Suits investors looking to receive a steady reliable income from diversified sources. Although income will be the top priority, investors will also benefit from the prospect of growth in the Asia Pacific region.
The Company aims to provide a high dividend as well as capital appreciation from a diversified portfolio of investments traded on Pacific, Australasian, Japanese and Indian stock markets. Dividends are paid quarterly.
Asian markets moved ahead in October following a successful, if inconclusive, end to the negotiations over the US debt ceiling which removed, at least for the time being, the possibility of a US default. Following the decision by the US Federal Reserve in September to postpone the withdrawal of quantitative easing, weaker than expected economic numbers in the US were taken positively in October, reflecting the view that liquidity is more important than growth for stock market performance. Despite posting better than expected GDP and PMI data the Chinese markets underperformed the region over the month. The best performers were India and Indonesia which continued their bounce as fears over QE tapering receded pushing indices and currencies higher. Returns were broadly similar at the sector level with growth and cyclicality marginally outperforming defensives. Technology was the best performer while telecommunications lagged.
The portfolio slightly underperformed over the month reflecting the weakness of China and Hong Kong compared to the strength in Australia and India where we are underweight. Sector allocations were also detrimental as telecommunications underperformed and materials and energy met or beat the index. The strong performance of individual stocks mainly offset the negative contribution from allocation. In particular gaming stocks in Macau and Korea, namely SJM and Grand Korea performed strongly as did new addition Sinopec Engineering in China.
Over the month we sold our position in Malayan Banking reflecting our negative view on the growth prospects for the Malaysian economy. The proceeds were used to add to existing positions in China and Singapore.
We remain positive on Asia in the medium to long term owing to strong economic fundamentals and attractive valuations. In the short term however, we expect markets will be dictated by the strength of the recovery in the US and China and speculation over the ending of quantitative easing. The portfolio remains domestically focused with a bias towards companies with dividend growth as the valuations of some traditional yielding sectors remain quite stretched.