The Board of abrdn Asian Income announced this morning a reduction in the management fee that abrdn Asian Income Fund pays to abrdn, with the change aimed at better aligning the fee with shareholders’ interests.
The fee will be calculated monthly at a rate of 0.75% per annum on market capitalisation (or net assets, whichever is lower) up to £300 million, and 0.60% for amounts exceeding this threshold. This adjustment is anticipated to decrease the Company's overall ongoing charges for the financial year ending December 31, 2024, by approximately 17% compared to the previous year.
Additionally, abrdn has initiated its reinvestment of management fees program by subscribing to 190,000 shares of the Company as of today's date, equivalent to approximately three months' worth of management fees. |
 Fund managers’ report
Market and portfolio review
Asian markets remained weak in October, in common with global equities, as
investors turned more risk averse due to a spike in bond yields, concerns about
higher-for-longer interest rates and the most recent conflict in the Middle
East. Sentiment on China remained cautious despite better GDP and export
data, fresh policy measures including 1 trillion yuan (£112 billion) in planned
government bond issuance and improving US-China dialogue with a Biden-Xi
meeting now seen as possible in November. Elsewhere, the Indonesian market
was among the weakest in the region as trade data fell by more than expected
year-on-year, and the central bank unexpectedly raised rates by 25 basis
points. Downbeat updates from Tesla, GM and Ford weighed on the Korean
market because of concerns over slowing demand for electric vehicles that
will also affect the supply chain. The Indian market fell by less than the wider
region, and Taiwan also proved resilient as exports to all its markets rose in
September, reinforcing a recovery in technology exports.
In corporate news, many of our holdings reported earnings in October
that were in line with our expectations despite the challenging global
macroeconomic backdrop. It was good to see resilient performances
across a range of different sectors. In the technology sector, both Samsung
Electronics and Taiwan Semiconductor Manufacturing Company (TSMC)
reported better-than-expected third-quarter results. At TSMC, the company
saw some stabilisation in demand which provided some confidence that the
semiconductor cycle was near the bottom and 2024 should see more healthy
growth generally. Samsung’s results also gave a clear signal that earnings
were steadily improving.
In Taiwan, the Fair Trade Commission (FTC) approved the merger of Taiwan
Mobile and Taiwan Star Telecom Corp (TStar). The FTC imposed three
conditions on the new merged entity, including the protection of customer
rights, the improvement of service and network quality, and the promotion of
fair market competition. The deal will now go to the Taiwan Stock Exchange for
approval and the merger is due to be completed by the end of the year.
Third-quarter figures from Singapore’s United Overseas Bank showed growth
in net interest income and a good recovery in fees. Low to mid-single digit
profit growth might still be achievable in 2024 and the dividend yield should
hold above 6%. In the same sector, TISCO Financial Group (TISCO) beat
expectations with a 5.8% rise in third-quarter net profits and said it will maintain
its dividend in 2024, even if net profits fall, by increasing the dividend payout
ratio. The half-yearly dividend payment was also expected to continue.
Mining giant BHP reported a stronger-than-expected operating result in the
third quarter despite the usual scheduled maintenance in the first quarter across
most assets. Copper production, iron ore shipments and nickel production were
all better than expected, but coal production was much weaker.
There were no major portfolio changes in October.
As part of our ongoing ESG engagement, we engaged with Rio Tinto to discuss
proposed changes to its remuneration policy, which are due to be tabled at
the 2024 Annual General Meeting. We had questions about several aspects
of the proposals, especially those related to performance measures and
vesting thresholds for the long-term incentive plan, as well as the share deferral
requirements for the annual bonus. We will continue our engagement in order
to seek further clarification on those matters and to reiterate our views.
Outlook
We still see significant potential for China’s economy and market to
spring back, given that much of the bad news has been priced in, while a
fundamental recovery is gathering pace. The rollout of more supportive
policies in a coordinated manner sends a strong signal to the market that the
government is intensifying its effort to prop up the economy. The government's
decision to raise the budget deficit to around 3.8% of GDP and approve a
1 trillion yuan sovereign bond issue bodes well for the economy and stock
market in the months ahead. Outside of China, the rest of Asia is benefiting
from global supply chain diversification. India is in the early stages of a cyclical
upswing. As AI-related apps and chips start to proliferate, rising demand will
boost the region’s semiconductor and consumer electronics segments.
Asian valuations remain attractive versus markets like the US, along with
expectations of better earnings performance in the fourth quarter and early
2024. There is also dividend support. Dividends of companies in the regional
MXAPJ benchmark have been growing steadily, with Asia having the best
dividend growth across major markets compared with pre-Covid levels.
In addition, Asia’s 2024 dividend growth is likely to be healthy. Consensus
estimates suggest that MXAPJ dividend growth is set to accelerate from a
forecast 0.3% for 2023 to an expected 6.7% for 2024, led by consumer services,
insurance, and staples retail.
At the portfolio level, a “higher for longer” rate environment could pressure
growth stocks and we have a relatively lighter positioning here. We remain
focused on ensuring our conviction is appropriately reflected in our positioning.
We are finding the most attractive opportunities around these structural
themes: Aspiration, Building Asia, Digital Future, Going Green, Health & Wellness
and Tech Enablers. We continue to favour fundamental themes, which we
believe will deliver good dividends for shareholders over the long run. |
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