 Fund managers’ report
Market and portfolio review
Asian equities closed flat in August in sterling terms following a volatile start
to the month. Global markets fell sharply following the US Federal Reserve’s
decision to keep rates unchanged, triggering recession concerns, and an
unwinding of yen carry trades after the Bank of Japan’s rate increase and a
sharp rise in the yen. Subsequently, however, markets rebounded thanks to
more reassuring economic news in the US and growing hopes of a soft landing
for its economy, while most Asian currencies rose against the US dollar.
Across the region, Southeast Asia outpaced North Asia and India. Indonesia,
one of the most rate-sensitive stock markets in Asia, was boosted by rising
expectations of Fed policy easing, while Thai stocks rose on better-thanexpected GDP growth. In North Asia, stocks in Hong Kong outperformed their
peers in mainland China, as more resilient earnings lifted internet names and
high-yielding stocks drew interest. The gains in mainland China were more
modest following mixed economic data. Meanwhile, the market in Korea was a
key laggard as memory stocks were weighed down partially by concerns over
Nvidia’s revenue guidance. Indian stocks also underperformed on the back of
soft quarterly earnings and GDP growth that reached its lowest in five quarters.
There were positive reports from a number of our holdings in August,
especially in the financial sector. Hong Kong-based insurer AIA announced
positive interim figures which showed the business remains strong, with
good momentum in its key Chinese market. The company set itself a new
operating profit after tax target over three years and the interim dividend
was raised by 5% with a further US$2 billion (£1.53 billion) allocated to its
share buyback scheme. Second-quarter results from Singapore banking
group DBS were again easily the best out of the country’s three main banks.
The performance was driven by a stable net interest margin, strong fees and
resilient asset quality. The dividend was maintained and the outlook for the
group was positive with expectations of mid-to-high single digit full-year profit
growth. CEO Piyush Gupta announced that he will be retiring and DBS’ head
of institutional banking, Tan Su Shan, will take over. She’s already proven to be
competent, and we don’t anticipate any significant change in strategy in the
short term.
Meanwhile in Australia, both Commonwealth Bank of Australia (CBA) and
National Australia Bank (NAB) posted decent results. For CBA, the main
positives were less pressure on profit margins and good growth in the balance
sheet. NAB saw similar underlying trends with strong loan growth and an
improving net interest margin. Also in Australia, mining giant BHP reported
better-than-expected free cashflow for the year to June and announced an
unchanged final dividend.
Elsewhere, Chinese internet group Tencent reported second-quarter growth
in online gaming revenue along with net profits which comfortably beat
expectations. The latter was mainly due to a higher share of profits from
associates, which is likely to include PDD, and lower taxes. Second-quarter
net profit at Taiwan-based electronics manufacturer Accton Technology was
ahead of consensus. The gross profit margin was slightly lower than expected
but is forecast to improve in the second half of the year
In terms of portfolio activity in August, we exited our holding in Keppel
Infrastructure Trust in view of better opportunities elsewhere.
Outlook
September has historically been a difficult month for markets, and the first few
days have borne that out. Technology stocks have turned volatile again, after a
sharp drop in Nvidia’s share price and renewed concerns over AI-related stock
valuations. Geopolitics simmer in the background, as it appears a dead heat
for Donald Trump and Kamala Harris heading into the US presidential elections
in November. At the same time, US rate cut expectations are rising, which
is likely to support investor appetite in Asia as the US-Asia yield differential
narrows. Market sentiment is likely to remain volatile over the short term against
a still-uncertain backdrop, and we have continued to tighten the quality
characteristics of our portfolio, introducing and adding to names with greater
near-term earnings visibility and steady cash flow generation, while actively
reducing and exiting names where earnings are less visible. More broadly, we
maintain our conviction in our holdings and their ability to navigate the various
crosswinds buffeting markets, given their quality and fundamentals, which we
believe will deliver good dividends for shareholders over the long run. |
Time: 9.30am - 10.30am
Date: Monday, 3rd June 2024
Location: Virtual and in-person (280 Bishopsgate, near Liverpool Street station)
CPD: Certificates available
Presenter:
FM
Please join lead fund manager Yoojeong Oh for an update on the abrdn Asian Income Trust. There is both a virtual and in-person option where we will be offering breakfast in our London office; please specify your preference when registering.
Yoojeong will be providing investors with an update on the Trust as well as how the portfolio is currently positioned. Yoojeong is typically based in Singapore so this will be an opportune time for you to meet her and ask any questions that you may have.
The Trust targets income and capital growth by investing in quality Asia-Pacific companies across the market cap spectrum. Environmental, social and governance (ESG) analysis is embedded in the research process.
The Trust's strategic underweight to China has been significant contributor to performance and the Trust's management fee is one of the lowest in the peer group.
If the registration link in the box does not work for you, please register by emailing abrdn.Investment.Trusts@abrdn.com and include ‘AAIF update’ in the subject line. Please specify whether you'd like to join the 9.30am online webinar or the 9.30am breakfast meeting in person. The breakfast meeting will be taking place in abrdn's London offices, 280 Bishopsgate, EC2M 4RB.
We hope that you can join us |
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