Latest trust commentary

Performance overview

• Asia ex Japan equities rose in the fourth quarter of 2025 in sterling terms and outperformed developed markets in aggregate, rounding off a positive year for the asset class. A weaker dollar was beneficial as were robust returns from index heavyweights Korea and Taiwan, which served to offset weaker performance from China.
• Korea posted the best returns by far, driven by its technology sector, which benefited from optimism towards memory chips. The financial and technology sectors supported Taiwan’s market. India also produced positive performance, modestly outperforming the benchmark index, as it benefited from an interest rate cut, lower oil prices and improving macroeconomic data.
• China was the only index market to produce negative returns. Weaker macroeconomic data, together with heightened concerns about the property sector, following a near-default of the country’s largest property developer, weighed on the market. Singapore rose mildly but was weaker than the wider index. 
• The fund produced a positive return and outperformed the MSCI AC Asia ex-Japan index over the period.

Drivers of fund performance

• Strong stock selection was the main driver of the fund’s positive relative returns. At a regional level, selection was particularly strong in Singapore and Korea, while weaker in India and China. Allocation was broadly neutral overall, with the underweight to China adding value, partially offset by the underweight to Korea. From a sector perspective, stock selection was strongest in information technology, though weaker in industrials.
  

Outlook/positioning

• Continuing the pattern seen through much of 2025, December was a month of healthy gains for the regional index, powered by strength in large-cap semiconductor stocks in Korea and Taiwan. This leaves the Asia ex-Japan index up more than 30% for the full year in US dollar terms – one of the strongest annual returns of the last 30 years.  Equity markets have continued to rally, reflecting hopes that the underlying US policy backdrop remains equity-market friendly and that further reductions in local interest rates can be expected, especially as US labour markets weaken.
• With growth in the first nine months of 2025 in China close to the official 5% target, there appears to be less urgency for more fiscal measures currently. However, the broader bottom-up growth picture on the ground in China feels a lot more challenging. Activity levels and pricing in the residential property market have deteriorated again recently, and the sector remains a drag on household confidence and broader consumer spending. The employment picture remains weak (particularly for younger workers) and wage growth has slowed, putting pressure on areas of discretionary spending. In our view, the economic backdrop in China therefore remains fragile and deflationary, the earnings picture is very mixed, and an export slowdown going into 2026 could exacerbate deflationary forces. However, the government’s efforts to tackle deflationary problems and excess capacity are being viewed positively at the margin and feeding a healthier narrative on the equity market outlook. The local A-share market also has a history of developing its own strong momentum, sucking in domestic fund flows once it starts to break out on the upside. We have started to see signs of this in recent months, with increased retail trading activity, account openings and margin finance balances. We remain underweight the China market, albeit offset by an overweight to Hong Kong.
• The North Asian markets of Korea and Taiwan have been very strong in recent months, led by the technology sector. Confidence has continued to improve in recent weeks on the outlook for AI-related capex and new data centre infrastructure around the world. Earnings revisions for key large-cap technology stocks across these two markets remain positive, and valuations are at marked discounts to US peers, which is helping stock price performance.
• The Indian market continued to underperform the broader regional index in 2025, coming off a very high base after its relative strength in 2023 and 2024. Domestic fund flows remain very robust, supporting valuations, but foreigners have been net sellers as attention has turned to other regional markets, and high headline multiples remain a headwind. Sentiment has been further undermined recently by the surprise imposition of 50% import duties in the US market due to a falling-out between the two countries over the issue of Indian purchases of Russian oil. Although the listed equity market has very limited direct export exposure, these tariffs, if sustained, could impact employment in certain sectors, while weaker export revenues could also pressure the local currency.
• With the recent strength in markets, aggregate price-to-earnings multiples for regional equities are now above long-term average levels. In our view, they are not pricing in any real downside risk from a global growth slowdown or more serious tariff impacts. Market performance this year has become increasingly tied to AI, and continued momentum in AI-related capex spending globally therefore remains key to the future performance of Asian equities.
• The outlook for US interest rates and the US dollar also will remain very important to regional returns. Rate cuts and a weaker dollar are now a firm consensus view, so anything that disrupts this picture could put pressure on valuations.
• Although the macroeconomic backdrop for markets remains volatile and the range of outcomes is wide, we continue to see attractive longer-term opportunities across Asian equities. Despite the strength of the rally this year, global investor participation in China and the broader region remains fairly limited. Continued positive performance, alongside stabilising US-China relations, could help improve perceptions of risk and attract more flows.  
• We continue with our bottom-up investment approach and focus on mispriced quality stocks.

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• China risk: If the fund invests in the China Interbank Bond Market via the Bond Connect or in China "A" shares via the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect or in shares listed on the STAR Board or the ChiNext, this may involve clearing and settlement, regulatory, operational and counterparty risks. If the fund invests in onshore renminbi-denominated securities, currency control decisions made by the Chinese government could affect the value of the fund's investments and could cause the fund to defer or suspend redemptions of its shares.

• Concentration risk: The Company may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the company, both up or down.

• Counterparty risk: The Company may have contractual agreements with counterparties. If a counterparty is unable to fulfil their obligations, the sum that they owe to the Company may be lost in part or in whole.

• Currency risk: If the Company’s investments are denominated in currencies different to the currency of the Company’s shares, the Company may lose value as a result of movements in foreign exchange rates, otherwise known as currency rates.

• Derivatives risk: Derivatives, which are financial instruments deriving their value from an underlying asset, may be used to manage the portfolio efficiently. A derivative may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the fund.

• Emerging markets & frontier risk: Emerging markets, and especially frontier markets, generally carry greater political, legal, counterparty, operational and liquidity risk than developed markets.

• Gearing risk​: The Company may borrow money to make further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase by more than the cost of borrowing, or reduce returns if they fail to do so. In falling markets, the whole of the value in such investments could be lost, which would result in losses to the Company.

• Liquidity Risk: The price of shares in the Company is determined by market supply and demand, and this may be different to the net asset value of the Company. In difficult market conditions, investors may not be able to find a buyer for their shares or may not get back the amount that they originally invested. Certain investments of the Company, in particular the unquoted investments, may be less liquid and more difficult to value. In difficult market conditions, the Company may not be able to sell an investment for full value or at all and this could affect performance of the Company.

• Market risk: The value of investments can go up and down and an investor may not get back the amount initially invested.

• Market Risk: The value of investments can go up and down and an investor may not get back the amount initially invested.

• Operational risk​: Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the Company.

• Performance risk: Investment objectives express an intended result but there is no guarantee that such a result will be achieved. Depending on market conditions and the macro economic environment, investment objectives may become more difficult to achieve.

• Private market valuations, and pricing frequency: Valuation of private asset investments is performed less frequently than listed securities and may be performed less frequently than the valuation of the Company itself. In addition, in times of stress it may be difficult to find appropriate prices for these investments and they may be valued on the basis of proxies or estimates. These factors mean that there may be significant changes in the net asset value of the Company which may also affect the price of shares in the Company.

• Share price risk: The price of shares in the Company is determined by market supply and demand, and this may be different to the net asset value of the Company. This means the price may be volatile, meaning the price may go up and down to a greater extent in response to changes in demand.