets may be on the cards, particularly in light of the lingering risks, from rising protectionism giving way to full-blown trade wars, or an acceleration in the normalisation of monetary policy and the possibility of policy missteps by central bankers.
However, the fundamentals that have underpinned the rise in share prices over the past year have not changed. For example, we believe that China, which could see a moderation in economic growth in 2018, should continue to lift the region. Structural reform and favourable demographics also help sustain overall consumption across Asia. The broadening economic growth should fuel healthier earnings, which in turn, should translate into companies being able to pay out better dividends. Although valuations have climbed in the past year, Asian equities remain attractive relative to their counterparts in developed markets, both in the US and Europe. In terms of strategy, we remain focused on quality and value, the hallmarks of the Company’s underlying portfolio.”
AAIF : Underweight Chinese tech companies detract from Aberdeen Asia Income