Invesco Asia Trust (IAT) has release its annual results for the period ending 30 April 2023
- IAT reported a NAV total return of 1.2% and share price total return of 1.2%, compared to the -6.0% return of its benchmark, the MSCI AC Asia ex Japan Index.
- IAT’s outperformance primarily came from stock selection, with noteworthy contributors to performance being India’s ICICI Bank and Housing Development Finance Corporation, Singapore’s United Overseas Bank, and PT Bank Negra Indonesia. IAT also capitalised on China’s reopening, with several of its holdings benefiting.
- IAT paid a dividend of 14.8p per share, down from the 15.3p of the prior year. IAT follows an enhanced dividend policy, implemented in August 2020, whereby it pays out 2% of its NAV as a regular six-monthly dividend.
- Gearing increased over the year, starting at 1.6% and finishing on 5.3%.
- IAT’s discount widened slightly over the year, finishing on a 12.4% discount where it started its year on a 11.9% discount, and trading on an average discount of 11.6%.
IAT’s portfolio managers commented:
“A small positive return for the portfolio over the year feels like a good result. Markets have been volatile, and although they have rebounded strongly from their October lows, buoyed by some admittedly short-lived optimism surrounding China’s reopening, the benchmark index against which we measure performance has not recovered its lost ground and evidences the changing market conditions. Continued outperformance can be attributed to strong stock selection across different countries and sectors. Having a balanced portfolio has also helped, and we have remained active, seeking out new opportunities to invest in companies that are worth more than the market believes.”
“China’s economy is reopening, with a robust recovery in consumer demand, but its equity market continues to trade at a discount, even as fundamental improvement in the outlook for corporate earnings mean there is scope for positive surprises that would validate a re-rating. The rest of Asia should be a relative beneficiary of China’s reopening and as such may see less earnings vulnerability from the global slowdown compared to many advanced economies, with revisions beginning to improve.
“Asian markets continue to trade at a significant discount to developed markets, particularly the US. We believe there is scope for this to narrow, with US dollar strength challenged by a potential recession in the US as the Fed seeks to root out inflation. Inflationary pressures in Asia are less of a concern, suggesting greater policy flexibility, which should also be supportive for markets. Looking further ahead, US inflation might be stickier than expected, but it is declining from a high base which could lead to an easing of financial conditions at a time when Asia is enjoying a favourable growth differential. Combined, we feel this makes Asia an attractive place to be investing over the medium-term, with divergence between countries and sectors providing good opportunities for lucrative stock picking.”