Asian equities extended their losses in a volatile quarter for world markets. Persistent concerns over the US-China trade conflict and the pace of US interest rate hikes dominated sentiment. Rising worries about the global and particularly Chinese economic growth outlook continued to trouble investors.
Against this backdrop, the fund has fallen alongside markets and ended the quarter slightly behind the reference regional market index. From an absolute return perspective, our holdings across technology and exported-related names were hit the hardest over the quarter on lingering concerns over slowing economic growth and continued trade tensions. Meanwhile, the fund’s hedges have provided an element of downside protection and mitigated some negative returns of the portfolio.
Within technology, leading hardware names including Samsung Electronics continued to see share price weakness on concerns over a peaking memory cycle. Similarly, Apple supply chain names in Taiwan including TSMC and Hon Hai Precision corrected due to a continued slowdown in global smartphone demand and a selloff in the broader market. Conversely, our long-term position in Indian private sector bank HDFC Bank held up particularly well as it continues to deliver strong growth with minimal asset quality issues. It is also well poised to continue to gain market share against a backdrop of poorly positioned state banks in a growth market. Other notable contributors over the quarter include the more defensive Singapore REITs as well as blue-chip conglomerate names in Hong Kong.
Within the portfolio we made few changes over the quarter. We used the bounce at the end of the year to trim a few names in China where we felt the weaker earnings outlook was not fully discounted. Proceeds were used to add to selective Hong Kong blue-chips where we felt some of the contagion sell-off from China was excessive and stocks offered good upside to our fair values.
|Q4/2017 - Q4/2018||Q4/2016 - Q4/2017||Q4/2015 - Q4/2016||Q4/2014 - Q4/2015||Q4/2013 - Q4/2014|
|Net Asset Value||-8.2||34.9||28.5||3.0||16.5|
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.
Investors in the emerging markets and Asia should be aware that this involves a high degree of risk and should be seen as long term in nature.Less developed markets are generally less well regulated than the UK, they may be less liquid and may have less reliable arrangements for trading and settlement of the underlying holdings.
The Company holds investments denominated in currencies other than sterling, investors should note that exchange rates may cause the value of these investments, and the income from them, to rise or fall.
The Company invests in smaller companies that may be less liquid than in larger companies and price swings may therefore be greater than investment companies that invest in larger companies.
The Company may borrow money to invest in further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase in value by more than the cost of borrowing, or reduce returns if they fail to do so.
Investments such as warrants, participation certificates, guaranteed bonds, etc. will expose the fund to the risk of the issuer of these instruments defaulting on paying the capital back to the Company
The fund can use derivatives to protect the capital value of the portfolio and reduce volatility, or for efficient portfolio management.