£530m Abrdn Asia Focus fund tops index, ups dividend

The £530 million Abrdn Asia Focus plc fund reported that its net asset value (NAV) total return declined 2.0% over the 12 months to July 31, 2022 — ahead of the MSCI Asia ex Japan Small Cap Index which fell 5.1%. 

“The performance has also benefitted from the weakness of sterling relative to many Asian currencies and particularly the US dollar,” said the fund.

“The share price ended the period at 254p, with the discount to NAV per share to 14.0%.”

The fund said its total dividend of 8.0p per share will be 25% higher than its annual target dividend and a 100% increase on the level of dividend paid in 2021.

Abrdn Asia Focus holds a “fundamental, high conviction portfolio of well-researched Asian small caps.”

Its 10 biggest holdings at July 31 were digital advertising specialist Affle India, Indonesian industrial fuel firm AKR Corporindo, Singaporean semiconductor chip testing firm AEM Holdings, Korean atomic force microscopes developer Park Systems Corporation, Hong Kong-based Pacific Basin Shipping, Taiwanese online retailer Momo.com, China-based wind turbine blade and battery separator maker Sinoma Science & Technology, Vietnamese IT services firm FPT Corporation, Vietnamese affordable housing specialist Nam Long Invst Corporation, and Indonesian hospital chain Medikaloka Hermina.

Nigel Cayzer, outgoing chairman of Abrdn Asia Focus, said: “The past year has been difficult for financial markets as the world emerges unevenly from the pandemic, with global stock markets suffering from bouts of weakness as investors digest the implications of a European war while facing inflation and the rising prospects of a global recession.  

“One of the advantages of serving as chairman for over a quarter of a century, is to see how these periodical seismic events might affect the future prospects of this company – I believe this is the sixth during my tenure.

“In this regard, I think the following points are worth making: as we have identified previously Asia is the great engine of growth over the next 25 years and these events will, over time, only be a blip in that cycle; and from an Asian perspective, a war in Europe is a long way off and while it will affect global trade, its impact on domestic markets and in particularly small companies where we invest, will have a more limited impact; and in times like these, opportunities to rotate out of mature, well managed businesses into ones where opportunities exist to make investments with higher growth potential at more attractive valuations occur and again this time, it is no different.

“The greater flexibility the board granted the managers with the lifting of market cap limit last year has widened the opportunity.” 

Abrdn Asia Focus plc’s investment managers are Flavia Cheong, Gabriel Sacks, Neil Sun and Hugh Young, who wrote:  “Asian equities fared well during the first half of the period as vaccine programmes led to an easing of lockdown restrictions and an economic recovery.

“However, there has been a pronounced risk-off trade in place since the turn of the year, with investors rattled by disruption to global supply chains, soaring inflation, rising interest rates and Russia’s invasion of Ukraine.

“This has manifested itself in investors rotating away from more expensive areas of the market − such as high-growth companies − towards value.

“When market conditions are as volatile and the macroeconomic backdrop as uncertain as they are currently, sticking to our investment process becomes even more important.

“The rigour that is central to our process has stood us in good stead this year, enabling us to deliver solid outperformance for shareholders.”

Abrdn Asia Focus said Nigel Cayzer will step down as chairman and retire from the board at AGM on November 30, 2022, and Krishna Shanmuganathan has accepted an invitation to succeed him.

“Krishna has deep ties to Asia and his experience at the Foreign and Commonwealth Office, Fidelity International and then subsequently as managing partner of Hakluyt Asia, based in Singapore, will bring considerable knowledge and benefit to the company,” said the fund.

Two other board members have also been appointed. Lindsay Cooper joined on June 15, 2022, and Alex Finn who joined on July 13, 2022.

“Mr Cooper brings a significant amount of Asian investment and small cap expertise to the board and, being based in Singapore, is well placed to assist in overseeing the execution of the company’s expanded investment mandate that was approved by shareholders in January 2022,” said the fund.

“Mr Finn brings significant accounting expertise and international business experience. He has been appointed Chairman of the Audit Committee and was a partner for twenty seven years in PwC’s global financial services practice, retiring on 30 June 2022.

“The board also thanked Debby Guthrie who resigned from the board on 13 April 2022 for her contribution to not only the board but also as chairman of the Audit Committee.”