Pacific Horizon Investment Trust (PHI) announced its interim report for the six months to 31 January 2025. During the first half of the financial year, the company produced a NAV total return of 3.0% compared to 6.7% for the benchmark MSCI All Country Asia ex Japan Index. The share price total return over the period was negative 4.0%, as the discount widened from 7.8% to 14.2%. In response to the discount widening, the company increased its share buybacks. Over the six months to 31 January 2025 PHI bought back 590,771 of its own shares at a total cost of approximately £3.5m and an average discount of approximately 13%.
Geographic returns across the region exhibited significant divergence. Most notably, after a significant period of weakness, China rebounded strongly, rising 20.6%, as the government moved to support the economy. Elsewhere, Taiwan continued to perform strongly, rising 16.1%, primarily driven by its semiconductor sector, which experienced strong demand from global investments in artificial intelligence.
Conversely, South Korea was the worst performing market, falling 15.7%, largely driven by weakness in its technology sector, particularly Samsung Electronics. India, which was one of the best performing Asian markets over the past couple of years, experienced a significant correction, down 8.0%, after valuations became extended and a significant number of company results disappointed market expectations.
Discussing the performance, the manager commented:
“Despite having significantly reduced our Indian exposure over the past 18 months and re-invested much of it into China, our performance disappointed. China was the main detractor, where the company was hurt by not owning some of the top-performing technology companies, including Xiaomi, Meituan and Alibaba. Stock selection in Korea was detrimental, with our large holding in Samsung Electronics being the single largest negative contributor as the company fell behind in high-bandwidth memory required in hyperscale datacentres, an issue we believe to be temporary.
“Taiwan was our largest positive contributor, led by our semiconductor-related holdings. This was followed by Singapore, where our significant holding in SEA generated substantial returns as the company’s operational performance significantly improved and the share price rose more than 90%. Vietnam, our largest country overweight position (+10.3%), continued to contribute positively.
“Some modest changes were made to the portfolio, including continued significant additions to TSMC in Taiwan, increasing our positions in China, in particular internet companies including Pinduoduo and Tencent, and additions to Vietnam. Funding came from a variety of sources, including continued reductions in India. In the six months to 31 January 2025, we increased the gearing of the company from 0% to 1.9% and bought back 590,771 shares, representing 0.7% of the issued share capital as at 31 July 2024.”
Regarding the outlook, the manager added that the company maintains its positive outlook for the region, supported by strong growth, record low valuations compared to developed markets, and China moving to support its economy and the private sector.
