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Fidelity Asian Values posts strong results as it celebrates its 25th year

Landmark 81 in Ho Chi Minh City - the tallest building in Southeast Asia

Fidelity Asian Values posts strong results as it celebrates its 25th year – Fidelity Asian Values (FAS) has published its annual results for the year to 31 July 2021, during which time its NAV increased by 39.5% and its share price increased. by 47.6%.

Meanwhile, the board has recommended a dividend payment of 8.8p per share, which reflects an increase of 3.5% against the previous year.

There were periods of ‘turmoil’ during the year and at times the company’s discount was volatile in reaction to such market conditions. The board, therefore, approved the repurchase of 753,228 ordinary shares for holding in treasury.

Chair’s review:

This year, Fidelity Asian Values PLC marked its 25th anniversary, having been admitted to the official list for trading on 13 June 1996. In this year’s Annual Report, in addition to our usual commentary, we have taken the opportunity to review the progress of the Company and Asian markets over that period which has seen periods of economic downturn and market stress followed by remarkable recoveries.

For most of the year under review, COVID-19 continued to dominate headlines and has had a stark impact on our daily lives. Those of us with friends and family overseas may have been separated from them for nearly two years. Indeed, the Company’s Portfolio Manager, Nitin Bajaj, has been unable to travel to the UK and the Board has been unable to travel to Asia. At the time of writing, offices are still operating at a fraction of their full capacity and “Zoom”, the video conferencing software that a significant number of us have adopted to communicate remotely, was highlighted by the Oxford English Dictionary as its “Word of an Unprecedented Year”.

It is therefore with a sense of relief, even hope, that we can reflect on improving prospects for a global recovery from the virus and its consequential social, economic and market impacts. Vaccination rates are rising in Asia and at home, hospitalisation rates are falling, and it seems that some limited international travel is resuming with appropriate precautions in place.

Pleasingly, from the low point of COVID-19 (in March 2020), your Company has seen a marked improvement in its performance, beating the Comparative Index and mean peer group returns in both NAV and share price terms. Smaller companies in Asia have rallied relative to companies with larger market caps, and the Company ranked 2nd out of 14 in share price performance terms across all three Asia-focused investment company peer groups for the year ended 31 July 2021.

Of course, with the rise of new COVID-19 variants, we must not grow complacent. The Manager continues to keep its business continuity plans and operational resilience strategies under constant review. Nitin and the investment team are monitoring companies within the portfolio and the wider market for idiosyncratic risks and opportunities arising from the evolving situation – while retaining their fundamental, research-driven bottom-up investment approach.

As the world recovers from COVID-19, our belief in the investment opportunities in Asia remains undimmed. In seeking to provide shareholders with a differentiated equity exposure to Asian markets, Nitin focuses on buying businesses that have strong management but are mispriced. This often leads him to invest in small and medium-sized companies, the ‘winners of tomorrow’, before they become well-known.

As Nitin explains in his Portfolio Manager’s Review, despite a rally in small-cap growth companies, the value-investing style he deploys, which has historically rewarded investors, remains out of favour and he still sees excellent longer-term opportunities where others are not yet looking.

Investment and market review

In the 12 months to 31 July 2021, NAV performance was strong, with a total return of +39.5% which was marginally ahead of the total return of +39.2% for the Comparative Index. Share price performance was stronger still, with a total return of +47.6%. With sentiment toward Asian equities and Company performance improving, the discount narrowed to 2.9% to the NAV. In last year’s report, I wrote that value, as an investment style, had been experiencing the longest and deepest underperformance relative to growth since the 1960s but that the Board believed that value investing would return to favour. It remains early days, but there are signs that the tide is turning in the Company’s favour.

Outlook

Throughout 2021, global investors have started to rotate out of growth stocks and into more value names, but this trend is not yet significant within the Asian smaller companies sector. As a result, the market is offering an unprecedented opportunity to invest in high quality companies at attractive valuations. Nitin continues to believe that owning good businesses, run by competent management teams, acquired at attractive prices is the most time-tested way to make money in the stock market. The Board has confidence in Nitin and his approach and is reassured by the high quality of his portfolio.

FAS : Fidelity Asian Values posts strong results as it celebrates its 25th year

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