ABERDEEN Asset Management’s Edinburgh Dragon Investment Trust trailed its index in the six months to the end of February, with underweight positions in China and Taiwan proving a drag on performance.
The £767 million trust, which is run out of Singapore by Aberdeen’s Adrian Lim, posted a net asset value total return of eight per cent over the six months against growth of 10.1 per cent from the MSCI AC Asia ex Japan Index.
According to the trust’s chairman, Allan McKenzie, Asian equities started the six months well, but fell off in November on concerns that the election of US president Donald Trump could impact on trading between the US and Asia.
“Subsequently, markets rebounded as investors favoured the narrative of faster US growth, underpinned by Trump’s promises on tax cuts and fiscal spending despite the dearth of details,” Mr McKenzie said. “A stabilising Chinese economy and receding worries over the yuan also influenced sentiment, as Beijing prioritised growth support ahead of a key party congress in late 2017 to choose its future leaders.”
He added that investments in financial stocks such as HSBC and Standard Chartered had helped the trust while avoiding Chinese state lenders had proved costly. Similarly, the trust’s avoidance of Taiwanese technology stocks at the same time as investing too heavily in the Philippines harmed performance.
In India, he said that investments in motorcycle distributor Hero MotoCorp and mortgage lender HDFC proved detrimental.
Edinburgh Dragon, which invests mainly in larger companies, is one of a number of Aberdeen-managed investment trusts that focus on the Asian markets.
Another - Aberdeen Asian Smaller Companies – fared better over a similar timeframe, delivering a net asset value total return of 8.9 per cent in the six months to the end of January against the MSCI AC Asia Pacific ex Japan Small Cap Index’s return of 5.1 per cent.
As its name suggests, the trust invests in smaller companies across the region. Its chairman Nigel Cayzer said that “the case for small companies in Southeast Asia remains a compelling story with considerable opportunities for growth in both the short and medium term”.
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