JPMorgan Asia Growth & Income (JAGI) has published its annual results for the year ending 30 September 2022.
- Over the 12-month period JAGI generated a NAV total return of -16.2%, and share price total return of 17.2%, compared to the -13.9% of its benchmark, the MSCI All Countries Asia ex Japan Index. Over the longer, ten-year time horizon, JAGI has returned an annualised 8.5% NAV total return, and 8.9% share price total return, compared to the 6.9% of its benchmark.
- JAGI follows a policy of paying out 1% of its NAV as a divided each financial quarter. Over the 2022 financial year JAGI paid out dividends totalling 16.5p per share. This was down from the 19.3p it paid over 2021, and the second lowest dividend paid out under its current policy, which was implemented at the beginning of financial year ending September 2017.
- JAGI’s Chairman, Bronwyn Curtis, has announced that he will be stepping down after the forthcoming AGM, held on 15 February 2023, and will be succeeded by Sir Ricard Stagg.
Extract from the manager’s report
“One of the largest detractors from the Company’s performance versus the Index over the financial year was the portfolio’s underweight allocation to India, which outperformed the Asian market index by approximately 25% over the period. Our stock selection in China and Taiwan also hurt performance, due to our exposure to higher growth issuers which de-rated so sharply over this period, as discussed above.
On the positive side, the Company’s large overweight allocation to financials contributed positively to returns, thanks to its holdings in bank names in Indonesia, China, and Singapore. Broadly, regional banks have performed well, driven by the economic recovery, which has been especially robust in Indonesia.
We have not made any major changes to the portfolio at the sector level over the review period. The Company’s largest overweight allocations are to financials (+4.9%), and consumer discretionary (+4.7%) and it has more modest overweight allocations to industrials (+2.8%) and information technology (+1.8%). We have also maintained underweight allocations to consumer staples (-3.0%) and materials (-2.9%).
China’s extremely poor short-term growth prospects, combined with mounting geo-political tensions related to Taiwan and Hong Kong, led us to eliminate our overweight allocation to China and Hong Kong on a combined basis. The portfolio is now neutral on these markets, and almost neutral in relation to Taiwan, as we believe valuations reflect the poor short-term outlook for these respective markets. The portfolio continues to have an underweight allocation to India given the view that this market is expensive relative to historical levels and compared to other regional markets. The portfolio’s largest overweight allocations at the country level are to South Korea and Indonesia
In our view, the past year’s sharp share price declines mean markets across the region now mostly reflect the deterioration in the economic environment and the many uncertainties and risks ahead. This view is supported by current valuations. The MSCI AC Asia ex Japan Index is trading at a price to book ratio of 1.25x, close to the previous historical lows seen in 2008 and 2016, and looking more deeply into the Index’s geographical constituents, valuations in South Korea, Hong Kong and China are also either close to or below their historical lows in price to book terms. India remains the sole market trading above its ten-year historical average valuation levels.
Despite the myriad of near-term uncertainties underpinning current low valuations in many markets, we stand by our conviction that Asian equities continue to provide attractive long-term investment opportunities. From a top-down perspective, Asian countries have large and growing economies, accounting for roughly 40% of the world’s GDP. Major structural and social changes will ensure the region continues to grow rapidly, with domestic demand supported by the increasing prosperity of Asia’s burgeoning middle class. Furthermore, the region is also home to many innovative and dynamic companies that are leading the world in a wide range of industries, including semiconductor manufacturing, healthcare, renewable energy, next generation automotive production and financials.”