Invesco Asia holds up well in a falling market

Invesco Asia has released its results for the 12 months ended April 30, 2022. The trust beat its reference in a falling market, return of -6.7% against -12.9% for the MSCI Asia ex Japan Index. The discount widened from 8.2% to 11.9% and, consequently, the return to shareholders was -10.0%. The fund has continued to outperform since the end of the period. Since April 30, 2022, the NAV full return was -0.6%, outperforming the index return by -2.2%. The share price is down -0.2% with a discount narrowing to 11.5%.

The dividend for the period was 15.3p, compared to 15.1p for the previous year. 6.68p of that was covered by income, the balance came from distributable reserves – Invesco Asia has a policy of paying an enhanced dividend.

The Chairman’s statement indicates that the performance attribution figures show that the year’s outperformance came mainly from selection of titles.

Excerpt from the manager’s report

Asian stock markets have trended lower since their post-pandemic peak. Market weakness was largely driven by concerns over China, which more than offset positive momentum in India and Southeast Asia markets which benefited from the lifting of restrictions related to the Covid-19 and the deployment of vaccination programs. This has resulted in an unusually large divergence in performance between the best and worst performing markets in our region. Stock selection had a significant positive impact on relative performance, particularly in Hong Kong/China and Indonesia, which helped offset the impact of some of our underperformance in India and Taiwan.

The wallet was also well positioned for a large market rotation away from expensive “growth” stocks towards “value” stocks and more cyclical areas that stood to benefit from reflation and reopening trends. This was sparked by the US Federal Reserve’s hawkish turn in early January, which led to a rapid upward adjustment in US Treasury yields and high-profile earnings disappointments at US nonprofit tech companies. United.

The portfolio’s exposure to Indonesia – the best performing country in the region over the period – was a key driver of performance, with PT Bank Negara Indonesia Persero being the main individual contributor, while Astra International and Telkom Indonesia also brought significant value. Indonesia is now one of our biggest index

Overweight is used as a relative term, generally to something neutral, generally an index and in the context of a benchmark.

The opposite is underweight

See also neutral weight

Example

Stock A is 10% of an index.  A portfolio holds 12% of Stock A.  The portfolio is overweight Stock A by 2%

Germany is 10% of the European Index. Investment manager likes Germany. Portfolio holds 12% and is 2% overweight

Outcome

If stock A's share price rises, the portfolio performs well relative to the index because it holds 2% more than the index

If German markets fall, the portfolio performs badly relative to the index because it holds 2% more than the index

" class="glossary_term">Overweight positions, as the economy seems to have room for better growth after a period of weakness. Indian bank ICICI Bank and conglomerate Larsen & Toubro (L&T) also outperformed significantly, supported by improving macro background.

In China, wind turbine maker MingYang Smart Energy made strong gains in the first half of the period as an expected beneficiary of authorities’ plans to cut carbon emissions. Property developers CK Asset and China Overseas Land and Investment have outperformed in turbulent times, with strong balance sheets leaving them well positioned to gain market share from weaker developers. Other notable contributors included Pacific Basin Shipping, while Singaporean United Overseas Bank and QBE Insurance showed positive sensitivity to rising US rates.

Autohome was the main detractor as advertising revenue slowed amid slowing auto sales, while competition between digital media platforms intensified. We believe Autohome’s competitive advantages remain understated, with its net cash balance sheet (more than 80% of market capitalisation) and EBIT (earnings before interest and tax), taking off tax payable and deducting capital expenditure and any change to working capital. For an ordinary shareholder, it'll be the same calculation but taking off interest cost as well.

" class="glossary_term">free movement of capital generation of additional sources of comfort. Meanwhile, Tencent Music Entertainment lowered its revenue forecast in response to increased regulation of social entertainment and live streaming, which fundamentally impacted the initial investment thesis and drove us out.

Concerns over collateral damage from overleveraged Chinese property developers have impacted stocks including Ping An Insurance, A-Living Smart City Services, air-conditioning maker Gree Electrical Appliances and fitted furniture designer and maker Suofeiya Home. Collection. We added weakness, encouraged by the relatively strong balance sheets and valuations of these companies which appear undemanding given their future growth prospects.

Other major detractors include LG, with portfolio company performance concerns and a restructuring of stakeholder interests appearing to be fully catered for, with the potential for a narrowing of the market. reset to net asset value. Meanwhile, Covid-related chip and component shortages have disrupted supply chains, particularly for miniature lens maker Largan Precision, although its medium-term outlook remains bright.

IAT: Invesco Asia resists well in a falling market

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