abrdn Asian Income Fund announced annual results for the year ended December 31 2022. NAV total return was -3.6% while shares fell 2.7%, beating the benchmark MSCI AC Asia Pacific ex Japan Index total return Index, which fell by 6.8% on a total return basis. NAV total return has now outperformed the index over one, three, and five year periods. Dividends grew year on year from 4.1% to 4.7%, an increase of 14.6%. Despite the positive performance, the discount has continued to widen, closing at around 12%.
Commenting on the performance, chairman, Ian Cadby explained:
“The portfolio fared well in the first five months of the year, only for those gains to be eroded in June by a rebound in China, where the Company is underweight. However, the portfolio staged a good recovery over the second half of the year, with particularly strong performance in November and December.
“One of the prevailing themes over the year was weakness in the technology sector, as investors considered how consumer demand would stand up to a global recession. However, the company has benefited from being underweight to some of the expensive growth areas and Chinese internet companies which underperformed over the course of the year. Conversely, relative to the High Yield Index, the company’s performance lagged over the period on account of the index’s heavier allocation to Chinese banks, a sector which held up relatively well on hopes of a recovery in credit growth.
“The end of the year saw stronger performance from two notable areas of the portfolio: Australian mining and commodity companies, which benefited from positive sentiment in China and higher prices for commodities such as iron ore (which returned to more than US$100 per tonne in November); and Singapore banks, which have benefited from higher interest rates and the growing economy. Singapore’s biggest banks have all reported record profits with growing net interest margins. As the Investment Manager looks to increase exposure to dividend-paying companies, this has included topping up the portfolio’s weighting to financials, including Singapore banks.”
Regarding the outlook, he continued;
“While growth prospects in Asia may have moderated slightly (the Asian Development Bank has reduced its 2023 outlook for GDP expansion to 4.6%), economic growth is still forecast to be ahead of many other parts of the world. The question now is whether the region’s growth prospects outweigh the potential for higher inflation creeping into Asian economies. Investors will also keenly watch the Fed’s monetary policy, with many Asian currencies pegged to the US Dollar, and China’s emergence from its zero-Covid policy, alongside other economies that continue to re-open, which is a positive sign for the region.
“The Asia investment story remains as compelling as ever for investors. Long-term drivers of rising affluence, green energy and technology adoption provide opportunities for companies that have the ability to generate steady cash flow and pay stable dividends. With a long heritage in Asia, the Investment Manager has a strong record of finding those proven, quality companies that benefit from structural trends while generating healthy income and capital growth for investors. The Board remains confident this will be to the benefit of shareholders over the long term.”
AAIF : abrdn Asian Income Fund continues to impress