Chinese internet stocks help Pacific Horizon outperform

Pacific Horizon’s interim results for the six months ended 31 January 2016 have been published. These show that its net asset value per share fell 6.1% to 185.64p. The share price fell 11.9% and the discount widened from 8.2% to 13.8%. Over the same period the MSCI All Country Asia ex Japan Index fell 7.4% in sterling terms.

Over the period, the Hang Seng and Shanghai indices were amongst the worst performing in the region, down between 12.4% and 22.5% respectively in sterling terms. China underperformed as the market reacted negatively to the weakening currency, slowing growth and questions over the government’s credibility. The Company’s India weight was a significant drag on performance. Their holding in Just Dial fell 27.1% whilst Federal Bank fell 29.4%. Just Dial’s management failed to deliver on the Search Plus business whilst the market became increasingly concerned over the quality of Federal Bank’s loan book. Korea acted as a defensive haven, up 1.1%.

The best performing market was Indonesia, driven by a rebound in the currency after an exceptionally weak period. They question whether this can continue given the exposure to commodities, especially coal, the use of dollar borrowings to increase foreign exchange reserves and a lack of credible leadership.

They say that, despite the poor absolute returns, relative performance was positive due to the strong showing of a number of the Company’s large China internet stocks, following inclusion in the MSCI index, and a reversal in the previous strong performance of Chinese financials, which were not held in the portfolio. Many of our highest conviction holdings outperformed the comparative index by a healthy margin; for example NAVER and CJ E&M in Korea returned 29.4% and 34.0% respectively during the period.

PHI : Chinese internet stocks help Pacific Horizon outperform